Wesfarmers Flags $1.6 Billion Writedown on Coal, Targetby
Target chain faces accelerating competition, company says
Slower recovery in export coal prices and volatility seen
Wesfarmers Ltd. flagged as much as A$2.15 billion ($1.6 billion) in writedowns for its struggling Target department store chain and coal assets in Australia’s Queensland state.
The Perth-based company expects a pretax impairment of A$1.1 billion to A$1.3 billion for Target in its full-year results, it said in a statement Wednesday. Wesfarmers also expects a pretax impairment of A$600 million to A$850 million for its Curragh coal business.
“The decisions which we have outlined today reflect more difficult market conditions in both Target and Curragh, but we remain confident that operationally we have the right plans to improve future performances over time,” said Managing Director Richard Goyder.
In coal, Wesfarmers cited forecasts for a slower recovery in export prices and higher volatility, while Target faces increasing competition, according to the statement. The company’s final dividend will be based on net profit after tax, excluding the impairment charges, it said.
Wesfarmers’ shares declined 2.2 percent to A$41.03 at 10:22 a.m. in Sydney, compared with a 1.5 percent gain for the benchmark S&P/ASX 200 Index.
The company expects an underlying earnings before interest and tax loss at Target of about A$50 million for the full year, due to high levels of seasonal stock clearance and lower gross margins, according to the statement. Wesfarmers also flagged restructuring costs and provisions of about A$145 million for Target. Target’s impairment reflects a writedown of its share of goodwill from the acquisition of the Coles supermarket chain, according to the statement.