Wesfarmers, an Australian conglomerate, has announced a 4.8% increase in its annual net profit. The company reported a net profit of 2.47 billion Australian dollars (US$1.59 billion) in the 12 months through June, compared to A$2.35 billion the previous year. Earnings before interest and tax also rose by 6.3% to A$3.86 billion, while annual revenue increased by 18% to A$43.55 billion.
Despite the positive financial results, Wesfarmers provided a mixed outlook for fiscal 2024. The company’s retail businesses are expected to benefit from consumers trading down to lower-priced products due to elevated inflation and higher interest rates. Wesfarmers’ retail brands, including Kmart, Bunnings, and Officeworks, are well-positioned to meet this shift in consumer demand.
However, the commodities unit of Wesfarmers is expected to face a significant decline in earnings. The industrial business WesCEF, which deals with ammonia and gas, is likely to see a sharp decline in fiscal 2024 due to lower ammonia prices and higher input gas costs. Fortunately, the company anticipates a boost from its new lithium business, which is set to begin production in fiscal 2024.
Managing Director of Wesfarmers, Rob Scott, commented on the financial results, stating, Wesfarmers’ net profit growth of 4.8% reflected strong combined divisional earnings growth, partially offset by a significant change in non-cash property revaluations recorded at the Group level. He also acknowledged that Wesfarmers’ operating businesses have responded well to trading and market conditions.
Looking ahead, Wesfarmers expects cost pressures in Australia and New Zealand to remain elevated, driven by inflation, labor market constraints, wage cost increases, and domestic supply chain costs. As a result, the company will closely monitor these factors and adapt its strategies accordingly.
Overall, Wesfarmers’ annual net profit growth demonstrates the company’s ability to navigate challenging market conditions. While the commodities unit may face some headwinds, the retail businesses are well-positioned to capitalize on changing consumer preferences. As fiscal 2024 unfolds, Wesfarmers will focus on leveraging its strengths and staying agile in response to market dynamics.
