Caltex Pumps, Wesfarmers Ends UK Misadventure

By Glenn Dyer | More Articles by Glenn Dyer

While rising wholesale oil and petrol prices will help Caltex Australia boost first half earnings by up to 7%, Wesfarmers buried its UK hardware adventure with news of another round of write down and losses of more than $400 million.

Wesfarmers has already taken more than a billion dollars in write down and losses on this value destroying attempt to enter the UK retail market, and yesterday confirmed that the proposed sale of the old Homebase business had been completed.

Wesfarmers said the sale to UK-based turnaround specialist Hilco Capital, which was announced in May, will result in a loss of between 200 million pounds and 230 million pounds (between $352 million and $404 million) in Wesfarmers’ full-year results.

Wesfarmers bought the Homebase hardware chain for $705 million in 2016 with the idea of converting the stores into Bunnings outlets, but abandoned the venture having burned through almost $1.5 billion in losses. That could see the total loss close to $2 billion.

Wesfarmers shares ended at $46.96, up 1.2%.

Meanwhile Caltex told the ASX yesterday that the expected rise in June 30 half profit would be due to a strong wholesale performance helping to offset lower retail fuel margins and the overhaul of its convenience store network.

The company forecast an underlying profit for the six months to June 30 of between $295 million and $315 million, compared to $294 million in the prior corresponding period.

Convenience store earnings are expected to fall about 17% due to rising oil prices and the cost of moving franchise stores in-house, but underlying earnings from Caltex’s fuels and infrastructure division – the larger of its two operations – are expected to rise about nine per cent.

Caltex said its reduced retail fuel margins stemmed from a lag between oil price increases and that cost being passed on at the pump.

It said crude oil prices were currently $US8 – more than 10% – a barrel higher than at the end of 2017.

Caltex shares rose 2.8% to $30.28.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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