Wesfarmers' underlying earnings fall 3.6pc
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The diversified conglomerate's underlying earnings meet Morningstar's expectations but reported profit falls 83 per cent on the back of over $2 billion in impairments.
Wesfarmers' (ASX: WES) net profit for fiscal 2016 fell 83 per cent to $407 million after the diversified conglomerate made over $2 billion in non-cash write-downs of its Target retail business and Curragh coal mine, while also booking $145 million in costs as part of its restructuring of Target.
Excluding these items, net profit for the full year fell 3.6 per cent to $2,353 million, broadly in line with Morningstar's expectations.
Earnings per share before one-off items fell 3.1 per cent to $2.09, also in line with Morningstar's forecast.
Wesfarmers declared a final ordinary dividend of 95 cents a share, bringing the full-year ordinary dividend to $1.86 per share, fully franked.
The full-year payment was just short of Morningstar's expectations for a dividend of $2.00.
The final dividend will be paid on 5 October 2016 to shareholders on the record as of 30 August 2016.
Wesfarmers managing director Richard Goyder said strong performances across the majority of the group's businesses were offset by challenging trading conditions and restructuring activities in Target, as well as the impact of low commodity prices in the Resources business.
"Excluding Target, the retail portfolio delivered growth in earnings before interest and tax (EBIT) of 7.5 per cent," Goyder said in a statement to the ASX on Wednesday.
"In a competitive environment, the group's retail businesses continued to invest in customer value, service, stores and online, as well as improved merchandise ranges to deliver long-term growth and improved returns.
"This growth was offset by weak underlying performance in Target, as well as the cost of restructuring activities following the creation of the Department Stores division in February 2016 to provide a stronger platform for future growth."
While not providing any specific earnings guidance, Goyder said competition in the retail sector is expected to remain "robust.
The outlook for the group's Industrials division remains "challenging in the short-term," he said, while the Resources business will continue to focus on improving operational efficiency.
"While its earnings will be largely dependent on export coal prices and exchange rates, the business will report lower depreciation and lower hedge losses in the 2017 financial year," Goyder said.
Goyder also said Wesfarmers will continue to evaluate "all strategic options" for the Resources business.
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Nicholas Grove is a Morningstar journalist.
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