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Wesfarmers result lifted by Bunnings

NZ Newswire logoNZ Newswire 15/02/2017 Rebecca Howard

ASX-listed conglomerate Wesfarmers on Wednesday reported strong earnings growth in the first half, bolstered by results in Bunnings Australia and New Zealand, Kmart and Officeworks.

The company reported a net profit of A$1.58 billion in the six months to December 31, up 13 per cent on the year. Operating revenue was A$34.9 billion, up 4.3 per cent on the year. It announced an interim dividend of A$1.03 per share, also a 13 per cent increase on the year.

"Total retail earnings were in line with the prior corresponding period, with very strong results reported for Bunnings Australia and New Zealand (BANZ), Kmart and Officeworks," managing director Richard Goyder said. "The continued momentum in these businesses was particularly pleasing and reflects the strong market positions they have each established."

BANZ reported earnings growth of 9.8 per cent to A$770 million with revenue growth of 8.3 per cent. It did not break down specific figures for New Zealand.

Mr Goyder said the strong result included store-on-store sales growth of 6.5 per cent and a 317 basis point improvement in return on capital to 39 per cent. Bunnings, the dominant player in Australia, now has 53 stores and trade centres in New Zealand compared to 301 in Australia. Nine new stores opened between June and December and two were closed. A further 11 are under construction.

New Zealand's construction sector is experiencing a boom as demand for building supplies was underpinned by the Canterbury rebuild for several years and is now being supported by the multi-billion dollar pipeline of work needed to address the housing shortage in Auckland.

Wesfarmers' Kmart business also fared well, with earnings up 16 per cent to A$371 million on revenue growth of 8.9 per cent. New Zealand has 19 of the company's 214 Kmart stores.

The company said it has commenced a strategic review of its Officeworks division which could include an initial public offering.

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