“Wesfarmers Ltd’s financial year 2023 result was marginally above our forecasts and in line with Bloomberg consensus,” Raymond said.
“Here are what we see as the key positives.
- Kmart Group and Officeworks earnings were ahead of our forecasts;
- Operating cash flow was up 82%;
- Financial year 2023 dividend per share (DPS) of 191 cash per share (cps) was comfortably above our forecast (179 cps) and Bloomberg consensus (184.5 cps).
“Of course, there were negatives and here are the key ones:
- Catch losses accelerated to -$163 million vs -$88 million in the prior year;
- Group earnings before interest and tax (EBIT) margin fell 100 basis points a share (bps) to 8.9%.
“Management’s outlook for the retail businesses was generally positive, while Wesfarmers Chemicals, Energy and Fertilisers (WesCEF) earnings (ex-lithium) are expected to fall significantly in financial year 2024 due to lower ammonia prices and higher input gas costs.
“We adjust financial year 24-25F group EBIT by between -2% and +3%, and underlying net profit after tax (NPAT) by between -3% and 2%.
“Our target price falls slightly to $55.15 (previously it was $55.50) and we maintain our Add rating,” Raymond said.
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