Slide 1: 2009 Full Year Results Teleconference
2009 Full Year Results Teleconference 20 August 2009
Slide 2: Presentation Outline
Presentation Outline Group p Performance Highlights g g Richard Goyder y Coles Ian McLeod Home Improvement & Office Supplies John Gillam Target Launa Inman Kmart Guy Russo Resources Stewart Butel Insurance Rob Scott Industrial & Safety, Chemicals & Fertilisers, Energy Keith Gordon Other Businesses &
Slide 3: Group Performance Highlights
Group Performance Highlights Richard Goyder Managing Director, Wesfarmers Limited
Slide 4: Group Performance Highlights
Group Performance Highlights • Significant g increases in revenue and earnings g – Record Resources earnings – Inclusion of full period of Coles, Target, Kmart and Officeworks – Strong Retail performance • Operating revenue of $51 $51.0 0 billion • Group profit after tax of $1.5 billion, up 44% – Af
Slide 5: Group Performance Highlights (cont)
Group Performance Highlights (cont) • Coles turnaround continues to meet Wesfarmers’ expectations p • Bunnings and Target delivered strong performances • Officeworks and Kmart transformations progressing well – Kmart still at an early stage • R Record dRResources production d ti andd sales l • Other
Slide 6: Group Performance Summary
Group Performance Summary Year ended 30 June ($m) 2009 2008* % Revenue 50,982 33,584 51.8 EBITDA 4 001 4,001 2 889 2,889 38 5 38.5 EBIT 2,977 2,229 33.6 Net profit after tax (pre significant items) 1,641 1,132 45.0 Net profit after tax (post significant items) 1,535 1,063 44.4 Operating cash flow 3,
Slide 7: Earnings Per Share
Earnings Per Share • 2009 EPS reflects growth in NPAT and impact of equity raising • Full impact of equity raising to flow into 2010 cps (WANOS) 250 200 150 218.5 100 195.2 178.3 174.2 160.0 50 0 2005 2006 2007 2008 2009 Excludes sale of ARG in 2006. Adjusted for equity raisings in FY08 and FY09. 7
Slide 8: Cash Flow Per Share
Cash Flow Per Share • Cash flow strengthened in 2009 • Continued focus on cash management and working capital initiatives cps 350 300 250 200 150 100 50 0 2005 2006 2007 2008 2009 Operating Cashflow Free Cashflow Excludes the sale of ARG in 2006 and based on WANOS including employee reserved shares
Slide 9: Divisional EBIT
Divisional EBIT Year ended 30 June ($m) 2009 2008* % Coles 831 475 n.m. Home Improvement 659 589 11.9 pp Office Supplies 65 36 n.m. Target 357 221 n.m. Kmart 109 111 n.m. Resources 915 423 116 3 116.3 Insurance 91 122 (25.4) Industrial & Safety 114 130 (12.3) Ch i l & Fertilisers Chemicals F tili 52
Slide 10: Divisional Return on Capital
Divisional Return on Capital • Insurance and industrial businesses ((excl Resources)) impacted p by y significant events eg Varanus, adverse weather and slowing economy • All businesses focused on improving ROC 2009 2008 R12 Capital Year ended 30 June EBIT ROC ROC Employed $m $m % % Coles 831 15,163
Slide 11: Coles
Coles Ian McLeod Managing Director 11
Slide 12: Coles Performance Summary
Coles Performance Summary Year ended 30 June ($m) 2009 2008* Revenue 28,799 16,876 EBIT1 831 475 Food & Liquor Revenue 3 22,506 12,825 Total store sales growth % 6.2 4.2 Comp store sales growth % 4.6 2.8 Trading EBIT 1,3 743 422 EBIT Margin M i 33 3.3 33 3.3 Convenience Revenue 3 6,273 4,038 Total s
Slide 13: Coles Performance – 2H09 vs 2H08
Coles Performance – 2H09 vs 2H08 ($m) 2H09 2H08 % Revenue 14,173 13,957* 1.5 EBIT1 400 345 15.9 Food & Liquor Revenue 3 11,315 10,554* 7.2 Comp store sales growth % 6.9 3.0 3.9pt Trading EBIT 1,3 362 304 19.1 EBIT Margin 3.2 2.9 0.3pt Convenience Revenue 3 2,848 3,390* (16.0) Comp store sales growth
