Ladies and gentlemen, thank you for holding and welcome to the Wesfarmers 2022 full- year results briefing. Your lines will be muted during the briefing. However, you will have an opportunity to ask questions immediately afterward, and instructions will be provided on how to do this at that time. The call is also being webcast live on the Wesfarmers website and can be accessed from the homepage of wesfarmers.com.au. I would now like to hand the conference over to the Managing Director of Wesfarmers Limited, Mr. Rob Scott.
Thanks very much. Good afternoon and good morning to others, to our 2022 full- year results briefing. I'm joined here in Perth today with our Divisional Managing Directors and our CFO, Anthony Gianotti. We've taken on board your feedback, and you'll notice the slight change to the format this results. We've included the usual divisional summaries in the appendices of the slide pack, but we won't step through each in detail on the call. Hopefully, this will give us more time to focus in on questions. To begin, I'll provide an overview of the group's performance, then Anthony will provide some more detail on the financial results. I'll conclude with some comments on current market conditions and outlook, and then the divisional MDs, Anthony and I would be welcome to take your questions. We'll kick off on Slide 4.
This year was the most disruptive period we've experienced through the pandemic, with extended government-mandated lockdowns in the first half. It was also a great opportunity to demonstrate our commitment to our core objective to deliver a satisfactory return to shareholders over the long- term. We recognize that we can only achieve this if we continue to anticipate the needs of our customers, look after our team members, treat suppliers fairly and ethically, contribute positively to the communities in which we operate, take care of the environment, and act with integrity and honesty. The last year has provided many opportunities to demonstrate our commitment in these areas. Turning to Slide 5, which sets out some of the highlights for the year. At a high level, there are three key takeaways from this year's results, which I'll talk through in the next few slides.
Firstly, it's really pleasing to report a solid set of financial results which were supported by strong growth in the second half following the significant impact of trading restrictions in the first half. Secondly, we continued to renew the portfolio and invest in our existing businesses, creating new platforms for value creation. Finally, we've reinforced our focus on continuous improvement, and this is translating to greater efficiency and productivity across our businesses. For these reasons, we are heading into 2023 financial year better positioned for the future than we were a year ago. On that point, I'd also like to take the opportunity to recognize the remarkable contribution of team members across the entire group.
I know I speak on behalf of all the Divisional Managing Directors in thanking our teams for the exceptional way in which they responded to the needs of our customers and continued to progress the strategic agendas of our businesses whilst navigating a very complex operating environment. Now turning to Slide 6. Total revenue for the group increased 8.5% to AUD 36.8 billion for the year. Now, this includes three months revenue from the Health Division and excluding Health, revenue increased 4.9%. The group's net profit after tax was AUD 2.35 billion, which is a decline of 2.9%.
Reflecting the solid NPAT result in the group's dividend policy, the Directors have determined to pay a final dividend of AUD 1 per share, an increase on last year, bringing the total full- year dividend to AUD 1.80. Our result this year clearly reflects what was a tale of two halves. In the first half, our results were significantly impacted by COVID, when over 34,000 store trading days were impacted by temporary closures or trading restrictions. During this period, we saw profit decline 14%. You'll recall during that time, we continued to pay our team, our rents, and adjusted our operations to meet the rapid shift to online. Now, while there were no lockdowns in the second half, elevated Omicron cases in January and February continued to create disruption in domestic and global supply chains and impacted visitation to stores.
Trading momentum accelerated in the second half and our businesses performed well, supporting 13% NPAT growth for the half. It's also pleasing that despite the disruptions, we were able to distribute over AUD 4 billion to shareholders and invest over AUD 2 billion across our businesses. Turning to Slide 7. There is understandably a lot of focus on the short-term outlook at present, and while our businesses are well prepared for a range of outcomes, we are focused on ensuring Wesfarmers will continue to deliver strong returns to shareholders next year, the year after next, and beyond. In recent years, we've invested to take advantage of opportunities arising from the digitization and decarbonization of the economy. We've continued to strengthen our data analytics capabilities at a divisional level and through our shared data platform, OneData.
We continue to develop our omni-channel offer, optimizing and expanding store networks, and developing deeper digital engagement with customers. We've made investments to modernize and digitize our supply chain and fulfillment capabilities, and we're progressing capacity expansion and clean energy opportunities within WesCEF. Some of the highlights to call out for the year. We've made great progress with the development of our Mt Holland lithium project. We've completed the acquisition of API, the foundation business for our new Health Division. We've established OneDigital as part of our development of a market-leading data and digital ecosystem. We've expanded Bunnings' commercial offering, completing the acquisition of Beaumont Tiles and rolling out new Tool Kit Depot stores. Turning to Slide 8, Divisional Highlights. At a divisional level, our businesses also did not slow down, making good progress on their strategic agendas, and in most cases, delivering pleasing results for the year.
I'll use this slide to touch on some of the key points, and Anthony will give more detail in the financial results shortly. Bunnings' performance this year again highlighted the strength and resilience of its operating model. Bunnings has delivered remarkable growth over the last three years, through which sales have increased 35% or AUD 4.6 billion, with earnings growth of more than 40%. Earnings growth outpacing that of sales is particularly pleasing in the context of COVID-related disruptions and COVID costs in 2022, as well as the continued investment being made to strengthen Bunnings' customer offer. This included the ongoing expansion of data and digital capabilities, which are driving greater personalization and digitization across both DIY and commercial customers.
For Kmart and Target, the second half result demonstrates the strength of the customer offer and the continued benefits from the conversion of some Target stores into Kmart or K Hub stores in recent years. Kmart maintained its focus on lowest price leadership with ongoing digitization initiatives in its stores and through the supply chain. Kmart also continued to leverage its product development capabilities to bring new products to market and to enter new categories in-store and online. Both Kmart and Target joined OnePass during the year, which strengthens the value and convenience of their offers, and this has been well-received by customers. We were pleased with the growth in the marketplace side of the Catch business, but performance in first-party products was below our expectations and clearance activity impacted margins.
Catch continues to invest in marketing, technology, and supply chain capabilities to support its long-term scale aspirations and the fulfilled by Catch proposition that is now supporting Kmart. This involved the opening of a new and highly automated fulfillment center during the year and is an important milestone for Catch. WesCEF delivered record earnings for the year, with the businesses all contributing to their strong performances during the favorable market conditions. We see WesCEF as an important driver of long-term growth, and the team continued to progress capacity expansion opportunities this year. Good progress also continued on the development of the Mt Holland Lithium Project, with the village and aerodrome completed and pre-strip mining and the construction of the concentrator and refinery advancing. The WesCEF lithium team is progressing discussions with key customers, which continue to be supported by very strong market fundamentals.
