Woolworths has termed the company’s 22.1% rise in first half net profit as an excellent achievement and pointed towards food and liquor as successful revenues.
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Net sales for the first 27 weeks of the financial year 2006 were up 18.4% compared to last year, at AUD$19.1bn (US$14.1bn), and earnings shot up 31.5% to $902.4m for the half-year period.
Woolworths, a major competitor in the Australian grocery market, purchased retailer Foodland’s New Zealand business and 20 Australian ex-FAL stores for around $2.6bn, gaining control on 2 November 2005.
Supermarket group sales, including Foodland, were at $16.1bn, an increase of 17.7% compared to last year. The half-year Australian supermarket division sales increased 12%, with food and liquor sales in Australia growing 5.6% and comparable sales growing 3.7% in the half.
Woolworths CEO Roger Corbett said: “The first half net profit increase of 22.1%, is an excellent achievement on several levels. It reflects strong underlying operating performance during a time of major change associated with the move to the new supply chain, solid sales growth which strengthened in the second quarter, and continued overall cost reductions even taking into account one-off conversion costs associated with the move to our new supply chain.
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By GlobalData“Further, the result reflects the initial contribution from our recent acquisitions, which are all performing well, and in some cases better than our expectations. These acquisitions continue to demonstrate the management team’s ability to successfully execute our strategy of bolt on acquisitions. Our supply chain initiatives are now approaching their completion phase and underpin our forecast cost reductions in subsequent years.”
The company expects sales growth for the rest of the year to be in the range of 15% to 20% and its long term EPS objective is to outperform EBIT growth, assisted by capital management.
“We are confident of achieving our five year target of reducing cost of doing business by at least another 1% of sales or 20bps per annum. This will enable us to continue to provide lower prices to our customers and further reward shareholders. Inventory levels at the half-year were down 2.2 days (excluding FAL). We are on track to achieve our budgeted reduction of 1-2 days by the end of FY06, although DC refurbishing has the ability to temporarily affect this objective over this years reporting periods,” added Corbett.
