West Australian conglomerate Wesfarmers says downbeat coal price outlooks, debt refinancing and the Coles turnaround have all contributed to the recent weakness in its share price, but the company was well placed to tackle difficult market conditions.
At the company's annual general meeting on Thursday, managing director Richard Goyder said Wesfarmers was facing new challenges in difficult environment but it had performed strongly so far.
"We have traded strongly across our businesses for the first four months of this financial year and we are well prepared for more difficult markets ahead, through providing the products and services our customers want and strong management of costs, and working capital," Mr Goyder said.
Wesfarmers chairman Trevor Eastwood said the fall in company's shares have been generally in line with the market.
Mr Eastwood also reassures shareholders that the long-term demand for coal will remain strong.
"We cannot predict or control coal prices- except to say that we believe the long-term demand for coal will remain strong," Mr Eastwood said.
"However coal is a large part of the group's profit and the market's view of future coal prices will inevitably impact on our share price both positively and negatively."
Debt re-financing fears unfounded
Mr Goyder also said that concerns surrounding Wesfarmers debt refinancing were unfounded.
"Like many companies, Wesfarmers has a certain amount of its debt rolling every year and much of the worry seems to be because we have debt to be re-financed in 2009 and 2010," Mr Goyder said.
"We feel that the concerns that some have expressed around this issue are unfounded."
Wesfarmers has already re-financed more than six billion of debt facilities since April, including $800 million in the past two weeks, Mr Goyder said.
"This leaves less than $150 million that needs to be re-financed by 30 June 2009."
According to Wesfarmers, it has some $2.2 billion of debt due by December 2009, a standard revolving capital facility, and $5 billion due in October 2010.
Coles turnaround on track
Mr Goyder said that Wesfarmers five year turnaround of Coles was on track despite volatile conditions.
"We're working hard to reverse the barriers to growth that have constrained business in the past, and allow the people in the business to get on with the job at hand without being distracted or hindered by short-term earnings targets, lack of cohesive strategy and underinvestment in stores and people," he said.
"I want to emphasise that the changes we need to make at Coles are entirely within our control and need to be made regardless of external conditions," Mr Goyder reiterated.
Trading continued to be challenging for the Kmart chain, which was in the early phases of turnaround, but he was confident this business, along with Coles and Officeworks, would continue to improve.
Bunnings continued to perform strongly and Wesfarmers' resources operations were performing well, he said.
Mr Goyder said the Bunnings hardware chain had achieved a "great result in a tough trading environment" and would continue to expand, with 10 to 14 new stores annually.
He said he expected a "busy Christmas in a subdued spending environment" for its Target business.
Remuneration packages come under fire
During question time, shareholders slammed the company for giving its executives large remuneration packages in the midst of the global financial market meltdown.
The majority of shareholders applauded when numerous people queried the packages - particularly for Mr Goyder.
Shareholders were angry that their return on investment had dwindled as Wesfarmers' share price fell.
The report showed Mr Goyder's 2008 cash salary was $2.73 million, up from $2.28 million in 2007, although his share-based payments had been reduced.
Mr Eastwood said Wesfarmers was the 14th largest company on the Australian stock exchange but Mr Goyder was the nation's 48th top-paid executive.
Wesfarmers shares closed the day 6.18 per cent weaker to $18.06.
WES Price at posting:
$17.33 Sentiment: LT Buy Disclosure: Not Held
(20min delay)