Wesfarmers announces increased dividend despite second half earnings slowdown

Company News

by Glenn Dyer

Shareholders in Wesfarmers (ASX:WES), the conglomerate that owns Bunnings, Kmart/Target, Officeworks, and a range of industrial enterprises, are set to receive a higher dividend for the fiscal year ending in June, even in the face of a second-half earnings deceleration.

The net profit after tax for the 2022-23 period amounted to $2.47 billion, up from $2.35 billion the previous year. However, second-half earnings saw a decline of approximately $80 million compared to the same period in 2021-22.

Nevertheless, Wesfarmers has declared a final dividend of $1.03 per share, combined with the interim dividend of 88 cents per share. This brings the total annual payout to $1.91 per share, marking a 6.1% increase from the previous year's $1.80 per share.

Revenue growth also experienced a slowdown, reaching 18% at $44.35 billion for the entire year, down from the 27% growth in the first six months until December.

Bunnings, the prominent hardware chain, reported a marginal 1.2% increase in earnings for the year, totaling $2.23 billion. This growth rate was slightly lower than the 1.5% growth recorded in the first half of the fiscal year.

Kmart, including Target, witnessed a substantial 52.3% surge in earnings, reaching $769 million. This growth was attributed to the reopening of the economy following pandemic-related closures in the 2021-22 financial year, during which most department stores faced restrictions or complete closures. This significant earnings increase from Kmart/Target contributed to the overall 4.8% rise in earnings and instilled the confidence to raise dividends.

Officeworks experienced a notable 10.5% rise in earnings, totaling $200 million, while WesCEF, responsible for chemicals, energy, and fertilisers, achieved a 30% increase in earnings, reaching $669 million for the year. However, this marked a slowdown from the 48% growth recorded at the halfway point in December.

On the other hand, the online business faced challenges, incurring a loss of $168 million in the 2022-23 period. This loss nearly doubled the previous year's loss of $88 million, surpassing the interim loss of $108 million in the same fiscal year.

CEO Rob Scott commented that the results demonstrate the strength of the Group's operating model and the portfolio's quality, offering a unique blend of resilience and growth. He highlighted the robust divisional earnings growth of 12.9% for the year, as the company's operating businesses adeptly navigated trading and market conditions.

Scott also emphasised Wesfarmers' unwavering commitment to long-term shareholder returns, as well as its dedication to advancing key growth projects and improving productivity and efficiency across its businesses. The CEO noted solid performance in Bunnings, strong earnings growth in Kmart Group and WesCEF, and significant earnings growth in Officeworks.

Additionally, Scott acknowledged the ongoing improvement in Wesfarmers Industrial and Safety, along with the accelerated transformation activities in the new Health division. While the results from the Catch venture were disappointing, investments in digital and e-commerce initiatives contributed positively, and actions taken during the year facilitated progress in the latter half.

In conclusion, Wesfarmers achieved a 4.8% NPAT growth, primarily driven by robust divisional earnings growth, although partially offset by notable changes in non-cash property revaluations at the Group level.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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