The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price will be one to watch on Thursday.

This follows the release of the banking giant’s first quarter update this morning.

How did ANZ perform in the first quarter?

For the three months ended 31 December, the banking giant reported an unaudited statutory profit after tax of $1,624 million. This was a 59% increase on the average profit it achieved during the final two quarters of FY 2020.

It was a similarly positive story for its unaudited cash earnings from continuing operations, which came in at $1,810 million. This is a 54% jump on the average of the last two quarters of FY 2020.

Another positive is that the bank has followed the lead of Westpac Banking Corp (ASX: WBC) by reversing some of its COVID-19 related provisions. This could go down well with the market and support the ANZ share price today.

According to the release, the total provision result in the December quarter was a net release of $150 million. This comprises an individually assessed provision charge of $23 million and a collective provision release of $173 million.

Management advised that the collective provision release is the equivalent of ~10% of the $1,700 million set aside during FY 2020. It feels this release is prudent when balancing the improvement in the economic outlook at the end of the December quarter with the level of ongoing uncertainty.

At the end of the period, the company had a pro forma CET1 ratio of ~11.8%. This is comfortably ahead of APRA’s unquestionably strong benchmark.

Management commentary

ANZ’s Chief Executive, Shayne Elliott, commented: “This is a strong performance in volatile trading conditions that again highlights the benefits of disciplined execution of our strategy as well as maintaining a simpler and well balanced portfolio of businesses.”

“We’re pleased to have achieved these results for shareholders while also helping customers in difficulty and providing the vital lending needed to support the economic recovery. All our major businesses performed well through the quarter with market share gains in our key home loan market in Australia as well as record home loan volumes in New Zealand.”

Mr Elliott revealed that its Institutional business also performed well during the quarter.

He explained: “Our diversified portfolio in Institutional delivered again for shareholders with a strong contribution from our international network. Markets had another solid quarter although revenue was down relative to the historic highs we experienced at the end of last year.”

Another positive is that ANZ’s margins have been improving.

The Chief Executive said: “Margins were up across the group due to higher volume growth in targeted segments and a disciplined and active approach to risk and pricing. The combination drove Group revenue up 4% for the quarter when excluding the impact of our Markets business.”

Outlook

Mr Elliott appears optimistic on the future, which could bode well for the ANZ share price today.

He commented: “ANZ is well positioned heading into the remainder of 2021 with good momentum in our core activities. The work done to simplify and de-risk the business over the past five years set us up well and we have the capital, liquidity and operational capacity to continue to support our customers and the broader economy through what remains a volatile period.”

More reading

• 5 things to watch on the ASX 200 on Thursday
• Westpac (ASX:WBC) share price on watch as it delivers $2bn quarterly profit result
• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• 2 high quality ASX dividend shares with generous yields
• How big will the ASX bank dividends be in 2021 and beyond?

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post ANZ (ASX:ANZ) share price on watch after $1.8 billion Q1 cash profit appeared first on The Motley Fool Australia.

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The Pro Medicus Limited (ASX: PME) share price has been a strong performer in 2021.

Since the start of the year, the health imaging company’s shares have rallied an impressive 27% higher.

This means the Pro Medicus share price has now doubled in value over the last 12 months.

Is it too late to buy Pro Medicus shares?

The good news for investors is that it may not be too late to buy Pro Medicus shares.

According to a note out of Goldman Sachs this morning, the broker has upgraded its shares to a buy rating with a $53.80 price target.

This price target implies potential upside of approximately 20% over the next 12 months.

Why is Goldman Sachs bullish on Pro Medicus?

Goldman has been impressed with the way the company continues to win large contracts in a difficult operating environment.

It explained: “Whilst many healthcare IT projects continue to face uncertainties associated with Covid-19, the demand for PME’s Visage 7 PACS technology has been robust, speaking to the strength of the solution, as well as the growing importance of an IT system that can improve efficiencies whilst healthcare imaging data continues to grow exponentially.”

“Through a highly challenging period, the cadence of PME’s contract wins has actually increased, whilst the quality/breadth of the customer base has also strengthened. In the last 8 months alone, PME has signed 6 new contracts at an average minimum size of $24m, including a further 3 of the Top 10 hospitals in the country (against a trailing 3-year average of 5 and $15m respectively),” it added.

