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Shares of Evolution Mining Ltd (ASX: EVN) have jumped from the open and now trade around 1% higher at $3.73 apiece.

Zooming out for a wider view, however, Evolution has struggled in 2022 having clipped an 8% loss this year to date. Over the last month of trade, shares are down 8% as well.

Meanwhile, the price of gold has also taken a backward step this past month, dipping almost 1% into the red to bring a year-on-year loss of more than 3%.

Broker upgrades for Evolution Mining

Analysts at JP Morgan upgraded their rating on Evolution Mining in a recent note, bringing their rating to overweight.

“We remain attracted to gold stocks on a 1y view and believe the recent pullback in stock prices provides a good entry point amongst a supportive macro backdrop,” the broker said in a recent note.

The broker is attracted to the company’s Cowal, Red Lake and Ernest Henry assets and also mentioned that Evolution had a good track record on its acquisition front.

We upgrade Evolution to overweight, and it is now our top pick from a valuation perspective, trading on a P/NPV of 0.77x and offering a 10% 5 year CAGR [compound annual growth rate] in production and a 3.2% FY23 estimated dividend yield.

JP Morgan values Evolution Mining at $4.80 per share, in line with Shaw and Partners on a $4.75 per share valuation.

Meanwhile, analysts Yi Zhu and Anthony Cham Fung Yau at Bloomberg Intelligence reckon Evolution’s $1.4 billion capital expenditure (capex) should be accretive to the company’s earnings. They wrote:

Evolution’s A$1.4 billion capex should improve productivity at its recently-acquired assets, lifting production by 320,000 ounces at lower unit costs.

Investments include brownfield exploration, new mine plans and extraction of synergies. This strategy has previously served the company well and we expect similar results with the most recent additions.

Not all recommend a buy

While 25% of coverage advocates buying Evolution Mining shares, around 44% of brokers still say the company is a hold, and 31% recommend investors sell, according to Bloomberg data.

Both Credit Suisse and Macquarie downgraded their ratings to underperform yesterday, valuing the company at $3.75 and $4 per share respectively.

RBC Capital and Barrenjoey Markets also rate Evolution a sell in separate notes from April.

The consensus price target is still $4.34 per share from this list, suggesting around 16% upside potential at the time of writing.

The post Why did these brokers upgrade the Evolution Mining share price to buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The Allkem Ltd (ASX: AKE) share price is having a week to forget.

Since the start of the week, the lithium miner’s shares are down 17%.

Why is the Allkem share price falling?

The Allkem share price, along with almost all lithium shares, have come under pressure this week for a number of reasons.

These include a broker downgrade by Credit Suisse, Argentina setting a lithium reference price of US$53 per kilo, Goldman Sachs reiterating its view that lithium prices will fall heavily in the coming years, and BYD planning to buy six lithium mines in Africa.

The latter is likely to be the biggest driver of the selling. Particularly given that the Warren Buffett-backed electric vehicle company is understood to be expecting these mines to produce approximately 1 million tonnes of lithium carbonate each year.

That would be enough to build at least 27.78 million electric vehicles, which covers the automaker’s expected demand for the next decade.

If everything goes to plan for BYD, this will increase overall lithium supply and take a major buyer of lithium out of the chain. This could ultimately have a negative impact on lithium prices.

How will falling prices impact Allkem?

While falling lithium prices is not what Allkem shareholders want to see, it is worth noting that the company has low operating costs.

During the most recent quarter, Allkem reported a cash cost per tonne of US$349 for its Mt Cattlin spodumene concentrate and US$3,811 per tonne for its Olaroz lithium carbonate.

Goldman Sachs has been forecasting a long-run average of US$800 per tonne for lithium spodumene concentrate and US$11,500 per tonne for lithium carbonate.

This means that even if prices crumble to Goldman’s long term estimates, Allkem is still a highly profitable machine.

Is this a buying opportunity?

