Woolworths Ltd, Australia's largest supermarket chain, posted a 27 percent jump in second-half profit after grabbing market share from rival Coles Group Ltd, and tipped more growth this year. Woolworths, which has been cutting prices to cement its dominant position, said it expected net profit growth of 19-23 percent and 7-10 percent sales growth this year.
"Woolworths has been able to extract cost savings and pass some of that to customers through price cuts. That means Woolworths is in fact becoming increasingly an aggressive competitor against Coles," said Angus Gluskie, a portfolio manager with White Funds Management, which oversees about A$500 million including Woolworths shares.
The company bid for two of Coles' general merchandise units at an auction in June, but lost out to conglomerate Wesfarmers Ltd's offer for the entire company. It was also thwarted in its plans to expand in New Zealand after the competition regulator rejected a proposed full take-over bid for general merchandise retailer The Warehouse Ltd Woolworths has appealed the decision.
Woolworths CEO Michael Luscombe told reporters he expected to continue to further grow the company's share of Australia's supermarkets and liquor market, from 29 percent now, and eye acquisition opportunities around the globe. "We maintain a very active book of potential acquisitions," he told reporters. He also said Woolworths remained interested in Coles' general merchandise assets if they came up for sale again.
Woolworths reported second-half net profit of A$598.4 million, compared to A$471 million last year, based on Reuters calculations - in line with market forecasts. A company forecast for 23 percent profit growth this year exceeded some expectations.
Woolworths shares were up 1.9 percent at A$28.22 by 0200 GMT. Shares in Coles, which is being taken over by Wesfarmers, added 1.1 percent to A$14.20.
Woolworths' full-year net profit rose 27.5 percent to A$1.294 billion, also in line with forecasts, and it posted a final dividend of 39 cents per share. Earnings before interest and tax (EBIT) was expected to grow faster than sales in the year, it said.
"Woolworths' result was very strong and the dividend payout reflects its confidence leading into full year 2008," Citigroup analysts said in a note to clients. Woolworths also flagged capital management initiatives in early 2008.
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