The broker believes this provides strong validation of its technology advantage over the competition.

What is Goldman forecasting?

Although Pro Medicus shares clearly trade at a premium to the market average, Goldman believes its growth profile justifies this.

It explained: “Whilst not cheap in absolute terms, our new estimates imply a +42% EBITDA CAGR (FY20-23E). In the context of ASX Healthcare, which trades at a ‘multiple to growth’ ratio of 2.9x, we do not see PME’s ratio of 1.4x as demanding, particularly given its position as a technology leader in a market we believe is set for further technology upgrades, and a recurrent revenue model with inherent upside. We upgrade to Buy.”

All eyes will be on the Pro Medicus share price at the open.

More reading

• One year on and 50% up, the All Technology Index is booming
• Why Coles, Netwealth, Pro Medicus, & Zip shares are sinking
• Why the Evolution (ASX:EVN) share price crashed despite record results
• Why the Pro Medicus (ASX:PME) share price is getting thumped today
• What’s with the Pro Medicus (ASX:PME) share price today?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia has recommended Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Are you looking to add a growth share or two to your portfolio? Then take a look at the two ASX shares listed below.

Here’s why they could be growth shares to buy right now:

ELMO Software Ltd (ASX: ELO)

The first ASX growth share to look at is ELMO. It is a cloud-based human resources and payroll software company that provides businesses with a unified platform to streamline a wide range of processes.

ELMO has been a strong performer during the pandemic and looks well-placed to continue this trend over the next decade. This is thanks to strong demand for its platform and recent acquisitions. The latter has bolstered its offering and expanded its addressable market.

Earlier this week Morgan Stanley put an overweight rating and $9.70 price target on its shares. This was in response to the release of its half year results on Tuesday. Those results revealed a 42.8% increase in Annualised Recurring Revenue (ARR) to a record $74.2 million.

Nearmap Ltd (ASX: NEA)

Another ASX growth share to look at is Nearmap. It is a leading aerial imagery technology and location data company. Its platform provides businesses in the ANZ and North American markets with instant access to high resolution aerial imagery, city-scale 3D datasets, and integrated geospatial tools.

Nearmap appears well-placed for growth thanks to its recent capital raising, new growth initiatives, geographic expansion, and the launch of its latest AI product. So much so, management is targeting annualised contract value (ACV) growth of 20% to 40% per annum over the long term, with underlying churn of less than 10%.

Analysts at Goldman Sachs are positive on the company and were pleased with its half year results this week. In response to them, the broker put a buy rating and $2.95 price target on Nearmap’s shares. 

More reading

• Here’s why the Nearmap (ASX:NEA) share price jumped 7% higher today
• Top brokers name 3 ASX shares to buy today
• Where next for the Nearmap (ASX:NEA) share price?
• Here’s why the ELMO (ASX:ELO) share price is surging 6% higher today
• ASX 200 rises, JB Hi-Fi profit soars, Altium drops

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Elmo Software and Nearmap Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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High-performing fund manager Wilson Asset Management (WAM) has revealed two ASX shares that it rates as buys within the WAM Research Limited (ASX: WAX) portfolio.

WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Leaders Ltd (ASX: WLE).

One of the LICs is called WAM Research, which looks at smaller businesses on the ASX.

WAM describes WAM Research as a LIC that invests in the most compelling undervalued growth opportunities in the Australian market.

The WAM Research portfolio has delivered gross returns (that’s before fees, expenses and taxes) of 15.7% per annum since the strategy changed in July 2010, which is superior to the S&P/ASX All Ordinaries Accumulation Index return of 8.9% per annum.

These are the two ASX shares that WAM outlined in its most recent monthly update:

Inghams Group Ltd (ASX: ING)

The focus of WAM Research this month was two food businesses. The first one, Inghams, is the largest chicken business in Australia and also in New Zealand. It supplies major retailers, food service distributors and wholesalers with chicken, turkey, stock feed and dairy feed.

WAM explained that the volume of demand for chicken and poultry products has remained high across Australia. The fund manager said that the price of chicken is more affordable compared to other protein sources like seafood and red meat.

