OPINION: Wesfarmers, which sources much of its retail inventory from China, is pressing ahead with a $1.7 billion growth project aimed at providing alternatives to the Chinese supply of lithium.
issued by Wesfarmers even though the country represents the yin and yang of the Wesfarmers business model.
The topic is controversial. Wesfarmers asked and failed to get a correction when Goldman Sachs said in a research note in May this year that Wesfarmers’ China supply chain was Bunnings 76 per cent, Kmart 72.4 per cent and Officeworks 93.8 per cent.China sourcing, which ranges between 25 and 75 per cent across the Wesfarmers group of companies, has contributed to Wesfarmers having among the highest return on capital and some of the best retail profit margins in Australia.
When asked about the consequences for the Wesfarmers business of an invasion by China of Taiwan, Wesfarmers chief executive Rob Scott says the company looks at a whole range of scenarios.“Obviously, on the demand side, so what it would do to global growth and demand would be a concern. There would also be implications around sourcing – diversification of sourcing.“And then, I guess, the other thing is that if there were issues you’d probably see a decoupling of the economy.
“It’s almost impossible to predict the future,” he says. “What matters most is having a really strong balance sheet and that’s where we believe that the diversity and strength of our group is really important.
China refines 60 per cent of the world’s lithium ore, according to a report prepared for the White House in June 2021.
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