Here's why Bunnings was once again the star performer for Wesfarmers Ltd

Shareholders in Wesfarmers Ltd (ASX:WES) might think it's all about Coles these days, but Bunnings is arguably still the best business within the conglomerate.

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Just where would the blue-chip Wesfarmers Ltd (ASX: WES) be without its star business Bunnings? That's the question shareholders will be asking themselves after the release of the conglomerate's first half results today.

Earnings before interest and tax (EBIT) from the group's Chemical, Energy and Fertiliser division fell 13.6% to $95 million, despite a 4.9% rise in revenues with management pinpointing the Kleenheat Gas business as the culprit for the decline.

Meanwhile, the Resources division recorded a 9.8% dip in revenues and a huge 40.7% drop in EBIT, despite a 4.4% increase in total coal production. The main culprit here, was of course lower coal prices.

The Industrial and Safety division also struggled with EBIT declining 31.5% despite a 3.9% increase in revenue. This division appears to be facing a number of headwinds with management highlighting subdued customer and project activity, pressure on margins, intense competition and a rise in the cost of imports as contributing factors.

Retail business saves the day

Given the strain on earnings from Wesfarmers' non-retail businesses, it would appear a prudent move to diversify the group's interests into retail. While Target is still struggling – revenue fell 1.5% and EBIT was flat – Kmart, Officeworks, Coles and Bunnings all excelled.

Kmart increased revenue 5.2% and EBIT by 11.2%; Officeworks grew revenues 7.7% and EBIT 19%; Coles expanded revenue by 2.8% and EBIT by 7.1%; and Bunnings achieved an impressive 11.8% increase in revenues and 10% increase in EBIT.

What is staggering is that Bunnings, which reported nearly $5 billion in revenues for the half, produced $618 million in EBIT. In comparison, the Coles division had $19.5 billion in revenue and made $895 million in EBIT. The profit margin and total earnings that Bunnings contributes is exceptional – it's no wonder Woolworths Limited (ASX: WOW) wants a slice of the action via its Masters Home Improvement offering.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned.  

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