Slide 14: Coles Highlights 4Q
Coles Highlights 4Q Coles Food & Liquor Comp y Quarter ((FY09))# p Sales by • F d & Liquor Food Li 4Q sales l 0.08 7.3% – 4Q headline sales growth 9.4%* 6.6% 0.07 E t adjusted Easter dj t d 8 8.8%** 8%** 0.06 – 4Q comparative stores sales 0.05 growth 7 7.7% 7%* 3.8% 0.04 Easter adjusted 7.3%** 0.03
Slide 15: Coles Highlights
Coles Highlights • Food – Supply chain transformation – DC modernisation complete – Improved service to stores – A 5 day reduction in net working capital – Optimising our store network – $600 million in committed capital expenditure – Ongoing refurbishment of existing stores – Encouraging response t
Slide 16: Coles Highlights
Coles Highlights – Building a solid foundation Gaps on shelf – Focus on store standards – Fresh food quality improved 500 – Better focus on service 400 – Further availability improvement 300 – Rising customer satisfaction levels 200 – Easyy ordering g rollout commencing g 100 – Self check-out trials
Slide 17: Coles Highlights
Coles Highlights • Liquor – New N managementt driving d i i change h – Improving our operating model – Improving p g our value p proposition p – Better brand definition – Ongoing investment in store network • C Convenience i – Fuel volumes – Q4 comparable p fuel volumes 2.7%* ((Easter adjusted j 3.2
Slide 18: Coles Outlook
Coles Outlook • Economic conditions remain fragile • Coles will help customers stretch their dollar further – Focus F on quality, lit service i & value l • Five year turnaround program to continue at pace – Renewal store evolution to continue – Scale of change remains significant 18
Slide 19: Home Improvement & Office Supplies
Home Improvement pp & Office Supplies John Gillam Managing Director
Slide 20: Home Improvement & Office Supplies Performance Summary
Home Improvement & Office Supplies Performance Summary Y Year ended d d 30 J June ($ ($m)) 2009 2008* % Revenue Home Improvement 5,845 5,359 9.1 Office Supplies 1,306 802 n.m 7 151 7,151 6 160 6,160 nm n.m EBIT Home Improvement 659 589 11.9 Office Supplies 65 36 n.m 724 625 n.m *Officeworks ownershi
Slide 21: Home Improvement Performance Summary
Home Improvement Performance Summary Year ended 30 June ($m) 2009 2008 % Revenue 5,845 5,359 9.1 EBIT 659 589 11.9 ROC (R12 %) 30.2 31.2 (1.0)pt Safety (R12 LTIFR) 14.4 13.5 Trading Revenue ((excl. pproperty p y & non-trading g items)) 5,808 5,265 10.3 Net property contribution 11 26 Trading EBIT (e
Slide 22: Home Improvement Highlights
Home Improvement Highlights • FY cash sales growth of 13% – FY store-on-store cash sales growth of 10.1% – 1 JJan tto 30 JJune 2009 12 12.9% 9% • 2.8% decline in trade sales in challenging markets – Good progress in enhancing the trade offer • Opened 10 warehouse stores, 3 smaller format stores & 10
Slide 23: Home Improvement Outlook
Home Improvement Outlook • Cash sales growth – Tempered for impact of recent Australian government stimulus actions • Positive trade contribution as economy recovers • Maintain strength of focus on customer and business improvements • Network expansion – open 10 to 14 warehouse stores & more trade c
Slide 24: Office Supplies - Performance Summary
Office Supplies - Performance Summary Y Year ended d d 30 J June ($ ($m)) 2009 2008* Revenue 1,306 802 EBIT 65 36 ROC (R12 %) 57 5.7 nm n.m. Safety (R12 LTIFR) 12.3 n.m. EBIT / Revenue (%) 5.0 4.5 * ownership period of 23 Nov 07 to 30 June 2008 n.m. = not meaningful given mis-aligned periods 24
