Bunnings NZ reports big uplift in annual profit on DIY and building boom
Bunnings, the hardware chain owned by Australian Wesfarmers, has more than doubled annual profit in New Zealand following demand for do-it-yourself home improvement and building products from consumers and tradespeople.
The New Zealand unit of the diversified Australian company, which has been facing union protest action over employment contract changes, reported net profit of $12 million for the year ended June 30, from $5.8 million a year earlier, according to financial statements lodged with the Companies Office.
The directors said in a statement that the "pleasing" profit increase was driven mainly by revenue growth of 11% for the year to $898 million, from $813 million in 2014, as well as productivity gains.
"Revenues increased in both consumer and commercial areas as well as across all merchandising categories and the breadth of the good trading performance was a highlight for the year," the statement said.
Earlier in the year its parent, Wesfarmers, which is listed on the ASX, reported an underlying profit of A$2.44 billion for the June year, up 8.3% on the prior year. It said Bunnings' earnings increased 11.1% to $A1.08 billion and another 15 to 18 Bunnings stores were planned to open in both the 2016 and 2017 financial years.
Bunnings' primary New Zealand rival, Mitre 10, reported a 92% drop in earnings for the year to June 30, at $106,000, reflecting accounting adjustments, higher rent and land-banking for future development sites.
In New Zealand, Bunnings has 50 stores and trade centres nationwide and it employs more than 3700 staff, of which around 850 are on a collective contract under the First Union. Some Bunnings union members have been holding pickets across New Zealand over changes to their rostering system and scuffles broke out last month when a dozen protesters chained themselves together at the company's New Lynn store in Auckland.
Union and company talks have stalled on the new contracts, which remove the workers' right to mutually agree with their employer over hours and rosters.
Bunnings' New Zealand results include a $313 million related party loan to NZ Finance Holdings, which is down from $328 million in 2014. The interest expense on related party loans was $16.5 million, up from $15.3 million the prior year, with the interest rate paid rising to 5.23% from 4.8% in 2014 although interest rates have been falling in recent months in New Zealand.
The financial statements say inter-company borrowings are unsecured and repayable on demand. However, NZ Finance Holdings has confirmed that it will not recall the loan unless the group has sufficient surplus working capital to make the repayment and continue to operate as a going concern, notes to the financial statements said.