According to a recent note out of Morgans, its analysts have an add rating and $16.98 price target on the company’s shares.

Based on the current Allkem share price of $11.63, this implies potential upside of 46% for investors over the next 12 months.

The post Is the Allkem share price selloff a buying opportunity? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Allkem Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The Superior Resources Limited (ASX: SPQ) share price is surging today after news of a copper discovery.

Shares in the copper explorer are currently trading at 4.7 cents, a 34% gain. However, in earlier trade, the Superior Resources share price leapt by 60% to 5.6 cents.

In contrast, the S&P/ASX All Ordinaries Index (ASX: XAO) is falling 0.91% today.

Let’s delve deeper into the news from this ASX explorer today.

Copper discovery sends Superior Resources share price skyward

Investors are buying up Superior Resources shares this morning.

The company is mining the Bottletree Copper Prospect within the Greenvale Project in Queensland.

Assay results show significant zones of high-grade copper with mineralisation covering almost the full length of the deep 658.9-metre diamond hole.

Drilling at BTDD004 intersected at 632 metres with 0.21% copper, 0.03 grams per tonne of gold, 0.60 parts per million (ppm) of silver, and 18 ppm molybdenum from 5 metres below the surface.

The company said this is the best copper intersection at the Bottletree project.

Managing director Peter Hwang said:

The better-than-expected results returned from BTDD004 are impressive, particularly considering the mineralisation is thought to be some distance away from the interpreted porphyry core where higher grades are expected.

To have intersected such a large interval of significant grade copper at this distal part of the interpreted system, provides us with further confidence that we are dealing with a very large-scale copper-gold system.

Superior Resources is planning to start the 2022 drilling program shortly to build on the project’s “near-surface, large tonnage potential”.

Commenting on the outlook, Hwang added:

2022 promises to be an exciting year for Superior and we expect multiple catalysts from the activities and expected results ahead of us at Bottletree and our other copper and gold prospects.

Share price snapshot

Superior Resources shares have rocketed 370% in the past 12 months. They are up 17.5% year to date.

For perspective, the All Ords has lost nearly 1% over the past 12 months.

Superior has a market capitalisation of nearly $60 million based on its current share price.

The post Here’s why the Superior Resources share price just rocketed 60% appeared first on The Motley Fool Australia.

More reading

• 2 ASX mining shares skyrocketing on new discoveries

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Lithium mining stocks have been having a great year. Shares of the three largest lithium producers listed on a major U.S. stock exchange — Albemarle (NYSE: ALB), Sociedad Química y Minera de Chile (NYSE: SQM), or SQM, and Livent (NYSE: LTHM) — returned 57%, 155%, and 63%, respectively, over the one-year period through May 31. The S&P 500 index returned negative 0.3% over this period.

The rising demand for lithium is primarily being driven by growing consumer adoption of electric vehicles (EVs). The silvery-white metal is used to make the lithium-ion batteries that power EVs.

This article covers the two current types of lithium mining operations and briefly mentions several other types that are being explored. It’s intended to lay the groundwork for a series, whose goal is to help investors make smarter investment decisions in this complex and rapidly growing industry.

While the “who” and “where” of lithium mining aren’t the core focuses of this article, it will touch briefly upon some of the main companies and geographies that fall into each section. These topics will be covered in more depth in future articles.

Brine mining  

In the most common method of lithium brine mining, brine (salty water) that contains lithium chloride and other salts is pumped from reservoirs that lie beneath dried lake beds into above-ground evaporation ponds. Arid weather conditions and high elevations help the water in these ponds evaporate faster than it would in other climates and geographies. 

The lithium chloride that is left is then processed into lithium carbonate, which is then sometimes further processed into lithium hydroxide, as well as other premium lithium products. Both lithium carbonate and lithium hydroxide can be used to produce lithium-ion batteries, but lithium hydroxide has emerged as the preferred compound for making EV batteries.

