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WESFARMERS LIMITED

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Wesfarmers : Australia hardware chain Bunnings sees timber price 'challenge'

06/02/2021 | 09:04pm EDT

SYDNEY, June 3 (Reuters) - Australian hardware chain Bunnings expects elevated timber prices to squeeze its margins for up to another year, its managing director said on Thursday, as a boom in home improvement and construction drives a surge in demand.

"We think about timber (and) we've probably got another six to 12 months of some challenge," Michael Schneider said in an investor briefing hosted by Bunnings owner Wesfarmers Ltd .

"Feedstock is in a reasonably good space, but getting it through the mills and, clearly, the strong demand is putting pressure on," added Schneider, using the term for raw timber that is processed into usable wood products.

Amid restrictions on movement to stop the spread of COVID-19, people around the world are looking for bigger homes or embarking on renovation projects, sapping supply and driving up market prices for the most important component, timber.

Supported by government stimulus payments, Australian approvals to build now houses leapt 67% to a record high in the month of April, compared to the same month a year earlier in the initial stages of pandemic-induced lockdowns. The United States recorded similar figures.

NASDAQ-listed lumber futures have quadrupled in a year, according to the U.S. exchange's website.

Schneider said Bunnings, which dominates Australian home improvement with 50% market share and no close rival, was reluctant to put up shelf prices and hoped to tackle the margin pressure by cutting costs.

"We do a lot of work with our suppliers to look at ways that we can offset costs through improved efficiencies in supply chain or volume purchases," he said. (Reporting by Byron Kaye; Editing by Muralikumar Anantharaman and Stephen Coates)


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
NASDAQ COMP. 0.22% 14797.777725 Real-time Quote.13.75%
WESFARMERS LIMITED -0.19% 61.43 End-of-day quote.21.88%
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Financials
Sales 2021 33 516 M 24 809 M 24 809 M
Net income 2021 2 298 M 1 701 M 1 701 M
Net Debt 2021 7 219 M 5 343 M 5 343 M
P/E ratio 2021 30,6x
Yield 2021 2,90%
Capitalization 69 652 M 51 552 M 51 556 M
EV / Sales 2021 2,29x
EV / Sales 2022 2,28x
Nbr of Employees 120 000
Free-Float 98,9%
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Mean consensus HOLD
Number of Analysts 13
Last Close Price 61,43 AUD
Average target price 54,47 AUD
Spread / Average Target -11,3%
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Managers and Directors
Robert Scott Chief Executive Officer, MD & Director
Anthony Gianotti Chief Financial Officer
Michael Alfred Chaney Non-Executive Chairman
Wayne Geoffrey Osborn Independent Non-Executive Director
Vanessa Miscamble Wallace Independent Non-Executive Director