One of the biggest costs for Inghams is the chicken feed, so the recent record crop in Australia is leading to higher grain volumes and could lower costs for the ASX share over the medium-term.

In November 2020, the company gave a trading update that said trading volumes in the first quarter of FY21 were up 6.3% year on year and up 7.5% quarter on quarter. There was growth in both Australia and New Zealand.

Bega Cheese Ltd (ASX: BGA)

Bega Cheese is the other business covered by WAM Research in the update.

WAM said that Bega is Australia’s leading dairy and food company, producing 236,000 tonnes of dairy products each year.

The fund manager is attracted to Bega’s shift of its production and volume to higher up the dairy value chain, which reduces the risks associated with commodity markets.

The acquisition of Lion Dairy & Drinks will double Bega’s annual revenue to $3 billion, strengthening the ASX share’s market position in the dairy market. It will also lead to a big increase of the Bega distribution network.

Lion Dairy & Drinks manufactures and sells many household brands in Australia including Dare, Farmers Union, Big M, Dairy Farmers, Yoplait and Pura. In the twelve months prior to September 2020, Lion Dairy & Drinks generated normalised earnings before interest, tax, depreciation and amortisation (EBITDA) of $56 million, excluding synergies.

Bega is expecting to be able to find at least $41 million of synergies per annum, primarily from milk network optimisation, indirect procurement and a corporate reorganisation. It’s expecting double digit earnings per share (EPS) accretion in FY22.

More reading

• The latest ASX shares upgraded by brokers to “buy” during the reporting season
• These are the 10 most shorted shares on the ASX
• Wilson Asset Management (WAM) thinks these 2 ASX shares are a buy
• Here are the 10 most shorted shares on the ASX
• Here are the 10 most shorted shares on the ASX

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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With the Reserve Bank recently reiterating that it doesn’t believe conditions will allow for a rate increase until 2024 at the earliest, it appears likely that low interest rates are here to stay for some time to come.

But don’t worry, because there are plenty of ASX dividend shares that can help you overcome low rates. Two that are highly rated are listed below:

Aventus Group (ASX: AVN)

The first ASX dividend share to look at is Aventus. It is the largest fully-integrated owner, manager, and developer of large format retail centres in Australia. It has a portfolio of 20 centres and a diverse tenant base of 593 quality tenancies. From these, national retailers such as ALDI, Bunnings, and Officeworks represent ~87% of the total portfolio.

One broker that is a fan of the company is Goldman Sachs. It currently has a buy rating and $2.79 price target on its shares. It notes that almost two-thirds of its tenants are exposed to the household goods sector, which has been performing strongly during the pandemic. Goldman also believes its bulky goods homewares tenant base is a natural resistance to online sales penetration.

The broker estimates that it will pay a ~16.5 cents per share distribution this year. Based on the current Aventus share price, this represents a 6% yield.

Telstra Corporation Ltd (ASX: TLS)

Another ASX dividend share to consider is Telstra. This telco giant has been tipped as a buy thanks to its improving outlook. This is being driven by its T22 strategy, the arrival of 5G internet, and its plan to split into three separate businesses.

The latter is expected to allow Telstra to take advantage of potential monetisation opportunities and unlock value for shareholders.

Goldman Sachs is also a fan of Telstra and recently reiterated its buy rating and lifted its price target to $4.00. The broker remains positive on its outlook and continues to forecast a 16 cents per share fully franked dividend for the foreseeable future. Based on the current Telstra share price, this will mean a 4.8% dividend yield.

More reading

• Telstra (ASX:TLS) full year dividend for 2021 expected to be 16 cents per share, fully franked
• Morgan Stanley: ASX earnings season is topping expectations
• 3 reasons the Telstra (ASX:TLS) share price is storming higher
• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• 2 high quality ASX dividend shares with generous yields

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended AVENTUS RE UNIT. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Wednesday the S&P/ASX 200 Index (ASX: XJO) was out of form and ended its winning streak. The benchmark index fell 0.45% to 6,885.2 points.

