Wesfarmers Limited

Ladies and gentlemen, thank you for holding and welcome to the West Farmers 2026 full year results briefing. Your lines will be muted during the briefing, however you will have an opportunity to ask a question immediately afterwards and instructions will be provided on how to do so at that time. This call is also being webcast live on the West Farmers website and can be accessed from the homepage of westfarmers.com.au. I would now like to hand the conference over to the Managing Director of West Farmers Ltd, Mr Rob Scott.

Thank you very much and hello everyone. Welcome to our 2026 full year results briefing. I'm joined on this call with our Divisional Managing Directors and our CFO Anthony Gianotti. I'll start with a summary of the group's performance followed by some comments on our strategic progress over the last year. I'll then hand over to Anthony to talk in more detail to our financials. I'll then conclude with some perspectives on our portfolio positioning and the outlook for the group and then Anthony, the divisional MDs and I would be delighted to take your questions. So starting on slide four, a slide that will be familiar with many of you. It sets out Westfarmers primary objective which is to deliver a satisfactory return to shareholders. We define satisfactory as a top quartile total shareholder return over the long term. We only believe it's possible to achieve long term value by anticipating the needs of our customers, looking after our team members, engaging with suppliers in a fair and ethical manner, contributing positively to the communities where we operate, taking care of the environment and acting with honesty and integrity. And in the last year our businesses have continued to make good progress in each of these areas. So turning to slide 5. This year we reported net profit after tax of $2.9 billion. Excluding significant items in the prior year this represents an 8.3% increase for the year. This growth was underpinned by strong earnings contributions from our largest divisions Bunnings, Kmart and Wessex. The result reflects the resilience of our businesses and the strong execution of our growth and productivity agendas. Many of you will have heard me talk about the virtuous cycle at the heart of the Westfarmers model. By running our businesses as efficiently as possible and keeping our costs low, we're able to keep prices low for customers and continue to invest in new capabilities and platforms. This investment helps to build stronger businesses for the future, creating fulfilling jobs for our team, all while delivering better returns to shareholders over the long term. As a result of the pleasing growth in profit, the Board has determined to pay a fully franked final dividend of $1.20 a share which brings the total dividend for the year to $2.22 per share, a 7.8% increase. Turning to slide 6. While we're pleased with our financial results, they really only tell part of the story. Over the past year we've continued to invest in our existing businesses. while building new businesses and revenue streams for the future. And this slide outlines these areas. So firstly with our existing businesses our focus is very much on reaching more customers and serving them better. Strategic partnerships with leading global technology companies have ensured that our team members have access to world class tools that support them to be more efficient and to direct time to high value tasks. In agentic commerce we've launched AI powered shopping assistance, Buddy at Bunnings, Joy at Kmart and Ollie at Officeworks and applications that help team members especially in retail settings to better serve our customers. Across the group the use of AI is all aligned with our people first digitally enabled approach which puts our team and customers at the centre. We continue to bring more value and choice to customers as we renew and expand our offer at Bunnings, Kmart and Officeworks. We're also investing in new store formats including the Kmart Plan C Plus renewals, K-Home and Atomica and Health. Investments in distribution and fulfilment centres and new express delivery options make our online offer faster and more reliable. And we're also building new platforms that extend our growth beyond our existing businesses. At WESF, the expansion of Mount Holland, which we announced in July, is expected to double Spodgermain concentrate production, lowering unit costs and accelerating cash flows. Our growing retail media business continues to expand, using the scale of our store network and customer reach to generate a new source of earnings. The new marketplace at Kmart and the developing marketplace at Bunnings are delivering very strong growth, and provide customers with more choice across hundreds of thousands of additional products. And the built living joint venture is progressing and will deliver residential apartments faster at a lower cost and at scale through advanced manufacturing. Now turning to slide 7 which provides some of the divisional highlights for the year. I'll let Anthony talk to this in more detail but I just wanted to touch on an important portfolio action through the year. On the 1st of July our industrial and safety businesses transition to Bunnings Group. This brings together businesses with market leading positions and highly complementary customer bases and will enhance customer offers, drive incremental sales and unlock cost efficiencies. And we see this as a significant opportunity for Bunnings to strengthen its commercial capabilities and accelerate growth with small to medium sized customers. This is another example of our focus on creating long term term value through disciplined portfolio management. Now before handing over to Anthony I just wanted to turn to slide 8 and consistent with our objective this slide sets out some of the broader progress during the year in the areas of team, community and environment. On safety the group tripper has improved from 9.5 to 9.1 at year end with WESF delivering a record result of 0.6. Across the group, 4% of Australian team members identify as Aboriginal or Torres Strait Islander people, maintaining employment parity. And we were proud to recently release our ninth Reconciliation Action Plan, which was our second at the Elevate level. And we've also made good progress on climate resilience, reducing Group Scope 1 and 2 market-based emissions by over 20% during the year. This step change was underpinned by our retail divisions achieving their 100% Renewable Energy Electricity targets in the 2025 calendar year. Now with that I'll move to slide 9 and hand over to Anthony.