Slide 25: Office Supplies Highlights
Office Supplies Highlights • 7 7% sales growth in Officeworks stores 7.7% – 11.1% growth in 2H09 – 10.6% 10 6% lift in transactions across the full year • Normalised EBIT growth of 10.5% in 2H09 – $40m $ vs $ $29m in pcp; normalised to exclude one-off items • Adverse sales trends in Officeworks Busi
Slide 26: Office Supplies Outlook
Office Supplies Outlook • Moderate sales growth in retail stores – Small business sector sentiment to remain volatile – Pressures on margin and costs • F Focus on executing ti strategic t t i agenda d tto reinvigorate i i t the th business b i – Improved customer offer – Network expansion – Eliminat
Slide 27: Target
Target Launa Inman Managing Director 27
Slide 28: Target Performance Summary
Target Performance Summary Year ended 30 June ($m) ($ ) 2009 2008** Revenue 3,788 2,198 EBIT 357 221 EBIT margin (%) 94 9.4 10 0 10.0 ROC (R12 %) 10.4 n.m. S f Safety (R12 LTIFR) 9.1 n.m. Total revenue growth (%) 7.2 7.4 Comp. store sales growth (%) 4.2 3.3 Store numbers 286 277 *Ownership period 23
Slide 29: Target Highlights
Target Highlights • EBIT margin g strength g maintained at 9.4% – Overall margins maintained across product ranges • FY09 comp store sales growth of 4.2% – All departments increased sales over last year • 2H09 comp store sales growth of 4 4.4% 4% (Q4 growth 6 6.4% 4%*)) – Toys and Leisure, and Baby
Slide 30: Target Outlook
Target Outlook • More subdued conditions expected following the recent Government stimulus packages • Careful management of margins and costs will be a key focus • Absolute focus on the customer and delivering what they demand – volume selling of wanted items at critical price points • Ongoing lever
Slide 31: Kmart
Kmart Guy Russo Managing Director 31
Slide 32: Kmart Performance Summary
Kmart Performance Summary Year ended 30 June ($m) $ 2009 2008* Revenue 3,998 2,454 EBIT^ 109 111 EBIT margin (%) 2.7 4.5 ROC (R12 %) 10.5 n.m. Safety (R12 LTIFR) 11 3 11.3 nm n.m. Total revenue growth (%) 0.5 2.4 Comparative store sales growth (%) 0.2 2.2 Store numbers (incl. Kmart Tyre & Auto) 439
Slide 33: Kmart Highlights
Kmart Highlights • Profitability improving through Renewal – Exiting unprofitable categories – Margin g improvement p with reduced discounting g – Supply chain rationalisation commenced; one-off non-trading costs incurred – Savings g in above store costs • Comparative store sales in line with last y
Slide 34: Kmart Outlook
Kmart Outlook • Focus on improving profitability – Drive profitable sales growth – Exit unproductive discounting – Continue investment in supply chain rationalisation – Leverage benefits of reduced cost base • Ongoing g g improvements p to Customer experience p and in store execution – Friendly and
Slide 35: Resources
Resources Stewart Butel Managing Director
Slide 36: Resources Performance Summary
Resources Performance Summary Year ended 30 June ($m) 2009 2008 % Revenue1 2,411 1,311 83.9 EBITDA 1,188 571 108.1 Depreciation & Amortisation2 (273) (148) 84 5 84.5 EBIT3 915 423 116.3 ROC (R12%) 85.4 43.0 42.4pt Coal Production (‘000 tonnes) 15,107 14,318 5.5 Safety (R12 LTIFR)4 2.5 7.2 1. Include
Slide 37: Resources Highlights
Resources Highlights • Record R d ffullll year production, d ti sales l and d earnings i • Highest achieved prices for metallurgical and steaming coal (up to March 2009) • Strong operational performance through global financial crisis • Curragh g remains a lowest q quartile cost p producer despite p