Livent, based in the United States, has a proprietary brine extraction technique, which differs somewhat from the process just described. 

The major players in extracting lithium from brine include U.S.-based Albemarle, Chile’s SQM, and Livent. Albemarle and SQM both have operations at Salar de Atacama in Chile. (Salar is the Spanish word for salt flat.) They pay royalties to the Chilean government, which owns this resource. It’s Albemarle’s primary brine operation and SQM’s sole source of lithium. Livent’s sole source of lithium is the Salar del Hombre Muerto in Argentina, which it owns.

China’s Ganfeng Lithium is on track to join the significant players in mining lithium from brine. It is part owner of two brine resources in Argentina, with one project nearing the commercial stage.

Extracting lithium from underground brine has historically been a more cost-effective method than mining it from hard rock. 

Hard-rock mining

Hard-rock mining is the other way lithium is now currently obtained for commercial use. This type of mining is what most folks probably think of when they hear the term “mining.” It involves open-pit mining of ore containing the lithium-bearing mineral spodumene.

The spodumene is processed into a concentrate and then further processed into premium lithium products, notably lithium hydroxide. Unlike the lithium chloride that’s obtained from brine mining, spodumene concentrate can be directly processed into lithium hydroxide. 

Most hard-rock lithium mining is in Australia and China. China’s Tianqi Lithium, Albemarle and Ganfeng are the major players in this sphere. Together with Albemarle, SQM, and Livent, China’s duo of Ganfeng and Tianqi make up the top five lithium producers. (Tianqi owns a 24% stake in SQM, so it’s indirectly a notable player in mining lithium from brine.) 

Other types of mining operations are being explored and developed  

Soaring lithium prices have been leading many companies to explore other potential sources of lithium and methods of mining that might now be feasible economically, as well as technically.

Numerous companies are in the exploration and development stages of obtaining lithium from clay, geothermal brine (a byproduct of geothermal energy production), and oil field brine. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Lithium stock investing series: How is lithium mined? appeared first on The Motley Fool Australia.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Commonwealth Bank of Australia (ASX: CBA) share price is in focus as it enters the final month of the 2022 financial year.

CBA is the biggest bank in Australia. It’s one of the big four ASX bank shares along with National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), and Australia and New Zealand Banking Group Ltd (ASX: ANZ).

No one can truly know what’s going to happen to any share price this week or even this month.

However, brokers have their opinions on the current situation with the bank and the wider banking sector. They have also given their rating on whether they think the business is a buy, hold, or sell.

Latest views on the CBA share price

The broker Citi has very recently released its analysts’ thoughts on the bank.

Citi currently rates Commonwealth Bank as a sell, even though it’s optimistic about the banking sector. The price target on the bank is $90.75. That implies a possible decline of about 15% over the next year.

The broker is expecting that CBA’s profit margins could benefit from the rising interest rate environment.

Ord Minnett is a little more positive on the big four ASX bank. The broker rates CBA shares as a hold, with a price target of $93, implying a smaller decline than Citi. While Ord Minnett notes that CBA’s operating costs could rise due to inflation and a more normal level of bad debts, the broker thinks the CBA net interest margin (NIM) could improve from here. CBA could also be the biggest beneficiary of increasing interest rates.

Expectations on CBA dividends

Citi is expecting CBA to pay a growing dividend in the next couple of financial years. At the current CBA share price, Citi expects the bank to pay a grossed-up dividend yield of 5.1% in FY22 and 6.1% in FY23.

Ord Minnett isn’t expecting as much of a dividend from CBA in FY22 and FY23. It’s tipping a grossed-up dividend yield of 5.1% in FY22 and 5.4% in FY23.

CBA share price valuation

According to Citi’s numbers, CBA is now valued at 20x FY22 estimated earnings.

On Ord Minnett’s profit projections, the CBA share price is also valued at 20x FY22 estimated earnings, though Ord Minnett’s earnings estimate is slightly lower.

