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7 facts shareholders need to know about Wesfarmers Ltd’s profit result right now

Shares in blue chip company Wesfarmers Ltd (ASX: WES) could find support today thanks to a solid set of half year results for the six months ending December 31.

However, with the share price performing strongly throughout calendar year 2016 to rise 4.4%, compared with a 6% decline in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) it could be that investors have already factored in a solid result.

Here are 7 facts from today’s announcement:

  1. Operating revenue increased 4.7% to $33.5 billion
  2. Earnings before interest and tax (EBIT) grew 1.6% to $2.1 billion
  3. Net profit after tax gained 1.2% to $1.4 billion
  4. Earnings per share added 2.6% to $1.24
  5. A fully franked interim dividend of 91 cents has been declared, a rise of 2.2%
  6. Net debt increased 18.9% to $6.1 billion
  7. Underlying return on equity expanded by 0.3% to 10%

Positives and Negatives

The major positive from today’s result was the continued strong performance achieved across Wesfarmers’ portfolio of retail businesses (includes Coles, Officeworks, Bunnings, Target and Kmart), which produced a combined $176 million (or 9.2%) increase in EBIT.

Also pleasing was the performance of the Chemicals, Energy and Fertiliser businesses which achieved an increase in earnings thanks to strong plant performances, reduced gas input prices, and an initial contribution from the group’s interest in Quadrant Energy.

On the negative side was the substantial decline faced by the group from its Resources business primarily as a result of lower coal prices and unfavourable moves in the currency hedge book which led to a $158 million reduction in EBIT contribution. The depressed conditions in the resource sector also had flow on effects for Wesfarmers’ Industrial and Safety business.

Outlook

While the group’s overall results were solid in what is surely a difficult operating environment for the group, investors are of course focussed on what to expect next.

Wesfarmers provided guidance that the outlook for its retail-facing businesses is positive with good sales momentum. While the outlook for its industrial business is mixed with the group aiming for further cost reductions within the Resources division.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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