Slide 38: Resources Outlook
Resources Outlook • Positive signs of global steel production recovery • 2009/10 price negotiations with major customers concluded – Price relativityy maintained • Forecast Curragh metallurgical sales of 6.2 – 6.7mt in FY10 – Estimated sales mix (Hard 47 - 50%; Semi Semi-Hard Hard 20%; PCI 30 - 33%)
Slide 39: Insurance
Insurance Rob Scott Managing Director 39
Slide 40: Insurance Performance Summary
Insurance Performance Summary Year ended 30 June (($m)) 2009 2008^ % Gross Written Premium Underwritten 1,358 1,328 2.3 Total Revenue 1 720 1,720 1 649 1,649 43 4.3 EBITA Underwriting 33 73 (54.8) EBITA Broking 61 56 89 8.9 EBITA Other 9 6 50.0 EBITA Insurance Division* Division 103 135 (23 7) (23.7
Slide 41: Insurance Highlights/Overview
Insurance Highlights/Overview • Frequency and severity of weather events affected underwriting claims and earnings (bushfires, storms and crop) • P fit and Profit d margin i growth th iin iinsurance b broking ki • Lumley NZ delivering on turnaround (A$32m YoY profit improvement) • Restructuring and
Slide 42: Insurance Outlook
Insurance Outlook • Rate increases being achieved on renewal but competition for new business is constraining market hardening • Higher reinsurance costs and lower industry reserves to place more upward pressure on rates • M i t i business Maintain b i focus f in i selected l t d market k t segments
Slide 43: Industrial Businesses
Industrial Businesses Keith Gordon Director Industrial Divisions 43
Slide 44: Industrial & Safety Performance Summary
Industrial & Safety Performance Summary Year ended 30 June ($m) 2009 2008 % Revenue 1 294 1,294 1 309 1,309 (1 1) (1.1) EBITDA 127 141 (9.9) Depreciation & Amortisation of PPE (13) (11) (18 2) (18.2) EBIT 114 130 (12.3) EBIT margin (%) 88 8.8 99 9.9 (1 1)pt (1.1)pt ROC (R12 %) 14.1 16.8 (2.7)pt Safe
Slide 45: Industrial & Safety Highlights and Outlook
Industrial & Safety Highlights and Outlook Highlights • Solid result, given challenging market conditions – Business activity slowdown in 2H09 • Continued strong DIFOT and customer service performance • WA operations and Bullivants performed strongly • Operational improvements and cost focus Outlook
Slide 46: Chemicals & Fertilisers Performance Summary
Chemicals & Fertilisers Performance Summary Year ended 30 June ($m) 2009 2008 % Revenue Chemicals 615 464 32.5 Fertilisers 547 533 2.6 1,162 997 16.6 EBITDA 115 172 (33.1) Depreciation & Amortisation (63) (48) (31.2) EBIT 52 124 (58 1) (58.1) Sales Volume (‘000t): Chemicals 747 605 23.5 Fertilisers
Slide 47: Chemicals & Fertilisers Highlights
Chemicals & Fertilisers Highlights • Ammonium nitrate sales volumes were up 52.1% • QNP expansion to 215,000 tpa was commissioned during February 2009 • Disruption of contracted gas supplies impacted production of sodium cyanide and ammonia – Estimated EBIT impact (13 months) of $65 million • Fertil
Slide 48: Chemicals & Fertilisers Outlook
Chemicals & Fertilisers Outlook • Sodium cyanide expansion expected to be commissioned by October 2009 • Demand for ammonium nitrate in WA and Qld remains strong • Generally, winter rains across the WA agricultural region have been reasonable in July, assisting secondary nitrogen applications • Gas
Slide 49: Energy Performance Summary