Thanks Rob and hello everyone. I'll start on slide 11 where we've provided some further details on the sales performance across each of our divisions. I'll speak to performance across each of them in more detail on slide 12 but overall it was pleasing to see sales growth achieved across all of our divisions in the financial year. In our retail businesses, the group's well-established everyday low-price operating models continue to resonate with consumers, supporting transaction growth across all of our businesses. Our marketplaces delivered strong growth in the year, extending our reach across e-commerce channels with gross merchandise value across Bunnings and Kmart marketplaces now exceeding $250 million. GMB and Bunnings marketplace grew more than 25% reflecting strong demand for home and living categories and an increase in the number of vendors on the platform. On slide 12 at a group level divisional earnings increased 6.2% for the year supported by strong results in Bunnings, Kmart Group and Wessef and positive momentum in health. Our retail businesses continue to execute well and their ongoing focus on productivity and cost discipline supported continued investment in low prices and customer experience while also delivering operating leverage with earnings growing faster than sales. I'll now step through the divisional results in a bit more detail. In Bunnings sales growth of 3.9% was supported by Bunnings lowest price positioning which underpins sales growth across both consumer and commercial customers and across all product categories and regions. Consumer sales growth was supported by strong demand for home repair and maintenance products while range innovation and expansion drove strong sales growth in the tools, automotive, rural, pet and lifestyle categories. Growth in commercial sales reflected resilient demand as Bunnings strengthened its proposition through faster fulfilment and specialist services. Digital sales grew across all channels with marketplace continuing to deliver strong growth benefiting from the launch of the Bunnings commercial and services marketplaces during the year. Bunnings continued to progress a range of productivity initiatives which strengthened its cost discipline and allowed further investment in price. Bunnings earnings excluding property contributions of $2.45 billion represented an increase of 5% for the year. Kmart Group delivered earnings of $1.1 billion for the year, an increase of 6%. Kmart Group's strong value credentials and world-class product development continue to resonate with customers, with prices dropped on more than 2,500 items during the year. Product innovation in ANCO's one-up and two-up price tiers also continued to generate strong demand. Comparable sales growth in the second half reflected more challenging conditions for seasonal categories in the fourth quarter, and the impact of a material deterioration in the exchange rate on Kmart's New Zealand dollar denominated sales. Adjusting for the New Zealand dollar impact, comparable sales growth for the second half was above the first half. Strong earnings growth reflected Kmart Group's focus on productivity and cost control which mitigated the impact of ongoing cost of doing business pressures during the year. Westef's earnings increased 18.5% to $473 million for the year driven by higher prices for nitrogen based products and spodumene concentrate. In chemicals earnings decreased on the prior year due to the rapid rise in ammonia index pricing following escalation of the Middle East conflict. Given the price lag in sales contracts this significantly impacted earnings in the second half but will provide a benefit as index prices normalise into the 2027 financial year. In energy, earnings decreased due to a lower Saudi CP price. And in fertilizers, earnings increased on the prior year, which was supported by a strong end to the 2025 season, partly offset by increased import costs in the second half of the financial year, again due to the Middle East crisis. In lithium, the business delivered its first positive earnings with a profit of $40 million, which was driven by higher market pricing for spodumene concentrate, and above nameplate production at the Mount Holland Mine and Concentrator. Ramp up of the refinery and the progression of qualification activities were affected by intermittent odour issues with the installation of mitigation measures initiated late in the financial year. In Officeworks sales increased 3.7% and earnings of $165 million were 22.2% below the prior corresponding period but in line with our previous guidance. Earnings were impacted by approximately $40 million in one-off costs associated with its transformation program, largely reflecting restructuring activities and the ERP related costs. Successful execution of the program will structurally lower the cost base and provide a foundation for improved performance. The program remains on track for completion by the end of this calendar year. West Somers Health continued to focus on its transformation program to accelerate growth and improve returns. Earnings of $92 million excluding purchase price accounting adjustments increased 12.2% on the prior year. Priceline Pharmacy's headline network sales increased 12.7% which includes both retail and dispensary sales. Priceline's retail sales were supported by a positive customer response to differentiated beauty, skin care and private label ranges and competitive pricing on key value lines. Digital sales also grew strongly supported by the launch of the new Priceline pharmacy app. Mediasthetics also delivered profitable growth supported by a simplified operating model and digital health maintained strong momentum with growth in instant scripts, users and services. In industrial safety, excluding core gas, earnings increased 16.9% to $76 million, supported by a strong performance in Blackwoods, which delivered growing share in a challenging market, and higher earnings from Workwear Group. As Rob's