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UPDATE 1-Australia's Woolworths sees brighter 2014; wary of acquisitions
August 28, 2013 / 1:21 AM / 4 years ago

UPDATE 1-Australia's Woolworths sees brighter 2014; wary of acquisitions

* NPAT from continuing ops up 3.3 pct to A$2.25 bln

* Dividend 71 cps

* Sees FY14 NPAT from continuing ops up 4-7 pct

* Shares down 0.5 pct in weaker wider market (Adds analyst and CEO comment, detail on acquisitions)

SYDNEY, Aug 28 (Reuters) - Australia’s largest supermarket chain Woolworths Ltd said it expected earnings to grow in the current year even though consumer sentiment would remain subdued, as it posted a 3.3 percent rise in annual profit.

Woolworths and Wesfarmers Ltd-owned Coles, which together control 80 percent of Australia’s supermarket sector, have been competing to lure shoppers by slashing prices of basic items such as milk and bread and branching out to find new areas of growth.

Woolworths said last week it would buy New Zealand-based direct retailer EziBuy Holdings Ltd to grab a larger share of Australia’s rapidly growing online retail business. The deal values EziBuy, which makes 70 percent of its sales in Australia, at NZ$350 million ($275.35 million).

The Sydney-based supermarket giant also has been ramping up its online and liquor sales, having sold its poorly performing Dick Smith electronics stores last year, and is expanding its Masters home improvement business to take on Wesfarmers’ Bunnings home-and-garden warehouses.

Woolworths has also made an offer for Hutchison Whampoa Ltd’s Hong Kong supermarket business ParknShop, according to Reuters sources, in a deal that could be worth up to $4 billion.

“They are currently very busy in Australia with their Masters strategy,” said Commonwealth Bank of Australia analyst Andrew Mclennan. “They’ve got a lot of capital tied up with that business, so it seems to be me both in terms of capital available and management skills available, now would not be the best time (for a ParknShop deal).”

Chief executive Grant O‘Brien declined to comment specifically on Woolworths’ interest in ParknShop, but said the company would be cautious on acquisitions.

“In fact we’ve said in 2011 international expansion is part of our consideration for our future growth. We never speculate on what we will be looking at. This is something we are very cautious about,” O‘Brien told reporters in a phone briefing.

Net profit from continuing operations for the year ended June 30 rose to A$2.25 billion ($2.02 billion) from A$2.18 billion a year ago, the company said in a statement. On a normalised 52 week basis before one-off items, net profit was up 6.1 percent to A$2.35 billion, matching a consensus analyst forecast, according to Thomson Reuters Starmine data.

“We expected retail conditions to remain subdued in FY14 with ongoing consumer caution reflecting cost of living pressures, a flat job market and uncertainty created by the federal election despite historically low interest rates,” Woolworths said, forecasting profit to rise 4 percent to 7 percent in the current year.

Australia goes to the polls on September 7 with the conservative opposition widely tipped to oust the Labor-led government under Prime Minister Kevin Rudd.

Shares in Woolworths were flat in a weaker wider market. The stock is up about 16 percent this year, outperforming the S&P/ASX 200 Index ($1 = 1.1154 Australian dollars) (Reporting by Maggie Lu Yueyang and Lincoln Feast; Editing by Stephen Coates)

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