Energy Performance Summary Year ended 30 June ($m) 2009 2008 % Revenue 598 565 5.8 EBITDA 122 128 (4.7) Depreciation p & Amortisation ((47)) ((38)) ((23.7)) EBIT 75 90 (16.7) ROC (R12 %) 9.2 11.6 (2.4pt) WLPG production (kt) 170 168 1.2 Safety (R12 LTIFR) 22 2.2 63 6.3 49
Slide 50: Energy Highlights and Outlook
Energy Highlights and Outlook Highlights • Reduced earnings largely due to a reduction in international LPG prices and the Varanus Island gas disruption (~$25m impact) • Industrial gas EBIT growth despite weaker customer demand • WA LNG project commissioned in September 2008 Outlook • Growth of LNG
Slide 51: Other Businesses & Capital Management
Other O h Businesses B i & Capital Management Terry Bowen Finance Director, Wesfarmers Limited
Slide 52: Other Business Performance Summary
Other Business Performance Summary Holding Year ended 30 June ($m) 2009 2008 % Share of net profit/(loss) of associates: Gresham Private Equity Funds Various (57) 16 Gresham Partners 50 1 5 Wespine 50 4 5 Bunnings Warehouse Property Trust 23 (8) - Sub-total (60) 27 Interest revenue 57 34 Dividend in
Slide 53: Non-Trading & Significant Items
Non-Trading & Significant Items FY09 FY09 ($m) $ Segment Comment Pre-tax Post-tax Property impairments partially offset Coles (52) (60) Other by write write-back back of store exit provision Kmart (70) (49) Other Supply chain and other restructuring Single licence and other restructuring Insurance &
Slide 54: Capital Management
Capital Management • Net Debt to Equity q y of 18.3% at 30 June 2009 – Gross debt $6.2bn, Net debt $4.4bn (net of cash at bank and on deposit) • Cash Interest Cover Ratio of 5.5 5 5 times (rolling 12 month basis) • Net Debt to EBITDA of 1.11 times at 30 June 2009 • S&P rating BBB+ (stable), Moody’s
Slide 55: Debt Maturity Profile
Debt Maturity Profile • Relatively low levels of debt going forward • Cash to be used for funding upcoming dividends, seasonal working capital, debt repayments and potential growth opportunities • $4.6bn $4 6b hhedged d d iin FY10 with ith allll iin costt off d debt, bt iincluding l di margins, i of
Slide 56: Cashflow
Cashflow • Strong operating cash generation across most divisions • Retail strategies delivered improvements in working capital during the year, partly p y offset by y higher g working g capital p levels in CSBP $m % 3,500 140 3 000 3,000 120 2,500 100 2,000 80 1,500 60 1,000 40 500 20 0 0 2005 2006
Slide 57: Working Capital Cash Flows
Working Capital Cash Flows • R t il strategies Retail t t i d delivered li d FY09 Inflow/(Outflow)* Total improvements ($m) – Growth-adjusted G h dj d net working ki R t il Retail 322 capital improvement of $450m All other businesses (180) • CSBP working capital increased Total 141 due to higher fer
Slide 58: Capital Expenditure
Capital Expenditure Actual Actual • Strong investment in organic growth Y Year ended d d 30 June J ($ ($m)) 2009 2008^ opportunities across the Group Home Improvement & Office Supplies 377 301 Coles 567 349 • Retail - Store roll outs and Target 92 47 refurbishments Kmart 64 42 • Industrials – expans
Slide 59: Outlook
Outlook Richard Goyder Managing Director, Wesfarmers Limited
Slide 60: Outlook
Outlook • Cautiously Cau ous y optimistic op s c about abou the e economic eco o c ou outlook oo in FY10 0aalthough oug cognisant of a degree of ongoing fragility • Underlying retail trading conditions remain somewhat volatile and difficult to predict despite recent signs of growing consumer confide
Slide 61: Questions
Questions
Slide 62: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au 62