Building on its long-standing work to decarbonize its operations, WesCEF released its net zero roadmap for the year, which includes a 2050 net zero commitment, as well as intermediate carbon reduction targets. Officeworks has continued to support customers working and learning from home and is well-positioned to serve this expanded segment of the market. Overall, it was negatively impacted by COVID restrictions and disruptions through the year. Officeworks completed the transition to its new customer fulfillment center in Victoria, which further strengthens its omni-channel capabilities and drives increased efficiencies. Industrial and Safety again improved its performance this year, benefiting from disciplined focus on meeting customer needs and improving productivity and efficiency. The new Health Division has made good progress on integration activities, and work has commenced on strategies to improve its financial performance and strengthen the competitive position of API and its pharmacist partners.
The new Marsden Park Distribution Center, which is highly automated and benefits from the latest pick and pack technology, commenced operations in the last half and is on track to operate at full capacity by the end of this calendar year. OneDigital launched the OnePass membership program during the year and continued to develop the shared data asset, which will provide the retail divisions with a single view of the customer and unlocks additional operating efficiencies across the group. Moving to Slide 9. During the year, we continued to deliver better outcomes for the environment, our team, and the communities in which we operate. Recognizing it's linked to long-term value creation, we continue to build climate resilience in our businesses. Our Divisions achieved a 6.4% reduction in Scope 1 and 2 emissions, including our new Health Division, making good progress towards their net zero targets.
During the year, we saw firsthand the impact of COVID on our team and the community. We were proud to provide nearly AUD 50 million in COVID-related support to our team, while also supporting the delivery of over 140,000 vaccinations at Bunnings sites in collaboration with government. Our commitment to the development and skills of our team is evident, with over 2.5 million hours invested in training and development in the past year. We were also pleased to regain indigenous employment parity a year ahead of our plans, and we continue to strive for gender balance across all of our teams, with 48% female representation across our board and leadership team. Turning to Slide 10, you can see the summarized performance of the group. I'll now hand over to Anthony who will talk in more detail on the financials.
Thanks, Rob, and hello, everyone. I'll start on Slide 12 with a brief overview of sales performance before covering off on earnings results for each division on the following slide.
Overall, we were really pleased with the sales results for the year, given the impact of lockdowns in the first half and the pressures from Omicron early in the second half. As you can see, the business has ended the year with strong trading momentum and performance, having improved significantly through the third and fourth quarters. For Bunnings, sales growth of 5.2% for 2022 reflected continued strong commercial growth and solid DIY activity. Growth accelerated during the year, with 9.2% second half sales growth following growth of 1.7% reported in the first half. Kmart and Target were undoubtedly the Wesfarmers businesses that were the most significantly impacted by the lockdowns, which is reflected in their full- year sales results.
As stores were able to reopen, results improved significantly, and Kmart and Target delivered combined sales growth of 3.8% in the second half. This was supported by growth across all categories, as well as the continued benefits from the successful store closure and conversion program. Catch reported GTV growth of 1.6% for the year, with particularly strong demand in periods of lockdown. Officeworks sales results and product mix were impacted by COVID during the year, both as a result of trading restrictions in the first half and through disruptions to the back to school period when Omicron cases were rising. Sales growth remained strong in technology and furniture categories as customers continued to work and learn from home. Lower traffic to stores as a result of COVID impacted higher margin categories such as office supplies and print and create.
For WesCEF, revenue growth of 42% reflected higher commodity prices, as well as strong operating performance and plant availability. Revenue growth of 3.8% in Industrial and Safety was driven by continued growth from strategic customers in Blackwoods and higher demand across Healthcare and Industrial customers in Coregas. Looking now at earnings across the divisions on Slide 13. You'll note that we have provided additional emphasis on the second half performance to reflect the significant change in operating conditions between the periods. Bunnings earnings were up almost 1% to AUD 2.2 billion for the year, supported by ongoing strong execution of its strategic agenda.
As Rob mentioned earlier, Bunnings earnings growth over the last three years has been very strong, and the 2022 result comes despite over AUD 70 million in COVID-related costs, the impact of supply chain disruptions, as well as further investment to support long-term growth. Full-year earnings for Kmart Group show the significant impact of lockdowns and about a quarter of trading days for Kmart and Target in the first half, either restricted or completely lost to government-mandated closures. During this time, Kmart Group incurred additional costs as it continued to pay team members and rapidly scaled online operations to meet the temporary spikes in demand when customers were unable to visit stores. As restrictions lifted, Kmart Group delivered strong earnings growth of 16.5% in the second half or 19.4% if you exclude Catch.
For Catch, the earnings loss reflected the investments to support a more scalable operation, as well as higher levels of clearance activity on first-party products. Officeworks earnings were lower than the prior year, impacted by the change in sales mix that I noted earlier, as well as investment in data and digital capabilities, the launch of new products and services, and higher fulfillment costs associated with COVID disruptions and temporary inefficiencies during the transition to the new Victorian fulfillment center. WesCEF delivered record earnings of AUD 540 million for the year, with strong results across all segments. Chemicals earnings benefited from a favorable ammonia price and continued strong demand from mining customers. With these partially offset by the impact of the planned ammonia shutdown in the first half.
Kleenheat's earnings increased significantly off the back of the higher Saudi contract price and the continued shift in sales mix to domestic LPG customers following the closure of BP's Kwinana refinery in February. Earnings from fertilizers increased due to stronger pricing, as well as benefits from recent investments into dispatch capacity and improved services for growers. Industrial and Safety delivered yet another pleasing improvement in performance, with growth across all businesses, including the realization of operating efficiencies and simplification benefits within Workwear Group during the year. In the new Health Division, we've made great progress on the integration and transformation agenda. The reported result includes AUD 36 million of one-off and non-cash costs relating to impairments within the Priceline store network, closure costs for the manufacturing operations in New Zealand, and acquisition accounting amortization expenses. Excluding these, underlying earnings for the three months of ownership were AUD 11 million.
In line with the guidance we gave in June, the operating loss to support our ongoing investment in OneDigital was AUD 80 million for the year. This reflected the development and expansion of the OnePass membership program, which has now been extended to customers in Kmart and Target, as well as ongoing investment in the group's shared data platform, OneData. As we noted in June, we expect an operating loss of approximately AUD 100 million for OneDigital in FY 2023 as we continue to expand the OnePass program across all of our retail businesses and improve member benefits. Catch has now joined OneDigital and as a result of further investment, is expected to generate a loss in FY 2023. Turning now to Slide 14 on other business performance.