Latest operating performance

CBA reported that in the three months to 31 March 2022, it generated $2.4 billion of cash net profit after tax (NPAT).

It said that it experienced 3% volume growth and higher non-interest income. This helped to offset continued margin pressure from elevated swap rates, mix effects, and competition.

CBA said that credit provisions reflected “continued sound portfolio credit quality and a cautious approach to managing portfolio risks”.

CBA share price snapshot

Over the past six months, the CBA share price has risen by 9.4%. At the timing of writing, CBA shares are swapping hands for $104.93, down 1.7% for the day so far.

The post What’s the outlook for the CBA share price in June? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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During early morning trade, the Magnis Energy Technologies Ltd (ASX: MNS) share price had been hovering in negative territory.

But since then, the battery technology company’s share price is rising 1.28% to 39.5 cents.

It appears investors are looking to get in on the action after Magnis shares fell 6.02% yesterday. This came off the back of a reality check from Goldman Sachs indicating the lithium prices have overshot their mark.

Magnis appoints new CEO

According to yesterday’s late afternoon release, Magnis advised that it has appointed David Taylor as its new CEO.

The latest inclusion follows the company’s extensive 6-month global search to replace the top job.

Mr Taylor’s vast experience in the energy, chemicals and resources sectors spans over a 30-year period. This includes senior roles in private, listed, and government organisations where he was responsible for a number of important functions.

Most recently, Mr Taylor led the development and growth of Worley Ltd (ASX: WOR) in the east region of Australia and New Zealand. He implemented business growth plans, managed strategic relationships with key customers and partners while leading and delivering change initiatives.

Mr Taylor holds a Bachelor of Building in Construction Economics (First Class Honours) from University of Technology Sydney.

In addition, he has a Master of Business Administration and a Master of Applied Finance from Macquarie University and is a member of the Australian Institute of Company Directors.

Mr Taylor’s position as Magnis CEO will come into effect on 1 August, 2022.

What did management say?

Magnis chair, Frank Poullas commented on the new appointment, saying:

After an extensive global search, we are delighted to announce the appointment of David Taylor to lead the next phase of growth for Magnis.

David has significant local and international experience spanning three decades in the development and growth of businesses and major projects in the infrastructure, energy, chemical and resources sectors. He will be instrumental in executing on Magnis’ vision to be a vertically integrated battery technology and materials company in the Lithium-ion battery value-chain.

Magnis share price snapshot

Over the past 12 months, the Magnis share price has gained almost 40%.

However, when looking at year-to-date, its shares are down roughly 30%.

Based on today’s price, Magnis commands a market capitalisation of around $386.59 million.

The post Why is the Magnis share price climbing today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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Consumers and businesses are bracing themselves for an unprecedented situation in Australia’s energy markets. A dark cloud has been floating over ASX energy shares in the last week as fossil fuels reach mind-blowing prices.

Initially, one might think this would be a boon for energy retailers. If prices rise, profits should rise too, right? Well, because keeping the lights on is an absolute necessity for modern society, the energy market is heavily regulated. Additionally, with wholesale gas prices reaching 80 times their normal level, the majority of consumers would be unable to afford the inflated cost.

So, how exactly is this playing out for the energy sector and ASX shares?

State of play in energy

The sobering reality is Russia had accounted for around 17% of the world’s natural gas supply. Meanwhile, Europe’s reliance on Russia is far greater than the rest of the world. At 40% of its gas imports, Russia has a firm grip on the European Union (EU).

Due to the sizeable shortfall in supply as the world banishes the importing of Russian products, the demand has spread globally. In turn, the going rate for energy-rich commodities has exploded, putting pressure on energy retailers.

Last week, news hit the headlines of Weston Energy ceasing operations. The gas retailer responsible for 7% of Australia’s east coast commercial and industrial supply shut up shop. A more than 180% increase in gas prices was cited as the culprit.

