WES 0.08% $61.38 wesfarmers limited


  1. 89 Posts.

    HOMEX - Perth


    The directors of Wesfarmers Limited today announced a record net
    profit of $414 million for the year ended 30 June 2002, an increase
    of 65 per cent over the 2001 year profit of $251 million. The result
    compares favourably with the proforma forecast of $379.7 million
    included in the bidder's statement dated 13 June 2001 issued for the
    Howard Smith takeover.

    Operating profit (before goodwill amortisation) was $493 million, an
    increase of 89 per cent on the $261 million reported in the
    corresponding period last year. Operating revenue of $7.4 billion was
    68 per cent higher than last year's $4.4 billion.

    The strong result was attributable to increased earnings from all key
    business units.

    Earnings per share of $1.38 (before goodwill amortisation) were 44
    per cent higher than last year's 96.2 cents. Cash flow per share of
    $1.98 was 29 per cent above the $1.53 reported last year.

    The 2001/2002 result included profit after tax of $9.9 million from
    non-current asset disposals, compared with $18.1 million earned last


    The directors have declared a fully-franked final dividend of 77
    cents per share (last year 60 cents per share). The dividend will be
    paid on 26 September 2002, which is approximately one month earlier
    than in previous years. This lifts the full-year dividend to $1.11
    per share compared to last year's 87 cents.

    The directors have decided to continue the company's Dividend
    Investment Plan for the final dividend with shareholders able to
    invest all or part of their dividend at the prevailing market price
    calculated in accordance with the Plan. Previously a discount of 2.5
    per cent applied.


    Net operating cashflows for the year for the group's activities were
    $683.7 million compared to $383.7 million last year, an increase of
    78 per cent. Operating cashflow was adequate to finance the group's
    replacement and expansion capital expenditure of $230 million as well
    as the net amount of acquisition expenditure not covered by the issue
    of new equity.

    As a result, there was a significant decrease in the group's ratio of
    net debt to equity from 63.4 per cent last year to 38.8 per cent at
    30 June 2002.

    Net interest cover on a cash basis of 12.7 times was higher than last
    year's 10.9 times and remains well above the group's policy level of
    a minimum of four times.


    Following the acquisition of the Howard Smith hardware and industrial
    and safety businesses, there is an increased diversity and balance in
    profit contribution from the group's business units as illustrated in
    the following graphs.

    Further details of the contributions made by each of the operating
    businesses to the group's results are set out below.


    Operating revenue for the Bunnings hardware business increased by 122
    per cent from last year's $1.4 billion to $3.1 billion. Earnings
    before interest and tax (before goodwill amortisation) of $297
    million were 117 per cent higher than the $137.1 million earned in

    Increased revenue and earnings were due to the inclusion of Howard
    Smith's BBC hardware acquisition from August 2001 and strong growth
    in the combined network.

    Total sales for the whole Bunnings/BBC/Hardwarehouse network on a
    full-year basis were 14.7 per cent above the previous year. Retail
    cash sales increased by 17.5 per cent above last year and represented
    76.5 per cent of total sales whilst trade credit sales increased by 9
    per cent above last year and were 23.5 per cent of total sales.

    Store-on-store growth in the combined network, excluding stores not
    trading for the full period or those affected by opening or closing
    of stores, was 11 per cent. Growth in the Bunnings' outlets was 12.4
    per cent. BBC/Hardwarehouse growth, on a comparable basis, was lower
    at 9.8 per cent but represented a significant improvement on the 5.8
    per cent annualised growth recorded in the first quarter of the year.

    During the year, seven new warehouse stores were opened and three
    were closed, resulting in 111 operating warehouse stores at year-end.
    The number of traditional stores trading at 30 June 2002 was 114,
    with 28 closures during the year. A total of 18 WA Salvage stores
    were operating at year-end with two new stores opened and one store
    closure during the year.

    Integration of Howard Smith's hardware division has progressed
    satisfactorily. A more detailed integration report is attached.


    Operating revenue of $964 million from the group's energy businesses
    was in line with budget but marginally lower than in 2000/2001.
    Earnings before interest and tax (before goodwill amortisation) of
    $236.9 million were 24 per cent higher than the $190 million earned
    last year due to strong growth in coal earnings.