Our other businesses and corporate overheads reported total earnings of AUD 6 million, which was in line with the prior year. This result includes expenses associated with OneDigital. Profit from associates reflected a significant increase in contribution from property revaluations in the BWP Trust, as well as higher earnings from the group's interest in Wespine and Gresham during the year. Other corporate earnings of AUD 64 million included a favorable group insurance result, dividends received from Coles and API, and the receipt of an equity distribution under the value share mechanism that we agreed in 2018 on the sale of Homebase. Group overheads increased by AUD 12 million during the year, reflecting higher external insurance and team member costs. Turning to divisional cash flow and working capital on Slide 15.
Divisional operating cash flows were AUD 4.1 billion for the year, 14.2% lower than the prior year, resulting in divisional cash generation of 78%. While the divisional cash flow result was impacted by slightly lower earnings from divisions, the movement was largely driven by higher net working capital positions in the retail businesses due to both the normalization of inventory positions following the temporarily low balances in the 2020 and 2021 financial years, as well as the timing of supplier payments at the end of the current financial year. Significantly higher utilization of employee leave provisions as travel restrictions eased also impacted divisional cash generation. Recognizing the significant movement in net working capital through the year, we've actually provided some further information and breakdown by division on the slide.
I wanna step through some of the specific drivers from an inventory perspective. Starting with the group's inventory position at the end of the year of AUD 6.1 billion. It's worth noting that this balance includes around AUD 450 million of stock acquired as part of the API and Beaumont Tiles transactions. Within the AUD 1.2 billion of inventory cash outflows shown on the slide, there are really four key factors impacting this movement. Firstly, the ongoing normalization of stock levels, particularly in Bunnings, which as we've mentioned over the last few results, have seen abnormally low stock levels due to the rapid growth in sales over this period. This is illustrated in the graph on the lower right of the slide.
Secondly, we've seen average unit cost inflation of between 5%-10% across the retailers, which includes the impact of input costs as well as higher shipping and demurrage costs. Third, we continue to hold deeper stock weights of everyday products in Kmart to manage ongoing supply chain variability. It's worth noting, however, that Kmart's inventory position declined through the second half as domestic supply chain constraints eased. Finally, the impact from higher commodity prices on the inventory position at WesCEF, most notably in its fertilizer business. Overall, we believe inventory positions are appropriate for current conditions, and we are well placed for the lead-up to the Christmas period. With retail working capital and inventory positions relative to sales returning to pre-COVID levels and team member leave patterns normalizing, we'd expect cash generation to revert back to the long-term average of around 100%.
Moving to Group cash flow on Slide 16. Group operating cash flows of AUD 2.3 billion for the year were AUD 1.1 billion or 32% below 2021, and cash realization was 59%. The key movements are set out in the chart on the right of the slide and include the lower divisional earnings and higher working capital that I just talked to on the previous slide. As well as that, there is AUD 300 million in higher tax payments as a result of higher tax installments made during the year, and some additional non-cash earnings, mostly from property revaluations.
From a net debt perspective, the increase to AUD 4.3 billion reflects the decision to return AUD 2.3 billion via the capital return to shareholders at the end of the last half, as well as higher net CapEx and increased acquisition activity. The group's net CapEx was AUD 884 million for the year, an increase of about 40% on the prior period. The increase was largely driven by AUD 304 million of project CapEx and AUD 34 million of capitalized interest in relation to the Mt Holland lithium project, as well as an increased spend on data and digital CapEx. Bunnings property sales for the year of AUD 258 million were in line with the prior year. A more detailed breakdown of divisional CapEx has been included in the appendix to the presentation.
Acquisitions and divestments during the year of AUD 1.1 billion includes the cash consideration for API, along with its acquired net debt, as well as the Beaumont Tiles acquisition. This was partially offset by around AUD half a billion in proceeds from the sale of Coles shares during the year. Turning to balance sheet and debt management on Slide 17.
Wesfarmers continued to take opportunities to reposition the balance sheet during the year, which has allowed us to lower our cost of funds from 4.7% in 2021 to 3.1% in 2022, and improve the maturity profile of our debt and extend the weighted average term from 3.5 years out to 5 years. The group recorded an 18.6% reduction in other finance costs as a result of the lower average cost of borrowings and higher capitalized interest associated with the Mt Holland development. Our strong investment-grade credit ratings from Standard & Poor's and Moody's were maintained during the year, and the group retains considerable headroom within its key credit metrics. Finally, turning to Slide 18 on Dividends.
As Rob mentioned, the Board has determined to pay a fully franked final dividend of AUD 1 per share, bringing total dividends for the year to AUD 1.80 per share. This is consistent with our dividend policy, which takes into account available franking credits, our balance sheet position, credit metrics, and cash flow generation. I'll now hand back to Rob.
Thanks, Anthony. Turning to Slide 20. Retail trading conditions have remained robust through the first seven weeks of this financial year. Sales growth has been particularly strong in Kmart Group, with sales significantly higher on both a one year and a two year basis. Bunnings also continues to see positive sales growth on a one year and two year basis, while sales in Officeworks were in line with the prior year. In relation to the positioning of our businesses, there are three points that give me confidence that we are well-placed to respond to any changes in the economic environment that may arise. Firstly, Wesfarmers businesses largely provide essential and everyday products to both retail and commercial customers. This skew towards essential products provides a level of resilience for our businesses.
Secondly, our Retail businesses are well-known for their strong value credentials and everyday low prices, especially Kmart, where our average price points are materially below what you would ordinarily find in traditional department stores. As inflation and cost of living pressures increase, we expect value to become increasingly important as households look to balance their budgets, and we believe our businesses are well-placed in this environment. Finally, we're starting from a strong base. We've been investing in our teams and our businesses throughout the pandemic and are well-positioned with our inventories, cost structure, and offer to customers. We have maintained our commitment to low retail prices throughout the pandemic, rather than taking margin at the expense of customers, and the trust that we have built will serve us well going forward.
The quality and reliability of our operations in WesCEF support it to maximize the opportunity associated with the favorable global commodity prices. Now finally, on the outlook on Slide 21. The Australian economy is starting from a strong base, with low unemployment and high levels of household savings. The effects of inflation and higher living costs are placing pressures on parts of the economy, including household budgets. Wesfarmers continues to actively manage the impact of inflation and is leveraging its scale and sourcing capabilities to mitigate the impact of cost increases. While inflation remains elevated, in recent months, we have seen prices for some inputs, such as cotton, timber, and plastic resin, start to moderate. At a group level, our strong and flexible balance sheet, together with our focus on financial discipline, provides us with the capacity to take advantage of value-accretive opportunities that may arise.
In summary, the actions that we've taken over recent years, together with our strong balance sheet and portfolio of high-quality businesses, make Wesfarmers well-positioned to deliver satisfactory return to shareholders over the long- term. That's the end of our presentation, and we'd now be happy to take your questions.