Will the market be able bounce back from this on Thursday? Here are five things to watch:

ASX futures pointing lower

It looks set to be another tough day for the Australian share market on Thursday. According to the latest SPI futures, the ASX 200 is expected to open the day 23 points or 0.35% lower this morning. This follows another mixed night on Wall Street, which in late trade sees the Dow Jones up 0.2%, the S&P 500 down 0.2%, and the Nasdaq down 0.8%.

ANZ update

Hot on the heels of the Westpac Banking Corp (ASX: WBC) update on Wednesday, today it is the turn of Australia and New Zealand Banking GrpLtd (ASX: ANZ) to hand in its report card. Westpac impressed the market with its strong first quarter performance and the reversal of COVID-19 related bad debt charges. ANZ shareholders will be hoping for the same this morning.

Oil prices push higher

It could be a good day for energy producers such as Oil Search Ltd (ASX: OSH) and Santos Ltd (ASX: STO) after oil prices pushed higher. According to Bloomberg, the WTI crude oil price is up 1.4% to US$60.82 a barrel and the Brent crude oil price is up 1.3% to US$64.13 a barrel. Oil prices are being supported by supply disruptions in Texas falling a winter snap.

Gold price sinks again

Gold miners Northern Star Resources Ltd (ASX: NST) and Resolute Mining Limited (ASX: RSG) could come under pressure again today after the gold price dropped again. According to CNBC, the spot gold price fell 1.4% to US$1,773.40 an ounce. A stronger US dollar and rising US treasury yields are weighing on the safe haven asset.

CSL half year results

The CSL Limited (ASX: CSL) share price will be on watch this morning when it releases its half year results. According to CommSec, the biotech giant is expected to report a net profit after tax of US$1.4 billion and declare an interim dividend of 97 U.S. cents. All eyes will be on its outlook and particularly its comments regarding challenging plasma collections. As these are a vital ingredient in many key therapies, there are concerns that input costs could rise and weigh on margins.

More reading

• ASX 200 dips, EML soars after reporting, Appen sinks
• 3 fantastic ASX shares to buy for strong returns
• 2 high-yielding ASX 200 shares
• Westpac (ASX:WBC) share price jumps after Q1 54% profit growth
• ASX 200 down 0.5%: Domino’s delivers, Westpac impresses, Coles sinks

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) fell by around 0.5% today to 6,885 points.

It was one of the busiest days of reporting season so far, with some major movements in both the gains and declines sections of the market.

Here are some of the highlights from today:

EML Payments Ltd (ASX: EML)

The EML share price was the best performer in the ASX 200 today after it reported its FY21 half-year result.

It reported that gross debt volume (GDV) increased by 54% to $10.2 billion, which drove revenue higher by 61% to $95.3 million.

The earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 42% to $28.1 million and underlying net profit rose 30% to $13.2 million. The ASX 200 share also reported underlying operating cash inflows grew by 68% to $35.1 million.

EML re-instated its EBITDA guidance range, it’s expecting EBITDA to be between $50 million to $54 million (up 48% to 56%) for FY21 whilst underlying net profit is expected to be between $30 million to 33.5 million (up 25% to 40%).

The company ended the period with $136.5 million of cash.

Webjet Limited (ASX: WEB)

The Webjet share price rose by 5% today after the travel business reported its FY21 half-year result.

The ASX 200 travel business reported that its total transaction value (TTV) was down 89% to $267 million because of COVID-19 impacts. Revenue declined by 90% to $22.6 million.

A focus on expenses and reducing the cash burn saw underlying costs fall 52% to $62.7 million. The monthly cash burn is down to $4.8 million, the company had a cash balance of $283 million.

Reducing costs by around half wasn’t enough to stop underlying EBITDA plunging to a loss of $40.1 million. The underlying net loss was $60.5 million, with the statutory net loss being $132.2 million which included a number of non-cash items.

Webjet revealed that its online travel agency (OTA) business has returned to profitability due to its focus on the domestic leisure market and the ability to utilise its variable cost base.

Rio Tinto Limited (ASX: RIO)

The big ASX 200 miner reported its FY20 result this afternoon.

It reported that it generated US$15.9 billion of net operating cashflow, an increase of 6%. Rio Tinto also made US$9.4 billion of free cashflow, up 3%. Net earnings rose 22% to US$9.8 billion.