    Domestic liquified petroleum gas (LPG) sales volumes were ahead of
    budget but lower than last year's due to the commencement of the
    Eastern Australian-based Unigas autogas joint venture in August 2001
    and general weak demand for autogas. Despite above budget earnings in
    the traditional Australian gas distribution activity, the poor
    autogas performance, together with below budget sales volumes and
    profit margins in the Bangladesh LPG import and distribution
    business, resulted in Kleenheat's earnings for the year being
    marginally below budget and last year's.

    Wesfarmers LPG's export volumes of 225,000 tonnes were ahead of
    budget but below last year's 235,000 tonnes due to shipment timing
    differences. The lower export volumes and weaker international LPG
    prices more than offset increased domestic sales and resulted in
    revenues and earnings being below budget and those of last year.

    In September 2001 Wesfarmers acquired a controlling interest in
    StateWest Power which specialises in the supply of electricity to
    mining operations and regional centres. Performance during the year
    was in line with expectations and the current major focus is on
    completion of the Mid West power project, which will provide power to
    six Western Australian country centres over the next ten years.

    Earnings from the 40 per cent-owned Air Liquide WA were above last
    year's with strong growth in the health services sector and bulk
    sales offsetting reduced demand for cylinder products. In a major
    milestone, June 26 saw the achievement of ten years without a
    lost-time injury.


    Sales of 3.6 million tonnes of coal in 2001/2002 from the Premier
    mine in Collie, Western Australia were in line with last year but
    below budget, due mainly to a continued shortfall in deliveries
    required by the mine's major customer, Western Power. However,
    earnings were in line with budget despite the volume shortfall, due
    to reductions in production costs.

    The Curragh coal mine in Queensland performed well ahead of
    expectations. Total sales volumes of 6.0 million tonnes were more
    than 20 per cent higher than last year's. Overburden removal and coal
    production were both higher than last year to meet the increase in
    sales volumes.

    Earnings were ahead of budget and rose significantly from last year's
    result due to a combination of increased export and domestic volumes,
    stronger selling prices and favourable exchange rates.

    During the year, Curragh's Coal Preparation Plant was upgraded to
    improve yield, the initial development of the Curragh East deposit
    was completed and work began on the second stage of the development.

    Wesfarmers holds a 40 per cent interest in the Bengalla coal mine in
    New South Wales. Lower domestic sales volumes, which were down 20 per
    cent versus the prior year, together with less than budgeted volume
    growth in export markets due to weak demand and strong competition,
    resulted in total sales volumes slightly below last year's. Earnings
    were above last year's due to higher prices but were below budget.


    The industrial and safety businesses reported operating revenue of
    $1.1 billion and earnings contribution (before goodwill amortisation)
    of $84.8 million for the eleven months from August 2001. Earnings
    before interest and tax (after goodwill amortisation) were $61.7
    million, a pleasing result considering the mixed trading conditions
    in the Australian industrial sector over this period, with two major
    customers failing.

    The integration of the Protector and Atkins Carlyle businesses has
    been completed. Work is well progressed to enable all businesses to
    operate from two information technology platforms, one in each of
    Australia and New Zealand.

    The Australian Blackwoods' business units returned a solid result,
    with the Northern and Southern regions performing strongly. The
    Australian safety businesses (Alsafe and Protector) experienced
    growth in sales and earnings. All of the New Zealand businesses
    achieved sales and earnings results which exceeded budget.


    Operating revenue in the Wesfarmers Landmark rural services and
    Wesfarmers Federation Insurance businesses was $1.6 billion as
    against $1.3 billion last year. Earnings before interest and tax
    (before goodwill amortisation) of $89.2 million were 47 per cent
    above last year's $60.2 million.

    The results reflect the synergies and scale achieved in the rural
    service businesses from the acquisition of IAMA Limited in February
    2001 and positive trading conditions across major areas of

    Merchandise and fertiliser sales increased by 33 per cent on last
    year's figures. These results were strongly influenced by the IAMA
    acquisition. Apart from wool, which is being impacted by lower
    production levels, all other activity areas achieved higher revenue
    and gross profit results, with the livestock and real estate
    operations performing strongly.

    Premium income for Wesfarmers Federation Insurance grew by 16.6 per
    cent and earnings were ahead of budget and similar to last year's
    record result due to strong expense management. This outcome was
    achieved despite a high level of crop related claims and is
    particularly pleasing given the difficulties being faced by other
    insurance companies in Australia and internationally.


    Operating revenue of $464 million was recorded by the group's
    fertilisers and chemicals business segment, representing growth of
    six per cent over 2000/2001 with higher sales in both fertilisers and
    chemicals. Earnings contribution (before goodwill amortisation) of
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