Thank you. We will now begin the question- and- answer session. If you wish to ask a question, please press Star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star two. We do ask that you limit your questions to one per caller and that clarifying questions are concise. You may then rejoin the queue for any additional questions. Your first question comes from Thomas Kierath from Barrenjoey. Please go ahead.
Oh, good day, guys. Just a couple of questions or one question rather on Bunnings. Just in the second half, the sales growth is obviously quite strong. Can you maybe just split that by volume versus price? And maybe just elaborating on when prices went up, did you see gross margin come down? Was there some investment in that? Obviously noticed the margins fell a bit in the second half. Thanks.
Yeah. Thanks, Tom. Couple of things. Certainly saw transaction growth in both consumer and commercial in the second half. It was obviously a bit disrupted in the first half with the lockdowns that both Rob and Anthony touched on. That was really pleasing. We've been working really closely with suppliers to make sure that, you know, when we do need to move on price, we're doing it in the most efficient way possible and really challenging ourselves. You know, we don't, as you know, call out anything around our gross margins, but, you know, we're really pleased with where we sort of ended up. It is a dynamic environment, right? There's different levels of inflation across different categories, and it is really quite diverse, you know, across the sort of Bunnings category group.
There's no one sort of homogeneous sort of inflation number that we've got to work around. That's why we've got such detailed level work, you know, at a sort of category by category level.
Thank you. Your next question comes from Michael Simotas from Jefferies. Please go ahead.
Hello. I just wanted to talk about inventory a little bit more if we could. I think you've given a good explanation for the move. Going forward, just interested how the management teams are planning for inventory. It sounds like generally managing the business to similar industry inventory cover to what you had prior to COVID, maybe with a little bit more cover in Kmart. Just wanted you to clarify that and then.
Also, what sort of demand levels are you assuming? If demand falls short, how quickly can you adjust?
Well, Michael, I might get Ian, Mike, and then Sarah to cover that from an inventory point of view.
Yeah, Michael, Ian Bailey here from Kmart Group. Yeah, so we're managing inventory on a consistent basis to where we've been for the last year or so, which is we're carrying an extra week's cover versus history, which pretty much take us to market levels of inventory. We've always had very fast inventory turns relative to other players, and we've come back probably more to an average level. That just gives us the flexibility with international supply chain, if there's any disruptions. We're seeing increasing consistency through international supply chain now, and we're getting more confident. We expect in the second half to start unwinding that extra week's cover on the basis that we continue to see that improvement as we go through this half.
When you look at the quality of our inventory, more than 80% is 365. That's inventory that doesn't change. If there is any change in consumer demand, all we need to do is slow down future orders, and that inventory will come back into line as time passes without the need for any clearance.
I'll pick up from there, Michael. It's Mike from Bunnings. Similar on the sort of last point to Ian, quite a lot of our product, you know, is 365. So, you know, if there was a change in demand, our ability to sort of carry that product through longer cycles is really good, and we've had that experience in the past. But we've also been a little bit conservative heading into this spring. Some of this is the first time in three years, for example, in Victoria, we can trade our stores through spring and Father's Day and really important events like that for us. So we made sure we brought some inventory in a little bit earlier and similar with our festive product as well to make sure that we had strong availability for customers.
You know, while we were pleased with what the team was able to do through the last couple of years in terms of availability for customers, it still was sort of in that 80%-85% range. You know, we do have more work to do to make sure we've got good availability. You know, this time last year, if you walked one of our stores, our timber yards were virtually empty and no product. It's great to see this year that we're sort of back into those sorts of things where demand is really strong from a construction sector point of view. Maybe over to Sarah.
Yeah. Thanks, Mike, and thanks Michael for the question. Sarah from Officeworks. I think, similar to Mike and Ian, from our perspective, it does depend on the part of our business that we're talking about. For example, in technology, we still see some shortages in areas and, you know, certainly we are living hand-to-mouth in a number of the tech hardware areas. We'd love to see more stock if we could get our hands on it. However, in terms of things like stationery, education, and art, and the more traditional office supplies areas, recognizing that this time last year, our stores were closed significantly down the East Coast, we are expecting a normalization of inventory levels.
We've ordered in line with the growth that we expect to see that is coming from those areas. Same with print and create. Then in terms of furniture, we are expecting a normalization of inventory levels over the course of this 12 months, recognizing that there was a real step up in our furniture sales, acknowledging people were setting up their home offices. Hope that gives you a flavor across the different businesses.
Thank you. Your next question comes from David Errington from Bank of America. Please go ahead.
Morning, Rob. Morning, Anthony . I'm gonna break convention a little bit. I'm gonna ask a question on what I believe is one of the more exciting businesses at the moment, and that's WesCEF. Can I ask Ian Hansen a question? Ian , it was announced they've cut their ammonia production because of problems in Europe in gas. It looks like to me that the ammonia market is certainly, if it's not structural, it's certainly longer term. It's gonna remain fairly elevated at very high international prices. You've got a terrific business position here in Australia, where you've got a really good gas right in longer- term. But what I'm trying to do is I'm trying to understand a little bit more of your business because I believe it looks really exciting for the next two years.
Now, this year, you were impacted because of shutdown. Can I ask you a little bit about what that actually does? In that shutdown, how much does it help you going forward in terms of plant availability? Are there any more plant shutdowns likely? Can you give us a bit of an idea of these pricing lags that happened? Because it just seems to me. Also, watching West Erregulla, it looks like they're progressing that might make you a bit more opportunity to get more gas. I know there's a lot in that question, but I think that WesCEF doesn't get the exposure that it deserves, Ian, because I think you're running a brilliant business at the moment, and it looks like it's got some great opportunities in the next two or three years to really expand your earnings.
Good morning, David. Thank you for the compliments around WesCEF. I appreciate it. I'm sure my team also does. Trying to answer those questions. In terms of the shutdown, I think our shutdown towards the end of calendar year 2021, so first half FY 2022, we were down for about six weeks. It was part of our five-yearly shutdown rotation for the ammonia plant. If you think back, we've had that ammonia plant now for 22 years. We started doing annual major shutdowns, moved those out to every two years, and have progressively increased the time between shutdowns to now, about five years, which is pretty much the limit that we can do for regulatory reasons. We had the shutdown for six weeks, which meant that we lost six weeks' production, which was planned.
Somewhat unfortunate that the ammonia prices were so high at the time, but of course we weren't to know that when we were planning the timing of the shutdowns. Going forward, we would hope the ammonia plant stays online for the next four and a half years. That's unlikely. It's likely to fall over for one reason or other. But generally, when it does trip, it's only for a day or two, and then we'll get it back up. We don't see any long shutdowns going forward. Hopefully four and a half years of good ammonia production. I might say, David, that all the work the team's been doing in the ammonia plant means that we're getting more tons out of the ammonia plant today than we ever have before. Really pleased with the business improvement that we've undertaken in the ammonia plant.
