(Reuters) -Australian retail conglomerate Wesfarmers Ltd on Wednesday warned persistent cost pressures in certain key markets will trigger supply chain bottlenecks in the second half even as it recorded double-digit growth in first-half profit.
Wesfarmers flagged significant cost increases in its Australia and New Zealand markets in the second half, as “general inflation together with labour market constraints impact personnel costs and costs in domestic supply chains”.
The conglomerate said it expects to incur a net capital expenditure of between A$1.00 billion and A$1.20 billion in fiscal 2023.
The Perth-based company, however, said normalised trading conditions aided its first-half earnings after all the disruption caused by COVID-19 lockdowns a year earlier.
Half-year net profit after tax stood at A$1.38 billion, compared with A$1.21 billion a year earlier, beating analysts’ expectation of A$1.37 billion, according to Refinitiv data.
The company recorded solid earnings growth across all its divisions. Earnings before tax from Bunnings, which is Australia’s no. 1 hardware chain, was A$1.28 billion ($894.34 million) for the six months ended Dec. 31, up 1.5% from a year earlier.
Home improvement chain Bunnings is Wesfarmers’ star unit and brought about 65% of the group’s profit in fiscal 2022.
Wesfarmers’ half-year performance was largely aided by strength in its Chemicals, Energy and Fertilisers (WesCEF) unit as strong prices for ammonia and related products cushioned a pleasing performance during the period.
“WesCEF is expected to continue to benefit from favourable commodity prices in the second half, and will continue to advance offtake discussions with key lithium customers,” the company said.
The company declared an interim dividend of 88 Australian cents per share, an increase of 10.0% from a year earlier.
($1 = 1.4312 Australian dollars)
(Reporting by Roushni Nair and Riya Sharma in Bengaluru; Editing by Krishna Chandra Eluri)