The damage is also being witnessed in public markets. ASX-listed small-cap energy share, Locality Planning Energy Holdings Ltd (ASX: LPE) entered voluntary suspension after suggesting to its 20,000 retail customers to seek out a new supplier. The company planned on increasing its electricity prices by over 100% on 1 June.

Showing that the pain is not exclusive to the small end of town, Origin Energy Ltd (ASX: ORG) was dealt a blow yesterday after revealing a toll on its expected earnings. The ASX energy giant now expects its underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) to be between $310 million to $460 million for its energy markets division.

Aren’t higher prices good for ASX energy shares?

There’s an important variable in this equation for energy retailers. One that morphs high prices from a potential tailwind into a likely headwind. In the finance world, it’s called a price ceiling — but it is commonly referred to as a price ‘cap’.

To try and maintain an orderly energy market, regulators have stepped in and introduced price caps. For instance, the Australian Energy Market Operator (AEMO) applied a $40 per gigajoule to the Victorian gas supply on Tuesday. Meanwhile, the ‘real’ price reached $800 per gigajoule.

In essence, this means that ASX energy shares such as Origin and AGL Energy Ltd (ASX: AGL) won’t be able to take full advantage of this ‘perfect storm’.

The post In the dark: ASX energy shares facing a perfect storm appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The market may be dropping on Thursday but that hasn’t stopped a couple of ASX mining shares from surging higher.

Here’s what is causing these shares to rocket:

Anax Metals Ltd (ASX: ANX)

The Anax Metals share price is up 19% to 10 cents. This follows the release of assay results from recent diamond drilling from the Evelyn deposit at the Whim Creek project.

According to the release, the company intersected near-surface massive sulphides comprising chalcopyrite, sphalerite, galena, pyrite and pyrrhotite with true widths of up to 15 metres encountered.

Management believes these results bode well for Whim Creek project outcomes. Anax’s Managing Director, Geoff Laing, commented:

These assay results are very pleasing and confirm that the Evelyn deposit will provide considerable upside to Whim Creek project outcomes. Metallurgical test work is well advanced and initial indications suggest that Evelyn ore will be highly compatible with the processing flow sheet currently being finalised for both the Mons Cupri and Whim Creek ore deposits. It is envisaged that Evelyn ore will feed directly into the Whim Creek development scenario.

Superior Resources Limited (ASX: SPQ)

The Superior Resources share price has rocketed 43% higher to 5 cents. Investors have also been buying this copper explorer’s shares following the release of assay results from the Greenvale project.

Those assay results confirm extensive strong copper mineralisation in the BTDD004 drill hole with significant zones of high grade copper from a distal part of interpreted porphyry system. Copper mineralised over almost the entire length of a 658.9m hole.

Superior’s Managing Director, Peter Hwang, was pleased with the results. He commented:

The better-than-expected results returned from BTDD004 are impressive, particularly considering the mineralisation is thought to be some distance away from the interpreted porphyry core where higher grades are expected. To have intersected such a large interval of significant grade copper at this distal part of the interpreted system, provides us with further confidence that we are dealing with a very large-scale copper-gold system.

The post 2 ASX mining shares skyrocketing on new discoveries appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has struggled over the past 12 months, but one top broker is tipping a return to glory.

Broker Morgans is bullish on the pizza juggernaut following its recent drawn-out sell-off.

At the time of writing, the Domino’s share price is $68.25, 2.14% lower than its previous close.

For context, the S&P/ASX 200 Index (ASX: XJO) is also down 1.08% today.

Let’s take a closer look at what might have spurred Morgans’ excitement over Domino’s.

What’s got this broker bullish on Domino’s stock?

The next year could be a good one for the Domino’s share price and those invested in the pizza franchising giant.