In terms of the pricing lags, most of the ammonia that we manufacture and purchase, and for those not aware, we purchase about 50% of the ammonia that we either use or on-sell, so 50% of our demand. Most of the ammonia is on a pass-through, international price pass-through contractual arrangement, either through the direct sales of ammonia or through the sales of products with ammonia in them. We have a small proportion which isn't pass-through, and that generally is related to gas-backed pass-through. So if there's a change in gas price, then we pass that through. The pricing lags on all of those pass-through contracts are pretty much a three-month lag. In fact, they're a four-month lag because we use the three-month average for the three months prior to the month that we then change the price after.
If you take an example of a January to March average international pricing, we would then change that pricing in May for the customers May, June, July going forward. There's a one month gap in a 3-month lag, if that makes sense.
Mm-hmm.
Finally, on West Erregulla, or the Strike gas situation, yes, West Erregulla is looking more and more positive, but I'll leave it to Strike to make those announcements. Whether there's any additional gas available, time will tell.
Thanks, Ian.
Thank you. Your next question comes from Shaun Cousins from UBS. Please go ahead.
Thanks. Good afternoon, and good morning in WA. Can you maybe talk a bit about the Health division, please? I'm just curious, there's a lot of moving parts here, but just around the EBIT outlook, if we annualize the AUD 11 million for the quarter end of June, that implies AUD 44 million, assuming each quarter is equal. This compares to API talking about a AUD 70 million sort of EBIT, and recognize there's an interest number in there. Can you talk a little bit about any of the Marsden Park savings that are coming through, yet? I think it's AUD 8 million annualized. There's Pfizer as well.
Maybe more generally, just what are the differences in treatment of costs between API and Wesfarmers and whether or not we should be thinking that your, you know, earnings for the next 12 months, you know, should be around AUD 44 million+ some growth there? Just in that, it's quite a big difference, and it has some implications for how judicious the acquisition is, particularly given it's over AUD 1 billion on a slightly, quite a different earnings profile now, please.
Shaun, Rob here. What I might do, I might make a few opening remarks and then hand over to Emily to talk more about trading, how you should think about earnings and Marsden Park performance and so forth. We've owned API for four months. The focus has very much been on engaging the team on a transformation plan. As we were very clear about when we bought the business, this is a business that has been underinvested in. It requires some investment. There are many opportunities to improve performance. Our investment horizon is very much to drive that improvement over the next few years. We are very much in the early stage of formulating that transformation plan.
This year, my advice would be don't judge the success of this acquisition on what the earnings number is in FY 2023. Judge the success of what we achieve in the next year by how we're coming out at the end of this financial year. You're right that there are a few. It is pretty noisy in terms of the results with acquisition accounting, and so forth. I'll hand over to Emily to talk to the business, and Anthony can give more context on the acquisition accounting, if you'd like.
Thanks, Rob. Thanks, Shaun. Look, overall, we are excited by what we've seen. It is in line with the expectations coming into the business, and we do think we're well-positioned for growth. There is a lot of focus at the moment on integration and accelerating sort of business transformation. It was a noisy result, as Rob said, with a lot of one-offs. In terms of Marsden Park, we're on track to meet the cost savings that API previously announced. We're really just at the moment thinking about the kinda investments that we're gonna need to transform the business.
Shaun, it's Anthony. Maybe just to add in terms of just for your, I guess, numbers, in terms of the PPA adjustments that'll be made next year, we've got identifiable and tangible amortization. We expect it to be about AUD 13 million in FY 2023, and that will taper down over, you know, the subsequent years.
Just to be clear, that AUD 11 million, however, pardon me, that 11 m illion, will we sort of, you know, think about annualizing that to a degree there, and then we take off the acquisition as well, the acquisition amortization? That's how we should be considering that, please?
Well, yes. I guess the AUD 11 million doesn't include any of the identifiable tangible amortization, if that's what you're asking. Yes.
Yep. Okay, fantastic. Thank you, everyone.
Thank you. Your next question comes from Bryan Raymond from JP Morgan. Please go ahead.
Thank you for taking the question. My question's around Kmart, and the strong performance you saw there in light of pretty high cost growth or through the COGS line in particular. Just there's a comment in the presentation around that you're able to essentially take some of those price rises on and, with your end-to-end supply chain really, not have to increase pricing too much for the customers. I'm just interested in how, to what degree you're absorbing prices, how, versus how much you're able to offset them, and also what sort of inflation you're seeing, and really just understand that gross margin line, even though I'm sure you won't quantify exactly on gross margin. Keen to understand the moving parts there a bit better. Thanks.
Yeah, thanks. Thanks, Bryan. I think the first thing to point out, of course, is that our retail prices are so low that any increases we put through are always gonna be modest. I think that's the first piece. We've been very successful as we've seen raw material costs increase that we've been able to manage margins effectively, and you can see that's obviously played out in the second half result this year. The way that we do that is we have complete line of sight all the way through to what's going on the raw material prices.
We then work with our suppliers in the way that we design and produce our products so that if there is a particular product type or a material that's going up in price faster than others, then we'll look to see how we can modify the construction of the product so that we can mitigate the cost increase. So what we do have is we have complete line of sight through our supply chain to costs, which then means we can be more reactive than most in making adjustments. Most of our competitors would work through intermediaries where that's much harder to realize. And then we look at mix, and we make sure we work our mix very carefully.
Of course, in the market that we see today, we're working hard to make sure our mix is really tuned to value in anticipation that customers will continue to seek out value in the weeks and months ahead. Therefore, we can play across the price points that we play in so that we can manage that overall margin outcome.
Great. Could you help us understand what inflation would look like in the business at the moment? In the second half, obviously, the sales growth is quite strong. Is inflation a meaningful part of that growth?
The ASP movement in the half was negligible, on average, but that's because of mix changes that goes on. Of course, we're seeing inflation in some of the products because of, you know, take cotton, there's been a significant increase in cotton price over time. Starting to come back now, as Rob called out earlier on. We wear that within the cost of products. Occasionally, we'll make a minor adjustment to the retail prices, but you know, that's as simple as, you know, maybe AUD 4.50 becomes AUD 4.75. We're talking like incredibly small variations in pricing that can help us manage those cost changes when they occur.
I think Anthony called out, you know, 5%-10%, and that was what we would generally see across the range of products.
Okay, great. Thanks.
Thank you. Your next question comes from Adrian Lemme from Citi. Please go ahead.
Oh, hi team. Just a question on absenteeism. The supermarkets have talked about how absenteeism and lack of drivers is hurting the operating rhythm, so to speak. Can you discuss what cost impacts you're seeing across the businesses and whether we should expect these to come down in FY 2023? Thanks.
