Tuesday, June 15, 2010

Wesfarmers Warns Super Tax Woeful

Wesfarmers has played the dividend card in its criticism of the federal government's resources super profits tax

It told shareholders the tax could dent dividends paid to shareholders.

Wesfarmers, a top 100 ASX listed diversified conglomerate warns its shareholders the tax could have significant flow-on effects for the broader economy and society.

It is concerned about the impact on its retail chains including Coles that is being paid off by the cash generated by it's coal division.

"This (coal) division has been very important to Wesfarmers since we first acquired the now Premier Coal business in 1989," Wesfarmers said in a letter to shareholders.

"Cashflows from the division during periods of high export coal prices have enabled us to undertake expansions at group level (much of the acquisition of Coles Group in 2007) with confidence.

"They have also supported Wesfarmers paying a significant component of our after-tax profits in dividends to our shareholders.

"Any threat to earnings is clearly a threat to the level of dividend we can pay you, our shareholders."

"That flow-on effect on a broadly based conglomerate like ours might be seen as analogous to the potential impact of the tax, not just on the resources industry, but on the wider national economy."

Wesfarmers said its resources division paid an effective tax rate of 41 per cent last year, comprising state royalties plus company tax.

This is a great example of effective shareholder communications.

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