Wesfarmers Goes Against the Grain; CEO Richard Goyder talks about playing the long game with investments and the conglomerate’s commitment to coal

Wesfarmers Goes Against the Grain

CEO Richard Goyder talks about playing the long game with investments and the conglomerate’s commitment to coal.

RHIANNON HOYLE

Dec. 8, 2013 11:08 a.m. ET

Wesfarmers Ltd. WES.AU -0.10% has its fingers in many pies: from supermarkets to coal mining, financial services to chemicals. But the appetite of chief executive and company veteran Richard Goyder is far from sated.At a time when companies from BHP Billiton Ltd. BHP.AU -0.37% to General Electric Co.GE +1.85% are looking to sell or spin off assets, Australia’s largest conglomerate—which last month faced speculation it may carve off its insurance arm—is determined to play the long game with its ventures, Mr. Goyder says. It may even consider expanding into other industries to tap the Asian growth story and what its top brass see as an upbeat outlook for Australia.

The 43 billion Australian dollar (US$39 billion) enterprise and Australia’s largest private-sector employer is cautious of stepping directly into emerging markets like China, though, where a plethora of multinational companies including main-street retailers are vying for a foothold.

For now, it is placing its bets closer to home. This already includes a major investment overhauling its own Coles division—Australia’s second-biggest supermarket brand behind Woolworths Ltd.WOW.AU -0.44%

Mr. Goyder, who took the helm in 2005 and celebrates 20 years with the group this year, spearheaded the A$19 billion takeover of Coles Group in late 2007, one of the largest corporate takeovers in the country. “I am still full of energy,” says the 53-year-old, one of just seven people to have held the top job at Wesfarmers in its near-100-year history.

Mr. Goyder recently spoke to The Wall Street Journal in Perth, Australia, about Wesfarmers’ commitment to coal and being a countercyclical investor.

Edited excerpts:

WSJ: In an environment where many companies have been stripping out assets to focus on their principal sectors, why does a conglomerate like Wesfarmers still work?

Mr. Goyder: We have a very small head office and give the people appointed to lead each of our businesses the freedom to make decisions. A lot of companies react to short-termism; they’ve had something not go right in one of their businesses and they react too soon. We get to take a long view on things. If a business isn’t going well we would rather fix it than sell it and let someone else create the value. That does require you to stare through the pressure, though.

WSJ: Miners like BHP Billiton Ltd. have curbed coal investments. Is Wesfarmers committed to coal?

Mr. Goyder: Our view is that to be sustainable in that business you have to be in the lowest cost quartile. We are, and so over the long run we think we can make decent returns out of it. Sometimes you just have to grin and bear it while you go through periods like we are now. We bought our Curragh mine right at the bottom of the cycle and it has been a phenomenal investment, so we are quite happy to be countercyclical if an opportunity arises.

WSJ: Would you look at other commodities?

Mr. Goyder: We have looked at other things, although not necessarily minerals. For a period of time we were looking at producing sugar along the Ord River, but we decided it was too volatile and that over the long run there weren’t decent returns to be made in that sector.

WSJ: Do you think you missed the boat in iron ore?

Mr. Goyder: We probably look back at Wesfarmers and think: Here we are, a significant Western Australian company, and we didn’t get into iron-ore mining. Did we miss something? I am not sure. BHP and Rio Tinto RIO.LN +1.12% PLC have always had a strong position. Andrew Forrest has done a fantastic job with Fortescue Metals Group Ltd.FMG.AU +0.44% , but our rule would be you have to be low cost.

WSJ: Do you see Wesfarmers investing in new industries in the years ahead?

Mr. Goyder: I think we have enough bandwidth in Wesfarmers to bring something else in. There are some sectors we think have compelling factors over the next few decades; industries where there is probably a growth story that you’d want to be part of. I can’t say which ones, but it isn’t the ones people would normally go to.

WSJ: Are you bothered by the constant scrutiny of your retail market position?

Mr. Goyder: It comes with the turf. We do have a significant position, and that comes with responsibilities.

WSJ: Do you have plans to expand Wesfarmers’ presence in the Asian-Pacific region?

Mr. Goyder: Some people say being a conglomerate is risky; I’d say diversifying into some overseas countries is at least as risky. We will probably do more offshore one day, but I think you have to have your eyes wide open. All the great retailers of the world are in China so you need to ask: What can we do better that people there can’t?

WSJ: What is your view on the outlook for Australia?

Mr. Goyder: I have always been pretty positive on Australia. We have a well-educated population, are blessed with natural resources and are on the doorstep of the growth economies of the world. There are issues like the aging of our population that you can’t stop, and will create real budgetary pressures unless we deal with them. So the government needs to get its fiscal house in order, not just for the next couple of years, but the next couple of decades.

WSJ: What is the outlook for your supermarket business?

Mr. Goyder: There is still a lot of work to do on the supply chain, particularly to get fresh food on the shelves more quickly. We also still have nearly half the network to refurbish, or about 300 of 700 stores. That will take us another few years to complete, but then it will be a bit like [painting] the Sydney Harbour Bridge—we’ll have to start all over again.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

Résumé

Education: Bachelor of Commerce, University of Western Australia; Harvard Business School advanced management program, 1998.

Career: Joined Wesfarmers in 1993 after working in various roles at Tubemakers of Australia Ltd. Held several positions in Wesfarmers’ business development department, including general manager, before being named managing director of agribusiness Wesfarmers Dalgety Ltd. in 1999. Appointed group finance director in 2002 and chief financial officer in 2004, and took over as chief executive a year later.

Extracurricular: Australian rules football and art. “I relax through spending time with my family, and we have a holiday home on the south coast [where] we love spending time,” he says.