Adrian, Rob here. Yeah, look, we're seeing similar trends. Obviously, you know, the exposure of absenteeism is more acute in some areas where you have a very high reliance on the individual role. But I might just get maybe Mike or Ian to provide a bit of color. You're right, it is a cost impost on the business for, you know, has been and it will be for a while.
Yeah. Adrian, we certainly saw the worst of it at the start of the second half. We were seeing absenteeism in the double digits in that sort of July, February period. That has moderated. Still sitting higher than our long-term averages, for sure. I think it's a bit unsurprising, you know, in middle of winter and you've got, you know, the sort of seven days at home for COVID, but cold and flu bugs around as well. I'd anticipate as we head into summer, that's gonna moderate back to normal levels.
Hopefully, as we sort of get well and truly into summer, you know, government will actually have a reflect on the sort of stay-at-home periods and maybe follow some of the trends that we've seen in other parts of the world when summer comes. I don't know, Ian, if you've got anything to add to that.
Probably, I mean, it's an impact, but lower than we would see in Bunnings as we have a higher casual base of employment. Therefore, obviously, an absence of a casual plays out differently. But there is some embedded costs, but it's increasingly moderating as time passes.
Great. Thank you. Yeah, 'cause I know the direct costs in Bunnings, for example, were AUD 70 million from COVID. I mean, it sounds like there should be some benefit from this also. Although, albeit it's harder to quantify.
Yeah. Look, the 70 million, 71 million was made up of a couple of different things, including absenteeism. Yeah, look, you'd anticipate that it wouldn't be as high going into the next year.
Thank you.
Thank you. Your next question comes from Craig Woolford from MST Marquee. Please go ahead.
Good morning, Rob, and afternoon to those on the East Coast. Just wanted to ask a question about the Bunnings. I guess I'd phrase it as the EBITDA margin, particularly for the second half.
You know, to look at, I guess one of the measures you guys have looked at, the second half 2022 sales are up 36%, but second half costs on a consistent accounting basis look to be up about 36% as well. Unfortunately we don't get enough disclosure to really understand whether that's product cost or the cost of operating the business. Can you give some clarity about, of that 36% cost growth, you know, what is transitory in nature, within that mix or, and what is, likely to be ongoing?
No, look, thanks for that, Craig. I might start maybe. Or do you wanna say something, Anthony, first?
Sure.
Look, you know, for us, there is a bit in there. You know, we talked about the AUD 71 million in extra cost. Roughly half of that was in the second half, so that's clearly some. There's a little bit of cost in supply chain as well, and clearly we're making some investments for the longer- term as well, because that's a thing that, you know, ultimately we're really focused on, is long-term growth and long-term returns for the business.
Yeah. I think probably the only thing to add on there is there's probably a little bit of a mix change through that period because as Mike's pointed out, earlier, commercial has grown stronger through that period, particularly in the second half. As we know, commercial is slightly lower margin than consumer. I think the only other thing is there's been some investment through that period. We've had TKD investments and we've had Beaumont Tiles come on board. I think there's a combination of things going on in there. As to the split in terms of, there's obviously a level of investment that will continue, but there's a level of that that will actually reverse over time as well.
Look, could I just get a clarification on that supply chain investment? Can you give some examples of what that might include?
Oh, look, it is a little bit in there around demurrage and things like that, so they are more one-off in nature. There's still a little bit of lumpiness in the supply chain, Craig, but, you know, some of that was just a reflection of, as I said before, bringing a few things in a little bit earlier and getting those through ports and container yards and things like that.
All right. Thank you.
Thank you. The next question comes from Ross Curran from Macquarie. Please go ahead.
Hi, team. Just a quick question around New Zealand. Woolworths yesterday called out that they expected EBIT to deteriorate significantly, or materially, the December half. Are you seeing those cost pressures coming through the New Zealand businesses?
Well, I might start, Ross, and think about Bunnings New Zealand. Really pleased with the performance over there. You know, we certainly saw inflation kick off a little bit earlier in New Zealand, and that was helpful for us with the Australian business 'cause it was a bit of a canary in the coal mine in terms of how we needed to think about things. There's nothing in the way that we're sort of looking and seeing the business in the first half that is giving us any particular concern at all.
Yeah, Ross, Ian here from Kmart. Yeah, our stores over in New Zealand, last year we had quite a few lockdowns in the New Zealand market as well, so of course we're cycling those, which obviously give us a significant benefit as we go through this half. In particular, underlying trade we still see as strong and the cost impacts that we're seeing within New Zealand are in the realm of, yeah, quite manageable at this point.
Ross, I might just get Tim Bult to comment on the WIS businesses. They, you know, they get to observe some of the supply chain challenges that New Zealand is facing. You know, where they're facing a lot more challenges as a nation than some other areas. Tim, do you wanna just comment on WIS?
Yeah. Thanks, Rob. I think the team in New Zealand continues to do a really great job in WIS in managing, you know, what is very much a supply challenged market. We've adjusted to be able to deal with that, and so far the team's done really well. Demand has remained pretty strong, so we haven't seen any big economic drop-off in terms of demand. Cost management is really important, and we're certainly seeing cost pressure in certain products. We've been able to work through that with our customers and, at this stage, so the team's doing a great job of managing through that and things are going quite well.
Great. Thank you.
Thank you. Your next question comes from Richard Barwick from CLSA. Please go ahead.
Good morning, guys. I got a question for Mike on Bunnings. Like, as you say, it's been a remarkable period of growth. Just be interested to hear your thoughts on how you can sort of work your way or cycle through this. Is there an inevitable slump in sales and earnings that we'll be seeing in FY 2023? I know obviously you're gonna be restricted in what you can say, but perhaps if you can give some context around the shape of sales. Obviously in the second half you saw trade outperform the DIY. I'll just go back to one of your comments I think you made it at the strategy day. Mightn't this year, but perhaps last year, you talking about people don't paint their house twice.
Just love to hear your thoughts on how you think Bunnings will shape up over the next 12 months.
I'd hazard a guess, Richard, that over the last couple of years with nothing else to do, they've painted their houses 3x or 4x . Look, more seriously, look, you know, we can see more clearly on the commercial side of the business because of the sort of pipelines of work. That one's a little bit easier to sort of see. With availability now in categories like timber, insulation, board product, there's pent-up demand and I think Anthony touched on that sort of mix in the second half. Some of that is a little bit of catch up in the work that's outstanding. Talking to our builder customers, you know, there's strong pipelines 2 and 3 years out, and the type of construction that we're focused on is the smaller builder.
They're not managing some of these bigger projects where you've seen some building companies get themselves in, into a bit of trouble. I think there's a lot of opportunity for us to pursue there. The whole of build strategy that the team have sort of built and the way we're sort of thinking about that through the different segments of Bunnings and also TKD and Beaumont Tiles, I think gives us some great opportunity to really.
