- Coles has announced plans to develop two automated distribution centres, and phase out existing centres.
- As part of the deal, the company said it will book provisions of $130-150 million for staff redundancies and lease exit costs.
- In a separate statement, Coles’ current owner, Wesfarmers, said shareholders will vote on the proposed Coles demerger on November 15.
Wesfarmers announced today that Coles has entered into a Heads of Agreement to develop two automated supply centres over the next five years.
Coles now plans to book provisions of between $130-$150 million in the 2019 financial year, to account for staff redundancies and lease exit costs.
The company said a number of distribution centres will be closed over the five-year period.
Business Insider contacted Wesfarmers for information on the breakdown of the provision between redundancies and leasing costs, but a spokesperson for the company declined to comment.
The deal was struck with the Australian subsidiary of Witron Logistik + Informatik GmbH, a German-based company which specialises in automated warehouse systems.
Coles Managing Director Steven Cain said the agreement forms part of Coles’ efforts to modernise its supply chain, which delivers more than 1 billion cartons to Coles stores each year.
“The investment we are making in this technology is expected to lower supply chain costs, provide safer working environments and enhance our business competitiveness,” Cain said.
Coles said spending on the new projects will be included within its broader capital investment budget of $600-800 million for the 2019 financial year.
A spokesperson for Coles declined to comment on how much of the $600-$800 million total would be allocated to the automated centres.
The decision by Coles follows a similar strategy by rival Woolworths, which unveiled a $215 million automated distribution centre earlier this year.
“Following a comprehensive review of all options this investment is expected to deliver significant productivity improvements over the medium to long term,” said Wesfarmers managing diretor Rob Scott.
In a separate statement to the ASX this afternoon, Wesfarmers said it had received clearance from the W.A. Supreme Court to proceed with a shareholder vote on the proposed demerger of Coles in November.
In line with guidance issued in July, Wesfarmers confirmed it plans to retain a 15% share in Coles and a 50% stake in the Flybuys program.
“Eligible shareholders will receive one Coles share for every Wesfarmers share,” the statement said. The Coles spinoff is expected to be finalised by the end of November.
A vote will be put to shareholders in November 15, and the Wesfarmers board has unanimously recommended that the demerger should be approved.
Earlier today, Wesfarmers shares went into a trading halt pending the outcome of the court’s decision. Shares subsequently resumed trading in the afternoon.
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