Wesfarmers Limited

Wesfarmers reported net profit after tax of $1.6 billion, up 9.3% year on year. Divisional earnings increased 6.8% overall. Bunnings sales grew 4%, with earnings of $1.39 billion, up 5% excluding net property contributions. Kmart Group earnings were $683 million, up 6.1%. WesCEF earnings rose 18.1% to $209 million, including lithium for the first time; lithium earnings were $6 million. Officeworks sales increased 4.7% but earnings fell to $68 million, down $19 million year on year, in line with prior guidance. Wesfarmers Health earnings were $38 million, including $7 million of amortization expenses; excluding amortization and prior-period restructuring costs, earnings increased 9.8%. Industrial and Safety revenue excluding Coregas rose 1.3% to $869 million. Group operating cash flow fell 3.3% to just under $2.5 billion, while free cash flow rose 35.6% to $2.75 billion. Gross capex was $619 million; net capex was $311 million after $274 million of BPI sale proceeds. Net financial debt increased to $4.9 billion, debt-to-EBITDA moved from 1.7x to 1.9x, and available committed unused bank facilities were around $1.3 billion. For FY26, net capex excluding BPI sale proceeds is expected to be between $1 billion and $1.3 billion. Management said 2H retail trading has started well, Bunnings and Officeworks sales growth are broadly in line with 1H, Kmart sales growth is stronger, and WesCEF 2H earnings are expected to be profitable and slightly above 1H.

Rob Scott emphasized that Wesfarmers is focused on top-quartile long-term TSR through customer value, productivity, sustainability and disciplined capital allocation. He highlighted that low prices and operating leverage are working well in businesses like Bunnings and Kmart, and that newer growth platforms in lithium and health are still early in their development. He also framed AI and digital tools as a way to accelerate existing strategies, not replace them, with a people-first, digitally-enabled approach and training for all 120,000 team members.

Anthony Gianotti walked through a stronger first half on earnings and cash, with divisional earnings up 6.8%, operating cash flow just under $2.5 billion, and free cash flow up to $2.75 billion thanks largely to Coregas and BPI sale proceeds. He pointed to solid cash realization of 103%, gross capex of $619 million, and net capex of $311 million after sale proceeds, while noting FY26 net capex excluding BPI proceeds should land between $1 billion and $1.3 billion. On the balance sheet, he said net debt rose to $4.9 billion after the $1.3 billion ordinary dividend and $1.7 billion capital management distribution, but debt metrics remained comfortably within investment-grade parameters, with average cost of funds down to 3.6% and unused committed facilities of around $1.3 billion.

Analysts pressed management on Bunnings’ sales growth, margin leverage and whether 4% growth is a mid-cycle ceiling; Bunnings said it remains committed to growing the top line, has been investing more than $120 million in price, and sees additional upside as the housing market recovers. Questions on Kmart focused on slower-than-expected revenue growth and Target weakness; management attributed the setback to the Queensland DC closure, a later summer and a highly promotional market, and said Target would have been broadly flat excluding the DC disruption. Officeworks was questioned on the rationale for its transformation program, and management said the business has more potential than current performance reflects, with a low-cost model, ERP replacement and a new Queensland DC intended to support lower prices and longer-term earnings growth. There was also a detailed exchange on AI and productivity: management said the transition involves costs, but these are being framed as practical, scalable investments already producing benefits in Bunnings.