Wesfarmers revises first half profit

Coles owner Wesfarmers Ltd has warned it may slash dividends after flagging asset writedowns and greater provisions for some investments.
The conglomerate says it expects a first half net profit in fiscal 2009 of between $850 million to $880 million.

It also expects to make $150 million of writedowns, due partly to property
writedowns in the Coles division given reduced yield expectations.
Wesfarmers closed down 50 cents, or 2.86 per cent, to $16.99 on Wednesday after it
said it might cut its previous guidance of $2 a share dividend for its full fiscal
year.
Wesfarmers said the revised first half profit was "close to market expectations".
The diversified conglomerate had posted a net profit of $601 million in the same
period last year, but this was before the acquisition of Coles.
"The combination of concern over dividend, potential for more writedowns and the
prospect for capital raising has caused the market to be a little bit spooked," Fat
Prophets analyst Greg Canavan said.
The writedowns have also resulted from reductions in the value of several
investments as well as a provision for the closure of one of Kmart's distribution
centres, and higher workers' compensation provisions.
FW Holt retail analyst David Spry said dividend cuts and writedowns were expected
during tougher economic times.
"Dividend cuts in this environment are going to be part of the normal, and companies
that don't cut dividends that perhaps should are probably more punished by the
market than those that do," Mr Spry said.
"It's good move, I've always thought the payout ratio was too high.
"In this environment it should be about 65 per cent, not 100 per cent - it means it
will employ more funds into debt reduction.
"Every company that reports in the next month or so will probably will report some
sort of writedown, it's just the environment we're in."
Mr Spry said the market would focus on the Coles' results compared with rivals
Woolworths and Metcash.
"If you put all the three major players together, it's disappointing but they have a
five-year plan (for Coles) and they're confident about it, it's not going to be a
quick fix," he said.
"The store-on-store growth is running at 2.6 per cent, but they did note there is an
improvement in second quarter of 3.8 per cent, but it's nowhere near of what the
others are doing in this environment, which has been a good for food."
Wesfarmers managing director Richard Goyder said he remained confident that the
group would be able to turnaround Coles, and the preliminary results reflected the
benefits of the group's broad range of diversified businesses.
"I remain very confident that the turnaround of the Coles group over the five-year
timeframe we have set will continue to gain momentum and provide our shareholders
with satisfactory returns over the longer term."
Wesfarmers said earnings for its Bunnings and Target businesses continued to show
strong growth.