Wesfarmers Ltd. is more than a hundred-year-old business established as a Western Australian Farmers’ cooperative in 1914. It is a company to provide merchandise and services to the countryside community. The Wesfarmers share price had a hard time in the fiscal year 2022, dropping approximately 30%. The company had an excellent FY20 and FY21, but the shares came down in 2022.
Wesfarmers reaped financial rewards in FY20 and FY21 through significant boosts with do-it-yourself (DIY) projects at home. This boom started to fade when the Australian economy and ASX entered a new phase of increasing interest rates, higher energy costs, and widely elevated inflation.
As the pandemic restrictions were being lifted, CEO Rob Scott said, “we’re certainly seeing inflation pressure across the board.”
The company, at different times, has maintained and managed several Australian retail brands, such as Kmart, Target, and more. Currently, its most prominent project is Bunnings Warehouse, the DIY home enhancement business. Wesfarmers have owned the chain since 1994. Bunnings maintains a 50% market share in the home-improvement space.
Impact of the Pandemic on Wesfarmers Share Price
Wesfarmers dividend took a hit after the business was affected by consecutive outbreaks of COVID-19 and the instability in the supply chain, causing the company’s share to drop. The leading business segment of the company, which makes 70% profit, also went through a rare profit decline. This slump was caused by inflation associated with blockages in the supply chain and increased costs of critical materials like steel and timber. The government-instructed closures of the store also affected substantial retail.
Current Share Price Valuation
According to financial analysts, the Wesfarmers share price is at an attractive level. It is just in a lousy position in an economic cycle, which always happens. Also, after a considerable drop in the P/E ratio, the boost in share price looks much more achievable now.
The dividend is fully franked. In the past decade, 17% annual return has been achieved by the company. Approximately 85% of Wesfarmers profit is paid back to shareholders as dividends. The company’s current dividend yield is a healthy 7.4%, and it has the potential to increase it further, especially after the COVID-19 issues have faded. The company provides a plan to its shareholders for convenient investments and reinvestments.
Liabilities of Wesfarmers
The latest balance sheet states that the company has liabilities of AU$8.54b to be paid within the next 12 months and liabilities of AU8.95B$ to be paid beyond 12 months. Although the debt is a massive risk to Wesfarmers at the moment, it can make its balance sheet strong by raising capital. It is also noteworthy that while the Wesfarmers shares at the moment are not considered very desirable by the shareholders, it could be a buying opportunity for non-shareholders.
Wesfarmers’ Expected Earnings Projections
Wesfarmers share price and profits are expected to increase in FY23 and FY24. It is also projected that it will once again have the investor’s trust after seeing the evaluated profit.
Bunnings Warehouse was established in1886 by two brothers and is named after the founders, Arthur and Robert Bunning. The business offers around 45000 products, including; flooring, plumbing, and electrical products, hand and power tools, indoor and outdoor lighting, home storage, garden furniture, and building supplies.
Wesfarmers and Coles Group
The company reported that it sold 2.1% of Coles Group (supermarket chain). However, it did not report the total value of the business deal.
Wesfarmers in the Digital Space
The company’s moves into the digital space are facing much criticism as it is expected to affect the Wesfarmers shares price. The recently launched OneDigital data and e-commerce is expected to incur a loss of $180million in the fiscal years 2022 and 2023.
With the ongoing decline in the price of Wesfarmers shares, an investor presentation was delivered by Wesfarmers about how it will grow each project. For example, with Bunnings, the company plans to expand business by opening 15 to 20 new warehouses. It is also focusing on providing quality at a low cost. With Kmart, it intends to enhance the web-based customer experience to generate better revenue.
Acquisition of API
Wesfarmers completed the acquisition of Australian Pharmaceutical Company (API) for $763 million. API deals in wholesale and retail pharmaceutical, personal, beauty, and care products. It was acquired on March 31, 2022, and was delisted from the ASX on April 1, 2022. This business unit is expected to develop new opportunities in the health and wellbeing sector.
Anticipated Boom in Fertiliser Business
The fertilizer business is expected to see some advantages due to the recent price hike caused by restrictions on Russian fertilizer because of their current actions against Ukraine. The company is currently trading on a price-to-earnings ratio of 25X, and it is expected to increase Wesfarmers share price in the future.
That is all about Wesfarmers and their shares for now. Hopefully, the information provided in this article is helpful. If you like reading about technology, business, science, history, tourism, life, fashion, and more, keep visiting The Australia Time to read about the topics of your interest.
Here are some answers to the frequently asked questions about Wesfarmers to give you additional information about the company.
Who owns Wesfarmers?
There are more than 487,000 shareholders in the company. Wesfarmers is domiciled and incorporated in Australia and is limited by shares, with its headquarters in Perth.
Who do Wesfarmers own?
Wesfarmers owns various businesses operating in industries like home development and outdoor living, clothing and standard merchandise, and office supplies. It also has an industrial segment with energy, chemicals, and fertilizers businesses, and manufacturing and security providing products.
Businesses that helped improve Wesfarmers share price:
- Bunnings (Bunnings trade, Bunnings warehouse)
- KMART Group (Target, Kmart, Catch Group)
- Wesfarmers Chemicals, Energy and Fertilisers (Energy, Chemicals & Fertilisers, Covalent Lithium, AGR, QNP, ModWood, Kleenheat, Australian Vinyls Corporation)
- Wesfarmers Industrial and Safety (Workwear Group, Industrial & Safety, Greencap, Coregas, Blackwoods, Protector)
- BWP Trust
Is Wesfarmers owned by China?
The company is an Australian conglomerate and has grown into one of Australia’s largest listed companies. It is a $49billion business and the country’s biggest employer with more than 110,000 staff members.