Woolworths Records $137M Loss, Reviews NZ Business and Stake in Endeavour Group

Summary

  • Woolworths has mentioned potential record losses of A$209 million after a local alcohol retailer review.
  • The retailer’s investment in Endeavour Group will be adjusted since it no longer has significant influence over the ASX-listed colleague.
  • Woolworths’ New Zealand operations impairment may result in challenging the company’s current goodwill balance of NZ$2.3 billion.
  • The company’s annual projected EBIT is expected to lie between A$1.68 billion and A$1.70 billion, slightly above last year’s figure.

Anticipated Losses

Woolworths recently announced that it anticipates a loss of A$209 million ($137.35 million) after examining its 9.1% stake in local alcohol retailer Endeavour Group, concluding that it no longer has a “significant influence” over its ASX-listed peer.

Impact on Investment

Woolworths stated, “We will derecognise our equity accounted investment in Endeavour Group and reclassify our investment in Endeavour Group as a financial asset, measured at fair value.”

Concern Regarding Impairments

The impairment in New Zealand could lead to a write-down against the company’s current goodwill balance of NZ$2.3 billion, the firm noted. Woolworths had procured wholesaling and supermarket assets of Foodland’s New Zealand business in 2005 in a deal valued at A$3.38 billion.

Reviewing Goodwill Value

“Given the circumstances, it’s sensible to reconsider the carrying value of the goodwill on the balance sheet which was posted as part of Woolworths Group’s original acquisition of Foodland’s New Zealand business in 2005,” the organization clarified in a statement.

Future Business Prospects

The company explained that its New Zealand business has been influenced by a weaker medium-term market projection and organisational transformation initiatives that haven’t yet fully manifested. It projects its first-half pre-tax and interest earnings (EBIT) to be NZ$71 million for the New Zealand segment, which is 42% below the previous year’s figures.

Earnings Anticipation

As per Woolworths, its first-half unaudited EBIT should fall between A$1.68 billion and A$1.70 billion, slightly higher than the A$1.64 billion recorded the previous year. This anticipated EBIT increase is credited to solid financial performance from the firm’s Australian Food business and food distributor PFD Food Services.

($1 = 1.6420 New Zealand dollars)

($1 = 1.5209 Australian dollars)

This development may influence the forex market, impacting the valuation of the Australian and New Zealand dollars.

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