already mentioned, Blackwoods and Workwear Group have transitioned into Bunnings from 1 July this year, and as a result, the industrial safety division will no longer continue as a separate division, and the financial contribution from these businesses will be included in Bunnings' result moving forward. Turning now to slide 13. Our other businesses and corporate overheads reported a loss of $170 million, which was in line with the prior year. The group's share of profit from associates and joint ventures increased by $42 million to $106 million, primarily driven by favourable property revaluations from the BWP Group and improved contribution from the group's investment in Flybuys, West Pine and Gresham. Group overheads were broadly in line with the prior year, while other corporate earnings decreased by $27 million. This decrease primarily reflected a lower group insurance result and the loss of BWP management fees following its internalisation earlier in the year. Other EBIT includes the operating costs and investment in One Digital comprising our OnePass membership program, acceleration of our group AI initiatives, investment in the group's customer data insights capabilities and the group's retail media network. Total investment across these initiatives for the year was $73 million. As we said previously the benefits from these investments will continue to be realised through incremental sales and earnings in our businesses. Turning to working capital and cash flow on slide 14. Group operating cash flow finished 6.5% lower than the prior year due to deliberate investments in working capital in Wessex and health. These investments were temporary decisions our divisions made to strengthen availability to customers. In health, inventory contingency was increased to protect ethical supplies against supply chain disruptions due to the Middle East conflict. Similarly in WESF, investment in additional fertiliser inventory at elevated prices to minimise the impact of supply chain disruptions from the conflict in the Middle East adversely impacted operating cash flows. WESF also held higher spodumene inventories which will be used as feedstock in preparation for the ramp up of the covalent lithium refinery. Across our retard divisions, cash realisation remained strong at 99%. reflecting disciplined working capital management. Overall inventory remains in a healthy position with good stock availability across the retail divisions. Free cash flow for the year increased 15.8% to $4 billion with lower operating cash flows offset by the proceeds from the sale of core gas and the sale and lease back of seven properties following the wind up of the BPI restructure during the year. Moving to capital expenditure on slide 15. The group invested gross capital expenditure of $1.2 billion during the year which was 4.1% higher than the prior year. The increase reflected major project spend across a number of our divisions. In Kmart and Officeworks both convinced the development of new omnichannel supply chain facilities. In Bunnings, CapEx included investment in new stores and expansion projects with an increase in space growth reflecting its focus on optimising warehouse and smaller format stores. and in WSF CAPEX included spend on the covalent lithium project and the completion of the first phase of the expansion of the sodium cyanide facility. Proceeds from the sale of property increased for the period which reflected increased disposals as a result of the wind-up of the BPI structure which resulted in net capital expenditure for the year decreasing 29% to $779 million. For the 2027 financial year we're expecting net capex for the group to be in the range of $1.3 to $1.5 billion and this includes approximately $200 million of capex associated with the expansion of the Mount Holland Mine and Concentrator which we announced in July this year and increased investments as well in new stores, refurbishments and supply chain across the group. Turning to balance sheet and debt management on slide 16. The strength of our balance sheet continues to provide the Group with significant flexibility and capacity to support future investment. The Group's net financial debt increased to $5.3 billion which reflected the distribution of $1.7 billion associated with the Capital Management Initiative in December last year. We continue to actively monitor the Group's debt mix and we manage exposure to variable interest rates. Lower average cost of funds for the year reflected lower cash rates for the majority of the financial year combined with our low fixed rate bond program. Our finance costs including the component of interest that was capitalised increased 8% to $202 million. During the year Westfarmers debt to EBITDA ratio increased from 1.7 to 1.9 times following the capital management initiative but we have continued to maintain significant headroom against our key credit metrics. In July, S&P revised the group's credit rating downgrade threshold ratio from 2.75 times to three times debt to EBITDA, increasing the group's debt headroom within its current rating. The group retains considerable funding headroom and committed unused bank financing facilities of approximately $1.7 billion. In the 2027 financial year, total borrowing costs are expected to be higher due to higher levels of net debt, increased capital expenditure and a higher cost of funds. And finally too, shareholder distributions on slide 17. As Rob's already mentioned, the board has determined to pay a fully franked final dividend of $1.20 per share, bringing the total dividends to the year of $2.22 per share fully franked. This is consistent with our dividend policy having regard to available franking credits balance sheet position, credit metrics and cash flow generation. In line with the recent practice the group does intend to purchase shares on market to satisfy shares that are issued as part of the dividend investment plan. And with that I'll now turn back to Rob to cover off on outlook.