Earn the right to be chosen by customers in that space. On the consumer side, you know, I think there has been a structural shift in the way that our customers think about their home. It's become a workplace, it's become a classroom, it's become somewhere that, you know, you're spending more periods of time. You know, when you're working from home 2-3 days a week, there is more wear and tear on the house. You're seeing more things to do. You know, we sort of also see that over the last few years, customers have actually really developed, you know, quite a new array of DIY skills. We've been able to bring new products and services and categories into the market to be able to meet those needs.
We sort of, you know, have a view that with people at home a little bit more, you know, that is gonna see that. As I touched on earlier, we've got some, you know, parts of Australia and New Zealand where, you know, for the first time in quite a while, we've got the ability to actually trade our stores through a spring and summer cycle, you know, hopefully without interruption. I think that structural shift is there, and I'm really, you know, focused on driving strong growth as we move through this financial year and beyond.
Okay. Strong. You don't see it as inevitable that you need to go through a period of sort of, you know, negative growth after such a strong three-year period?
Our aim is always to outperform the market, and that's the focus of the team.
Okay, cool. Thank you.
Thank you. Your next question comes from Ben Gilbert from Jarden. Please go ahead.
Good afternoon, all. Maybe this one's for you, Rob or Anthony, but the OneDigital cost of AUD 100 million for next year, which you've obviously provided before, how do you think about a return and sort of judging success for this business over the next couple of years? I suppose what I mean by that is AUD 100 million is a lot of money, but in the context of, say, Super Retail spending like AUD 25 million, it doesn't seem as big.
I'm just trying to understand is this investment gonna need to increase as you find more things to do or will there be sort of a commensurate revenue opportunity that sits above it around media, these sorts of things that will mean that that loss can stay in check for the next couple of years or even come down?
Thanks, Ben. I'll try to answer that. A reasonable amount of that is very much around the development costs and setup costs, launch costs, associated with building out the shared data asset, OneData, the OnePass subscription program. But then there's also an element of recurring cost. Over time, the timing will depend a bit on how fast we move, but we think that about AUD 100 million is about the right estimate for FY 2023. Over time, we would expect that number to come down for the reasons that we've set it up, we've undertaken a lot of the technology work. Rather than building and setting up, we're iterating and improving.
Like, there'll always be some ongoing costs of team members, talent, tech, and so forth, marketing. In terms of how we will realize the financial benefit, we are only doing this because we think it is going to generate a financial benefit. The financial benefit will be driven in different ways. It will ultimately flow through to higher sales across all of our retail businesses. That higher sales will come through in a range of ways, better understanding our customers, more targeted marketing, higher frequency of transactions, improving the customer experience through better digital engagement. There's also a lot of other efficiency benefits that will flow through from the OneData asset. I should note that the divisions are already very well progressed on using data in a value-adding way.
You know, just at our recent board meetings, we were getting various examples of the personalization work that's going on in marketing, the way that the Kmart team are using it for range optimization. There's a whole range of ways in which we'll ultimately deliver value back to shareholders.
How do you measure that, Rob? At first, if say you get a big uplift from a promotion in the retail business with Officeworks, is if the Officeworks team are gonna say, Well, we did that, and then you go to OneDigital and say, "Well, this was us." I'm just wondering how you really actually tangibly measure it.
Yeah. Oh, look, it's actually really easy.
With the product structure of the business.
Yeah, sorry, Ben. Look, it's really easy to measure. Quite frankly, we don't really care where the value comes through. In fact, I'd suggest most of the value in the short- term will flow through to our divisions. The great thing with this is that it's very easy to measure. Then over time, I expect that there will be other ways in which we can monetize the phenomenal platform that we have built through OnePass. You know, you can look around the world and around Australia at ways in which people can monetize those kind of platforms and other products and services that you can have a right to participate in. That, over time, is probably more likely to be attributed directly to OneDigital.
Obviously are as around advertising, marketing, not to forget the subscription fees that will be generated and other use cases. It'll be a combination. The great thing, you know, with what we're doing is it's incredibly easy to measure the benefits that we're getting. Over time, as we move from the build phase to the operational phase, we'll have more capacity to manage the costs in a way that we're confident are delivering value. If you step back and think about the size of our group and the number of customer transactions, digital interactions we have, it's a fairly modest investment in the scheme of things, and it's an operating cost that will decrease over time as the returns start to flow through.
Yeah. Thanks, Rob.
Thank you. Your next question comes from Lisa Deng from Goldman Sachs. Please go ahead.
Hi. I'm still trying to understand sort of the resilience in the business of Bunnings. Are we able to further break down the different categories, for example, DIY into, you know, what is repair and maintenance? You know, what is everyday essentials as we define it? And, you know, commercial, like build and construct that might be tied a little bit more to the housing cycle. Are we able to further break that down and quantify and give us a range of sort of mix in terms of percentage of sales? And then how should we think about variable costs versus fixed costs as well in the business? Because we don't disclose the GP margin. So, you know, I'm just trying to put a little bit of quantification around the resilience of the business. Thank you.
Yeah, thanks for your question, Lisa. You know, we talk quite openly about the sort of mix of commercial and consumer sort of being in that sort of, you know, 60/40 sort of split, 60 consumer, 40 commercial. From a strategic point of view, you know, our ambition over time is to have that closer to 50/50, not through slowing growth in consumer, but by accelerating growth in commercial. You know, beyond that, we tend not to sort of dive into the detail. You know, what I can tell you, and I've been in Bunnings for 17 years, so I've seen a few different cycles sort of come and go.
You know, we do see when, you know, lots of people are buying, selling houses, there's opportunities to participate in the consumer market as people prepare their homes for sale, and then, you know, you settle into your new home and you personalize it to your space. We also know that when, you know, housing churn isn't there, you know, customers are really keen to, you know, continue to invest in their homes. As I was saying before, you know, we've had a couple of years where, you know, we've actually been educating our customers more than ever before on things to do around the home. You know, we do see that we have a very resilient business model. We do understand that there is a mix of discretion and necessity both in commercial and consumer.
That's not only in the product itself, it's in the way that our customers live their lives. You know, when you're, you know, in more challenging economic circumstances, people tend to not go out as much, they tend to not eat out as much, not go to entertainment venues as much. That leaves them at home. Obviously when they're at home, we've got the opportunity to engage with them more for them to be doing things around the home. That's what gives us the confidence that, you know, through the different cycles, we're able to deliver growth, and deliver a compelling offer for our customers.
The fixed versus variable cost component?
Inside the business? Yeah, we've got a mix of both, and obviously one of the more significant, you know, parts of the P&L is our budget for our team members in our stores. You know, over the various cycles, our teams have handled that incredibly well in terms of being able to flex up when there's growth, both rapid growth and sustained growth as we've seen over the last few years, but also manage that down if the volumes aren't there as well.
