The Bunnings cash machine delivers bigger Wesfarmers payout but Rob Scott warns of consumer uncertainty

Wesfarmers is on track to make money from its new lithium refinery at Kwinana, challenging the shock closure of US group Albemarle’s $1.5 billion value-adding plant in WA’s South West.

Despite some teething problems, the WA conglomerate says the protracted commissioning of its lithium hydroxide plant has revealed nothing to shake its belief that the refinery will turn out a competitively-priced product able to match China and other countries.

The comments came just a week after Albemarle announced it was mothballing the country’s leading refinery at Kemerton less than four years after it opened, complaining that Australia’s comparatively high operating costs made the project unviable.

The decision was seen as a blow to Australia’s bid to process critical minerals and help break China’s stranglehold on the production of value-added products for electric cars, wind turbines and the defence industry.

However, Wesfarmers chief executive Rob Scott said on Thursday that the commissioning of the 50,000 tonnes-a-year plant at Kwinana — owned in partnership with Chilean lithium group SQM through the Covalent joint venture — was “progressing largely to plan”.

“On the basis of the plant operating at full capacity, then the unit costs would such that it would be competitive,” Mr Scott said.

“Obviously, if you’re not operating your plant at full capacity, then your unit costs are going to be lot higher.

“One of the problems in Australia and outside of China has been getting the ramp-up to an effective level.”

Also, Mr Scott said that companies with refining capability in China — Albemarle operates in China — “that may change your view on where you should refine”.

“But we’ve deliberately built an integrated facility and we’re quite confident that that will deliver good returns and very cost-competitive product, and SQM share the same view”.

Wesfarmers on Thursday announced a 9.3 per cent increase in interim profit to $1.6 billion. While the result was again built on the group’s Bunnings and Kmart retail businesses, it included a modest first profit of $6m from the lithium business off the back of recovering prices.

Kwinana is supplied by Covalent’s Mt Holland lithium mine near Southern Cross. While the refinery is ramping up, the Mt Holland spodumene has been sold into rising spot prices for the raw material, which has more than doubled in value since mid-2025.

Mr Scott said rising inflation and interest rates would dampen consumer sentiment, but said its ability to offer lower prices stood it in good stead.

“Wesfarmers recognises the impact of inflation on households and businesses, and the retail divisions play an important role in the community through offering everyday low prices,” he said.

“Bunnings and Kmart’s well-established everyday low price operating models deliver sustainable growth in earnings through a relentless focus on productivity and low prices.

“Australian consumer demand remains solid, but cost of living pressures are being felt unevenly across the economy and impacting many households.

“The recent interest rate rise and uncertainty regarding the outlook for inflation and interest rates are affecting consumer sentiment, while higher operating expenses are weighing on business confidence and spending.”

Bunnings bucking any signs of consumer slowdown to grow revenue 4.2 per cent to $10.7b for the half year.

The big green sheds made up the lion’s share of its overall revenue of $24.2b for the six months to the end of December — up 3.1 per cent on the same time a year ago.

Wesfarmers will hike its interim fully franked dividend to $1.02 a share — up from 95¢ this time last year.

Earning before interest and tax for the half were up 8.4 per cent to $2.5b.

Mr Scott said the profit result was supported by strong earnings contributions from its largest divisions — Bunnings, Kmart Group and WesCEF, its fertilisers, chemicals and energy arm.

“During the half, Wesfarmers’ divisions benefited from productivity initiatives to navigate ongoing challenging market conditions,” he said.

“Despite a modest improvement in consumer demand, higher costs continued to weigh on many households and businesses, and residential construction activity remained subdued.

“The divisions performed well, driving productivity to mitigate cost pressures and keep prices low for customers.

“Bunnings demonstrated the strength of its offer, with higher sales across all product categories, operating regions and in both consumer and commercial segments.”

Kmart Group, which includes Target, improved its revenue growth 3.3 per cent to bring in $6.3b, reaping the rewards of the popularity of its in-house Anko range.

Wesfarmers’ shift into health — which includes Australian Pharmaceuticals Industries, The Silk Group and the Priceline and Soul Pattinson pharmacies — is paying dividends, with revenue up 8.4 per cent in the first half to $3.3b.

Wesfarmers said its retail divisions continued to trade well in the first six weeks of the second half, with Bunnings and Officeworks sales growth broadly in line with the first half of the year.

Kmart Group’s sales growth was stronger compared to the first half.