The high level of profit and cashflow allowed Rio Tinto to declare a 26% increase to the annual dividend to US$5.57 per share. It also declared a special dividend worth US$0.93 per share for investors. Including the special dividend, the FY20 dividends represented a 72% dividend payout ratio.

Rio Tinto was also able to reduce its net debt by US$3 billion to US$0.7 billion during the year.

Heavy declines in the ASX 200

There were some big declines today in the ASX 200.

The worst performer was the Zip Co Ltd (ASX: Z1P) share price which fell 14% after yesterday’s price query from the ASX.

Gold miner Evolution Mining Limited (ASX: EVN) suffered a 10% share price decline after reporting its result.

The Appen Ltd (ASX: APX) share price fell more than 9% after it was on the receiving end of a negative broker report.

More reading

• Share prices of travel shares soar, Corporate Travel (ASX:CTD) and Webjet (ASX:WEB) report
• Webjet (ASX:WEB) share price soars to 5% increase in late trade
• Rio Tinto (ASX:RIO) share price on watch after announcing special dividend
• Here’s why the Appen (ASX:APX) share price is sinking
• 2 high-yielding ASX 200 shares

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Eagers Automotive Ltd (ASX: APE) share price could be on watch tomorrow, following the circulation of plans to start selling cars at shopping centres and airports. The car sales conglomerate, formerly known as AP Eagers, closed down 2.2% today at a price of $13.87.

Cars in a mall, get ready for it

Reportedly, the Eagers conglomerate that delivered 10% of new cars sold in Australia last year plans to open showrooms in shopping centres by the end of this year. Multiple stores are being removed and made way for the supermarket-sized display area expected at the Indooroopilly shopping centre.

On top of this, Eagers will also begin construction of a 90,000 square metre complex near the Brisbane airport that will be accompanied by a 2.5-kilometre test track. The mega facility will also have over two dozen showrooms and service centres. This development would be one of the biggest in the world.

The airport facility is anticipated to be operational in 2023, with preparations already underway to begin construction.

The rationale behind this new approach explained by COO, Keith Thornton, is to engage potential customers in new ways in a stress-free environment. Adding, “The great thing about a shopping centre showroom is our customers are already going there.”

A shift in shopping centre utilisation

Following the aftermath of COVID-19 on traditional bricks-and-mortar stores, as well as the continued digitisation of shopping in general, businesses are finding new ways to adapt. It is becoming a common theme that shopping centres are shifting towards a more experiential destination.

Many shoppers probably weren’t thinking of trying their next car as part of the new mall experience, but who’s complaining?

AP Eagers share price snippet

It has been a solid 12 months for Eagers shareholders, witnessing the share price rise 51.4% over the period. It hasn’t been without its nail-biting times though. Shares in the auto group fell to a 52-week low of $2.50 in March, before steadily climbing to today’s $13.87 price point.

The company’s market capitalisation is now $3.64 billion.

More reading

• ASX 200 down 0.3%: Crown CEO hasn’t resigned, Mirvac update, Nearmap remains halted
• 3 forgotten ASX stocks left behind in the car sales recovery
• Why these brokers think today’s Eagers Automotive (ASX:APE) share price is a bargain
• Brokers list the latest ASX shares to buy in this market meltdown
• Why the Eagers Automotive (ASX:APE) share price is on watch today

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In what may be a catalyst for ASX cannabis shares, a private company today gained approval to grow medicinal cannabis in Western Australia.

As reported by the ABC, the private medicinal cannabis company Elite Cannabinoids has received approval for growing a range of different cannabis strains at a secluded location 800km north of Perth.

High-level details for Elite Cannabinoids

Elite Cannabinoids recently gained its license for growing medicinal cannabis. The company will now be able to utilise 46 hectares of land in the production of cannabis. Additionally, the company expects to have an onsite pharmaceutical manufacturing facility. The combined enterprise should generate more than 60 jobs for the Gascoyne region.

In the words of Elite Cannabinoids CEO Sebastian Cox, “It will be one of the biggest medicinal cannabis facilities in the southern hemisphere.”

