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Wesfarmers expects up to A$2.3B gain from Coles spinoff

Wesfarmers Ltd. expects to record a gain of A$2.1 billion to A$2.3 billion from the demerger of Coles Group Ltd. in November 2018, the Australian retail conglomerate said Jan. 14.

Retail chain Coles started trading on the Australian Stock Exchange last year as a separate entity from Wesfarmers, which acquired the business in 2007.

Wesfarmers also expects A$130 million to A$150 million in the provision relating to Coles' supply chain modernization.

In addition to its gains from the Coles spinoff, Wesfarmers said it expects to gain A$670 million to A$680 million from the divestment of its 40% interest in its Bengalla coal mine joint venture with New Hope Corp. Ltd.; A$265 million to A$275 million from the sale of Kmart Tyre & Auto Service to German auto parts giant Continental AG; and US$98 million from the disposal of its interest in Quadrant Energy Australia Ltd. to Santos Ltd.

The transactions helped Wesfarmers slash its net debt to approximately A$300 million as of Dec. 31, 2018, from A$3.6 billion as of June 30, 2018.

The changes will reflect in the group's first half-year results for fiscal 2019, Wesfarmers said.

In the same release, the company provided preliminary half-year results for two of its retail units. Kmart, excluding the tire and auto services business, recorded a 1% increase in total sales, with comparable sales falling by 0.6% due to weaker apparel sales, Kmart's planned exit from the DVD category, and moderated growth in everyday products.

Meanwhile, Wesfarmers' department store chain Target posted a 0.2% increase in total sales, with comparable sales rising by 0.5% for the first half.