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Highlights
- Wesfarmers' retail divisions are well equipped to manage inflationary pressures.
- The company is well-positioned for the post-COVID era, with existing divisions' skills improved and new platforms for future growth.
- In 2HFY22, inventory levels are expected to remain high.
In an ASX filing today (2 June 2022), Wesfarmers Limited (ASX:WES) has briefed its 2022 strategy. Following this, a presentation will be held at a Strategy Briefing Day in Sydney.
Meanwhile, shares of Wesfarmers were trading 0.82% lower at AU$47.19 each at 11.24 AM AEST on ASX.
Key Highlights
- Wesfarmers' retail divisions are well equipped to manage inflationary pressures and view this as an opportunity to grow share while extending value credentials profitably.
- The Group is well-positioned for the post-COVID era, with existing divisions' skills improved and new platforms for future growth in place.
- Wesfarmers' portfolio is constantly evolving, and new growth platforms will be developed in the coming years:
- WesCEF expansion through the Mt Holland lithium project.
-API and the new Health division have received funding to help them grow and enhance their performance.
- Creating a large-scale, distinctive retail environment that combines the strength of retail brands and store networks with OneDigital's value-added services.
- Ongoing emphasis on quickening the pace of continuous development and incorporating sustainability into all parts of Group strategies.
Source: © Mast3r | Megapixl.com
In the first half of the financial year 2022 (1HFY22), inventories were so high, driven by domestic supply chain disruptions and higher commodities prices. Wesfarmers anticipates normalising the inventory balances over time. In 2HFY22, due to Priceline Pharmacy chain owner Australian Pharmaceuticals Industries, inflation and commodity prices, and continuous prioritising of stock availability, inventory levels are expected to remain high.
Also Read: Wesfarmers (ASX:WES) completes API (ASX:API) acquisition, shares fall
Further, Wesfarmers informed that it expects FY22 net capital expenditure of $900 million to $1000 million. This includes around $320 million for the Mt Holland lithium project development.
Wesfarmers is constructing a mine in Mt Holland, Western Australia, and a processing plant in Kwinana. The ore will be processed into battery-grade lithium hydroxide at the processing plant. Wesfarmers has teamed with SQM of Chile, one of the world's largest lithium producers.
The growth in net CAPEX reflects data and digital investment, and network investment.
Source: © Igorbukhlin | Megapixl.com
Environment, social and governance (ESG) update
The divisions have all recognised possibilities to produce considerable long-term value by incorporating greater ESG-awareness into their operations and strategies over a lengthy period. ESG awareness has also aided Wesfarmers' capital allocation strategy.
Wesfarmers' new unit OneDigital (excluding Catch) is expected to lose roughly $70 million in full-year 2022, compared to a net loss of $10 million in 2021. This is $30 million less than previous guidance for developing its subscription service, which will be deferred until the next fiscal year when an operating loss of $100 million is expected.
Outlook
Wesfarmers said that a robust worldwide ammonia price is projected to benefit chemical companies. Saudi CP is also projected to continue to boost energy earnings.
The company further anticipated that the earnings would be influenced by worldwide commodity prices, exchange rates, and competitive factors.
Also Read: From Wesfarmers to JB Hi-Fi: How these 4 ASX retail stocks fared in 1H22
