record dips

Wesfarmers' record dips
By Andrew Fraser
May 08, 2002
INDUSTRIAL conglomerate Wesfarmers produced another record result yesterday, but in a nervous market it was not enough to prevent a fall in its stock price.

Wesfarmers unveiled an operating profit for the first three quarters of this year of $281.3 million, some 61 per cent above its performance over a similar period last year. Operating revenue of $5.4 billion was 79 per cent higher than last year's $3 billion.

The company also maintained its prediction that its full-year performance would exceed the $379 million it predicted early in the year.

But despite this, its share price dropped during the day from $30.08 to $29.40, about 2 per cent -- although the drop reached 3 per cent earlier in the day.

Most analysts agreed that the result was a good one -- one called it "simply outstanding" -- and the share price markdown was largely the result of a highly nervous market.

"The big fear is where the bombs are going to go off and no one wants to be holding one when it does," one analyst said.

Wesfarmers has yet to con duct its market briefings on the results but these are scheduled for tomorrow and Friday, so a more accurate picture could emerge by the end of the week. The main contributor within the company was the hardware division, where the acquisition of BBC/Hardwarehouse into Wesfarmers subsidiary Bunnings Warehouse was responsible for an increase in operating revenue of 122 per cent to $2.3 billion, while earnings nearly doubled to $220 million.

The branding of the former BBC/Hardwarehouse stores as Bunnings stores should be completed by October, although three Hardwarehouse stores and 24 traditional BBC stores will close by the middle of the year as a result of the integration.

Because the company's focus has been on this integration rather than opening new stores, only seven new warehouse stores will be open this year but, in future years, this should return to the previous level of 10 to 12 each year.

Wesfarmers' other main division, its energy section, which runs mines in Western Australia, NSW and Queensland, also returned an increase in earnings of 24 per cent to $173 million, largely because of better coal prices.

The only section of Wesfarmers' operations which caused some concern was the industrial and safety products section, where the company said both revenue and earnings "were slightly below expectations due to tough trading conditions in a few specialist businesses and marginally lower than expected sales of industrial products in NSW".