Bitter harvest for Wesfarmers
Rising coal and insurance costs have combined to take a chunk of the full-year earnings of Wesfarmers, with the diversified conglomerate posting a drastic 25% drop in net profit.
With the market unsettled over the WA giant’s acquisition of Coles, Wesfarmers has revealed its full-year earnings rest on similarly shaky ground as profit dived to $786,338 despite a 10% lift in total revenue.
MD Richard Goyder chose to focus on the company’s strong growth in the Bunnings home improvement division, which saw cash sales rise 10.4%.
“Our other four business divisions also contributed more than in 2005/06, boosted by the inclusion of part-year income streams from new acquisitions in insurance and energy,” he said.
Profit was down 9.6% on a normalised basis from the previous year.
Wesfarmers insurance assets, which contribute nearly 15% of the group’s consolidated revenue, laboured as reduced premiums and increasing claims costs put profitability into free-fall.
Overall revenue from the underwriting and broking assets rose 26% to $1.41 billion – bolstered by mid-term income streams from OAMPS and Crombie Lockwood – but profit fell 3.6% on rising liabilities and depreciation.
Lumley’s Australian and NZ arms were the most adversely affected by the softening market and rising claims. Their insurance margins were cut in half to 7% and 5.2% respectively.
Wesfarmers blamed the results on higher than expected claims as a result of the storms in Newcastle and Victoria and Cyclone George in WA, and falling premiums across the board – particularly in commercial motor, property and liability lines.
Lumley NZ has weathered intense competition and falling premium rates.
“The challenging trading environment has put pressure on loss and expense ratios, culminating in a disappointing overall profit margin,” the company said. “Plans are now in place to mitigate this.”
The performance of Wesfarmers Federation Insurance was a rare fillip for the company, with earned premiums rising 2.5% and the insurance margin up slightly to 16.1%.
With the market unsettled over the WA giant’s acquisition of Coles, Wesfarmers has revealed its full-year earnings rest on similarly shaky ground as profit dived to $786,338 despite a 10% lift in total revenue.
MD Richard Goyder chose to focus on the company’s strong growth in the Bunnings home improvement division, which saw cash sales rise 10.4%.
“Our other four business divisions also contributed more than in 2005/06, boosted by the inclusion of part-year income streams from new acquisitions in insurance and energy,” he said.
Profit was down 9.6% on a normalised basis from the previous year.
Wesfarmers insurance assets, which contribute nearly 15% of the group’s consolidated revenue, laboured as reduced premiums and increasing claims costs put profitability into free-fall.
Overall revenue from the underwriting and broking assets rose 26% to $1.41 billion – bolstered by mid-term income streams from OAMPS and Crombie Lockwood – but profit fell 3.6% on rising liabilities and depreciation.
Lumley’s Australian and NZ arms were the most adversely affected by the softening market and rising claims. Their insurance margins were cut in half to 7% and 5.2% respectively.
Wesfarmers blamed the results on higher than expected claims as a result of the storms in Newcastle and Victoria and Cyclone George in WA, and falling premiums across the board – particularly in commercial motor, property and liability lines.
Lumley NZ has weathered intense competition and falling premium rates.
“The challenging trading environment has put pressure on loss and expense ratios, culminating in a disappointing overall profit margin,” the company said. “Plans are now in place to mitigate this.”
The performance of Wesfarmers Federation Insurance was a rare fillip for the company, with earned premiums rising 2.5% and the insurance margin up slightly to 16.1%.