Morgans was recently quoted by my Fool colleague James Mickleboro as saying:

[A]lthough inflationary pressures have worsened since [the company’s earnings release], we continue to believe there is meaningful upside to the current share price over the next 12 months.

The last time the ASX heard news from Domino’s was back in February when the company dropped its half-year earnings.

The stock tumbled 14% on the back of the results. The company’s profits slumped 5% over the six months to 31 December.

However, the company’s long-term goals might have caught the broker’s eye.

The company expects to more than double its store network by the financial year 2033 – reaching about 6,650 stores. For context, it had 3,227 at the end of the first half.

Additionally, management is focused on identifying acquisition opportunities to grow the company.

Morgans has slapped a $100 price target on Domino’s shares, along with an add rating.

Domino’s share price snapshot

As previously mentioned, the Domino’s share price has had a rough trot lately.

It has slipped 44% since the start of 2022 and is currently trading 40% lower than it was this time last year.

However, if this tip from Morgans pays off, the stock could boast a 46% upside.

The post Top broker says beaten-up Domino’s share price has 46% upside appeared first on The Motley Fool Australia.

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• Why I would invest $10,000 into these ASX shares today

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Wesfarmers Ltd (ASX: WES) share price is slipping in early trade, down 0.6%. This comes as the S&P/ASX 200 Index (ASX: XJO) also sliding into the red, down 1.0%.

Wesfarmers shares closed yesterday at $47.58 and are currently trading for $47.29.

The ASX 200  conglomerate – whose portfolio includes household names like Kmart, Target, Officeworks and Bunnings Warehouse – is holding a strategy briefing day in Sydney today.

Here are some of the highlights.

Wesfarmers share price dips amid strategy briefing

The Wesfarmers share price is dipping into the red alongside the broader benchmark in the midst of today’s corporate presentation.

With ecommerce is continuing to grow across Australia, the retail conglomerate, with more than 1,500 physical stores, said it’s continuing to expand its digital offerings. It established Wesfarmers OneDigital in the second half of the 2022 financial year and is now offering its OnePass membership program to Kmart and Target customers.

Wesfarmers reported its online sales are up three times compared to levels in the first half of 2019, with more than 150 million online interactions per month.

On the growth front, Wesfarmers will continue to focus on developing Bunnings, its biggest revenue generator, as well as investing in growing and improving the performance of API and its new Health division.

The company is also expanding WesCEF through its Mt Holland lithium project, located in Western Australia. Its increasing spending to approximately $320 million on development of the Mt Holland lithium project.

Focusing on the environment, WesCEF – a portfolio of businesses supplying products to critical industries – has a new sustainability focus including a commitment to achieving net zero emissions.

With both the waning pandemic and waxing inflation in mind, Wesfarmers reported it “is well positioned for the post-COVID environment, having strengthened the capabilities of existing divisions and with new platforms for future growth”.

“Wesfarmers’ retail divisions are well equipped to manage inflationary pressures and view this as an opportunity to profitably grow share while extending value credentials.”

Inventories and capex higher

Wesfarmers reported “abnormally high” inventory levels in the first half for the 2022 financial year. This was due to its decision to temporarily hold more stock, domestic supply chain disruptions, and higher commodity prices.

Looking ahead, the company expects inventory levels to normalise in time, but these are likely to remain elevated in 2H FY22 due to “API, inflation and commodity price impacts, and ongoing prioritisation of stock availability”.

Capital expenditure is increasing with more money flowing into the Mt Holland lithium project, alongside increased digital and network investments. Net capex is forecast to come in the range of $900 million to $1.0 billion.

Wesfarmers maintains a strong credit rating, with Moody’s rating it A3 (a stable outlook) and Standard & Poor’s rating it A- (also a stable outlook).

Wesfarmers share price snapshot

The Wesfarmers share price has struggled this year, down 22% since the opening bell on 4 January.

By comparison, the ASX 200 is down 6% year-to-date.

The post Why is the Wesfarmers share price slipping today? appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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