By Archishma Iyer
(Reuters) – Wesfarmers Ltd cautioned on Friday that persistent inflation pressures and higher interest rates are expected to affect demand in parts of the Australian economy, as the conglomerate posted an expected 5% rise in annual profit.
“Cost pressures in Australia and New Zealand are expected to remain elevated, driven by inflation, labour market constraints and wage cost increases,” Wesfarmers Managing Director Rob Scott said in a statement.
Sales growth for the company’s KMart business moderated from the second half of the fiscal year 2023, although it benefited from strong trading results overall in the first seven weeks of the current fiscal year.
Australia’s largest-listed conglomerate said net profit after tax in the year to June 2023 came in at A$2.47 billion compared to A$2.35 billion a year earlier. The result was in line with a Refinitiv Eikon estimate and 1% above the Visible Alpha consensus.
In an effort to continue expanding its exposure to lithium, its Covalent lithium project is expected to contribute 50,000 metric tons of assumed lithium oxide, should there be a successful commission and ramp-up of the concentrator at the Mount Holland mine in Western Australia.
Earnings from the lithium business were expected to start in the first half of 2024 from the sale of interim spodumene concentrate.
“Spodumene concentrate offtake agreements with tier-one customers are well progressed and are expected to be executed in the second half of the 2023 calendar year,” Scott said.
The company said earnings from its biggest money-generating segment, hardware chain Bunnings, rose 1.2% to A$2.23 billion ($1.4 billion) from a year ago, with strong demand from commercial customers in the second half of the fiscal year.
“Wesfarmers reported a good FY23 result, with sales growth momentum in early FY24 mixed,” analysts from E&P Financial said in a research note.
Wesfarmers said it would pay a final dividend of 103 Australian cents per share.
($1 = 1.5584 Australian dollars)
(Reporting by Rishav Chatterjee and Archismha Iyer in Bengaluru; Editing by Maju Samuel and Stephen Coates)