Got it. Thank you.
Thank you. Your next question comes from Grant Saligari from Credit Suisse. Please go ahead.
Good morning, afternoon. Could you maybe just help me with a logical bridge to profitability for Catch? Lost AUD 90 million, and you've provided a little bit of color I know on the performance of the first-party product. Over the next couple of years, what actually has to change in the business and what are sort of the quantum of changes that need to occur to get that business to a reasonable level of profit, please?
Grant, Rob here. I might kick off and then Nicole can provide a bit more color. Nicole spent the last couple of months getting closer to the business. Obviously, we've got Brendan Sweeney joining us in a couple of months' time, the new CEO of that business. Look, there's a fairly heavy investment program going on. When we bought the business, clearly it was very much a niche deal of the day type e-commerce retailer with you know, one fulfillment capability out of Melbourne, and an emerging marketplace capability. The investment that's going on is investing in the technology, the distribution centers. I mentioned we've just opened a new DC in Moorebank. The DC investment is not just to support Catch, but also to support, for example, Kmart e-commerce fulfillment.
We see some very logical synergies around centralized e-commerce fulfillment that Catch can participate in. A lot of investment in talent and capability there. The bridge to profitability, it will, you know, it will need to improve over time. It'll improve as we continue to improve our delivery promise to customers as we grow the GTV, and as we get better on the first party business. I'll let Nicole talk to some of the initiatives that we're focused on. Look, we always knew when we bought this business that it would require a lot of investment to realize the o pportunity that we see. One miss through the year was the performance of the first party Retail business. We're learning a lot about how to do that better.
Really, it's about evolving what was initially very much an off-price, highly discounted, parallel import type deal of the day proposition to a more customer-centric, strategic first party proposition. But I might just let Nicole talk about some of the shorter term initiatives, and then we can have a more detailed discussion at the half year once Brendan's on board.
Yep. Thanks, Rob. Yeah, look, it definitely is a process of investment at the moment for Catch, but we've certainly, you know.
Made massive progress. I mean, in the last couple of years, we've doubled the number of SKUs, we've also doubled revenue, and that's put a lot of pressure on the systems. We've had to invest in those systems. I think there are certainly some number of success stories in Catch, and that namely comes down to the marketplace, which has grown significantly and increased the number of SKUs. In terms of first party, while it's not where we'd like it to be, we actually have done a range review and spent a lot of time understanding, and with some help with OneData actually, working closely to understand what is working and what is the right category strategy and how does one P and three Ps of the marketplace and first-party inventory work together to own those categories.
That framework that we've built, we're now rolling across other categories, and we're going to see over the next, I guess, six months, a lot of progress. There's the marketplace, there's obviously the OnePass program, but there's also the fulfillment, and Rob touched on that and the work we've done with Moorebank. Fulfilled by Catch is a really important part of our strategy. Kmart has just joined the trial a few weeks ago, and early signs are very positive. If we can grow the fulfillment side of our business, it has a double benefit. The benefit is for Wesfarmers divisions, but also for customers because we can speed up delivery, and that's essential in e-commerce. The growth of delivery is a key focus for us, and we tend...
We want to improve that significantly even before peak this year. Look, they're the key programs of work I think at the moment that we're working on, but we're very confident in the future of Catch.
Yeah. The final point just on the first party, because we obviously called out first party as something that didn't work as we'd like this year. As you'd imagine, it's a very different proposition around the deal of the day, very tactical niche opportunities to more systemic targeted initiatives. You know, one of the success stories this year was that the Catch team did a fantastic job with a much greater focus on the pet category. You know, being really targeted and focused on understanding what customers want, leveraging our customer data assets and our marketplace and our first-party product relationships to deliver a really strong proposition in the pet market led to incredibly strong growth, well in excess of market growth off a low base.
That's given us a lot more confidence on how to be more strategic about the first-party products. Nicole and the Catch team are taking those learnings and building them into the plans for the year ahead.
Okay. Thank you.
Thank you. Your next question comes from Phil Kimber from E&P Capital. Please go ahead.
Oh, g'day, Rob. Just a question on lithium. It's two-part. The first one is just with the I assume the mine and concentrator comes on stream before the refinery. I just wanted to know whether, given where current prices are, whether you've given any consideration that you may sell spodumene in FY 2024 rather than waiting until the refinery comes online. The second part of the question was just sort of longer term. Under Kidman, I think they'd assumed 85% spodumene went to the refinery and 15% be sold to external parties. I just wanted to know whether you guys have a different view on that and maybe, you know, more goes to the refinery than goes to external parties over the longer- term. Just wondering if you could comment on those two.
Phil, I'll get Ian Hansen to answer that. Look, the good news is that our joint venture partner, SQM, and ourselves are both very commercially focused. With these types of opportunities, if there's an opportunity to make some money and improve the returns, we're both very motivated to make that happen. I'll let Ian talk more to that question in more detail.
Yeah. Hi, Phil. In terms of the timing of the mine and concentrator, you're correct. We're forecasting that will come online later in 2023 compared to the refinery in late 2024 or second half 2024. There will be a period of time where the concentrator will be producing spodumene and the refinery won't need it as a feedstock. We're currently in discussions with our joint venture partner about selling some of that spodumene in the interim and taking advantage of the earlier cash flows we might be able to obtain as a result of the good pricing in the market that we're seeing at the moment. In terms of the longer- term, at the moment, we've sized the concentrator output to meet the input requirements for the refinery.
The volume coming out of the concentrator is designed to feed the refinery, which will produce 50,000 tons per annum of lithium hydroxide. That's on a 100% basis. That is for both joint venturers. Both SQM and Wesfarmers are focused on extracting as much NPV from the ore body as possible, as Rob alluded to. With a 50-year mine life, that indicates it'll be economic to increase capacity and potentially shorten this life. We're currently scoping an expansion of the project, which at this stage will involve increasing the mining capacity and also the concentrator, with a view to potentially sell that concentrate in the first instance and then assess refinery expansion further down the track. We should have something a bit more definitive on that in the near future.
All right. Thanks. Can I just check, those years were calendar years you were talking to, latter 2023 and latter 2024, not fiscal?
Yeah, that's correct, Phil. The concentrator should be online later in calendar year 2023, so that'll be FY 2024, first half FY 2024. The refinery remains scheduled, as per our FID announcement, to come online in second half calendar year 2024, so first half FY 2025.
Yeah. Great. Thank you.
Thank you. There are no further questions at this time.
Okay. Thanks very much, everyone. Appreciate your time. If any other questions, please, give Simon and the team a call, and all the best for the weekend. Thank you.