Mr Cox further explained that the Gascoyne region was exceptional for the operation due to the high solar exposure, low biosecurity risks, and good water security.

The facility will be positioned to accommodate the demand of patients throughout Australia, with the added potential of expanding to international markets. As such, the company will begin with 253,000 cannabis plants in the first stage of operations. Production is anticipated to be in the works by 2023.

What does this mean for ASX cannabis shares?

Any correlation between Elite Cannabinoids approval and other companies is speculation. However, it does indicate there is still an existing demand for medical uses of cannabis. As mentioned in the ABC report, the Australian Institute of Health and Welfare estimates 600,000 Australians currently use it for medical purposes.

Australia legalised production and cultivation in 2016, which invoked pot stock mania in 2017. Since then, the sector has been rather quiet, with many shares falling back to reality. The big potential yet to be unlocked is legalisation for recreational use in Australia.

A few ASX-list players in the game include Ecofibre Ltd (ASX: EOF), Cann Group Ltd (ASX: CAN), Zelira Therapeutics Ltd (ASX: ZLD), and Althea Group Holdings Ltd (ASX: AGH).

Notably, the best performers in the last year have been Zelira and Althea. Shareholders would be happy with appreciations of 38% and 47% respectively. In contrast, the others have experienced falls of 40% or more. Internationally it is a very competitive landscape for these companies, but the market is still budding.

More reading

• Here’s why the Cann Group (ASX:CAN) share price is in a trading halt
• How did ASX cannabis shares perform in 1H FY21?
• Why the Cann (ASX:CAN) share price is pushing higher
• Why the Ecofibre (ASX:EOF) share price is crashing 16% lower today
• Why AMP, Ecofibre, Magellan, & Vita shares are sinking today

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Wesfarmers Ltd (ASX: WES) share price will be on watch for a couple of reasons on Thursday.

As well as releasing its half year results, the conglomerate has just provided an update on its lithium operations.

What did Wesfarmers announce?

After deferring its final investment decision (FID) for the Mt Holland lithium project in January 2020, Wesfarmers and its joint venture partner, Sociedad Quimica y Minera de Chile S.A. (SQM), have now come to a final decision on the project.

According to the release, full funding will be committed upon receiving environmental approvals for the Kwinana refinery, which are anticipated in early FY 2022.

The company also advised that it has completed an updated definitive feasibility study (UDFS) for the Mt Holland lithium project.

The UDFS has provided greater certainty regarding the project’s engineering design and capital and operating costs. Furthermore, it has led to an increase in concentrator and refinery production capacity from 45,000 tonnes per annum to approximately 50,000 tonnes per annum of battery grade lithium hydroxide.

In addition, the UDFS includes increased flexibility to provide for a second phase of the project to expand production capacity at Mt Holland and the Kwinana refinery. Management advised that preliminary work to evaluate expansion options will commence in parallel with the construction of the first phase of the project.

Wesfarmers’ share of capital expenditure for the development of the project is estimated at approximately $950 million and will be funded using existing cash and debt facilities.

When will Wesfarmers be producing lithium?

Following receipt of all relevant approvals, construction of the mine, concentrator, and refinery are expected to commence in the first half of FY 2022.

After which, the first production of lithium hydroxide is expected in the second half of the 2024 calendar year.

Wesfarmers’ Managing Director, Rob Scott, is very positive on the project and expects it to create value for shareholders.

He said: “The development of the Mt Holland lithium project presents an attractive investment for Wesfarmers shareholders. The project capitalises on our Chemicals, Energy and Fertilisers divisions’ chemical processing expertise and Western Australia’s unique position to support growing global demand for electric vehicle battery materials which will make a crucial contribution to global efforts to reduce greenhouse gas emissions.”

“We have been pleased with progress of discussions with key battery manufacturers, which reflect a positive outlook for battery quality sustainably sourced lithium hydroxide,” he concluded.

More reading

• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• Wilson Asset Management thinks these 2 ASX shares are a buy
• 2 blue chip ASX dividend shares to buy today
• ASX 200 Weekly Wrap: RBA unleashes ASX’s inner animal
• 2 super ASX 200 shares to buy for your retirement portfolio

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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