Australia's Wesfarmers says may cut dividend

The owner of Australia's second-largest supermarket chain Coles is among the first of Australia's big blue-chips to waver on its dividend in the face of global financial crisis, which has taken some time to hit Australia's real economy.

Wesfarmers' statement follows earnings warnings last week from contractor Leighton Holdings (LEI.AX) and investment bank Macquarie Group (MQG.AX) and the cancellation of dividend increase plans from mining giant Rio Tinto (RIO.AX) last month. Wesfarmers said in a trading update it expected net profit of A$850-A$880 million ($587-$567 million) for the six months ended Dec. 31, after A$150 million in pre-tax provisions and writedowns.

"The group's full year outlook is particularly dependent on retail trading conditions, coal-price negotiations and sales volumes, and general economic conditions," Wesfarmers said.

"The company may not be in a position to pay dividends for fiscal-year 2009 at the previous guidance level," it added.

Shares in the group fell 3.5 percent to A$16.88 by 23:28 GMT.

"I can't find anything horrific in there," said Lee Mickelburough, a partner at Perennial Growth Management. He said the share price reaction was not too bad, considering the group was probably going to have to do a rights issue at some point.

Analysts have pinpointed debt as a major issue for the firm, as it took on a heavy burden to buy Coles and retailers Target, K-mart and Officeworks for A$19 billion before the credit crunch started to bite.

The company also said it would continue to consider a range of refinancing options.

Coles earnings before interest and tax in the six months ended Dec. 31 was estimated at A$420-A$430 million while earnings from hardware chain Bunnings of A$370 million was more than 13 percent higher than in the corresponding period last year. (Additional reporting by Sonali Paul, Editing by Mark Bendeich)