Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Day (October 2009)
52 slides from Wesfarmers's investor day presentation, Oct 23, 2009
Slide 1: Investor Briefing
Investor Briefing 23 October, 2009 InterContinental Hotel, Sydney Richard Goyder Managing Director, Wesfarmers Limited Agenda 8:30 Introduction 8:50 Coles 9:50 Home Improvement & Office Supplies 10:45 Morning Tea 11:15 Target 11:45 Kmart 12:15 Insurance 12:45 Lunch 1:30 Resources 2:00 Panel – Indust
Slide 2: Management Team; The Wesfarmers Way
Management Team Managing Director & CEO Richard Goyder Finance Director Terry Bowen Divisional Managing Directors Food, Liquor and Fuel Retailing Coles Ian McLeod Big Box Retailing Home Improvement & Office Supplies John Gillam Department Store Retailing Target Launa Inman Kmart Guy Russo Insurance
Slide 3: Providing satisfactory returns over time
Providing satisfactory returns over time Objective: Satisfactory Returns to Shareholders Outcome: Growth in value of future cash flows to equity Review processes: (Growth in EPS, Growth in ROE) • Corporate planning • Budgeting process • Incentive schemes Disciplines: Improve Returns Invest for Growt
Slide 4: Solid 1Q performance
Solid 1Q performance* • Growth in food and liquor sales – Total food & liquor sales up 7.3% – Comparable food & liquor sales up 6.1% New supermarket at Flemington (Vic) • Growth in fuel & convenience sales – Comparable shop sales up 6.5% – Comparable fuel volumes up 1.3% * 13 weeks ended 27 Sept Ref
Slide 5: Building strength & depth of top team
Building strength & depth of top team … • New executive appointments – Tony Buffin – Finance Director (Group Aeroplan Inc & Boots, UK) – Simon McDowell – Marketing Director (Sony Entertainment, US) – Sharry Cramond – GM, Marketing Communications (Tesco, UK) – Charlotte Maxwell – GM Bakery & Deli (Te
Slide 6: A more appealing fresh food offer
A more appealing fresh food offer… • Focus on Australian-made produce • Improving fresh through local sourcing • Better quality through direct supply • Market atmosphere in store – New fruit & vegetable presentation – Open meat preparation – Seafood counters – In-store bakery – Expanded deli offer •
Slide 7: Liquor renewal gaining traction with customers
Liquor renewal gaining traction with customers… • Clearer brand positioning & value focus – 1st Choice – price led destination big box format – Liquorland – continue with Everyday Value – Vintage Cellars –knowledge, quality & price • Accelerating our change program – Improved in store execution – Be
Slide 8: Trading outlook
Trading outlook… • Consumer sentiment improving but customers remain value conscious • Consumers cautious about rising interest rates and higher petrol prices • Food and liquor inflation to remain low • Encouraging progress on renewal strategy to date • Confident we are creating a solid foundation f
Slide 9: Our national footprint
Our national footprint… As at 30 September 2009 Selling Area 7 8 11 Supermarkets (sqm) 1,606,244 Liquor (sqm) – ex hotels 177,184 151 231 79 82 94 6 117 67 62 30 6 43 252 252 5 211 161 195 162 763 Supermarkets 14 15 777 Liquor stores 96 Hotels 625 Convenience 25 Improving our franchise… Open at Open
Slide 10: Bunnings agenda and history
Agenda 1. Bunnings • Background & market trends • Strategic agenda • Trading update & outlook 2. Officeworks • Background • Strategic agenda • Trading update & outlook 3. Q&A 28 History • 123 years • timber & building sector origins • consumer & DIY f focus from f 1980’s 1980’ • long term growth 30
Slide 11: Background: strategic platform and market trends
Background: Strategic platform 31 Background: Long-term growth drivers 1. A winning offer to customers 2. An engaged, focused & committed workforce 3 Business 3. B i b behaviour h i that h b builds ild trust 4. Sustainable satisfactory shareholder returns Achieving growth in every store & by expansi
Slide 12: Aust. & NZ market trends
Aust. & NZ market trends … evolution across 3 decades … et Size Marke “Traditional” Hardware 1980 - 2010 34 Aust. & NZ market trends … evolution across 3 decades … et Size Marke Home Improvement 1980 - 2010 35 Aust. & NZ market trends … evolution across 3 decades … Aust market today over $36b Bunnin
Slide 13: Market size: 2001 v 2009
Market size: 2001 v 2009 • $24 billion market in 2001 – Common market view at time of BBC takeover • Continued growth in all categories – Rapid expansion of outdoor living • Market today exceeds $36 billion – homogenous; major players ‘vertically capable’ – long term growth anticipated 37 Bunnings s
Slide 14: Strategic Agenda
Strategic Agenda 1. Profitable sales growth 2. Better stock flow 3. Engaging and developing a stronger team 4. Improving productivity and execution 5. Sustainability Agenda driving growth & business fitness 41 Strategic Agenda 1. Profitable sales growth A. Lifting customer service • Continued priori
Slide 15: Strategic Agenda: network expansion and merchandising
Strategic Agenda 1. Profitable sales growth C. Network expansion & enhancement • Ongoing rollout of new stores & trade centres a) more ‘Bunnings Warehouse’ stores • long term plans: open 10 to 14 annually • shorter term: likely to exceed top-end of forecast b) opening smaller format ‘Bunnings’ store
Slide 16: Strategic Agenda: stock flow, team, effectiveness
46 Strategic Agenda 2. Better stock flow • Improving end-to-end supply chain – lift in-stock levels, higher productivity, reduced cost 3. Engaging & developing a strong team • More effective safety, training & other development programmes • Higher team retention 47 47 Strategic Agenda 4. Lifting eff
Slide 17: Strategic summary and trading update
Strategic Agenda Summary Current agenda harnesses 5 growth drivers • Service • Category expansion • St Store roll-out ll t & reinvestment i t t • Trade presence • Business ‘fitness’ to fuel the productivity loop 49 Trading update 1 July to 30 September 2009 • Cash store-on-store growth 15% • cycled
Slide 18: Home Improvement Outlook
Home Improvement Outlook • Cash sales growth to continue – tempered for impact of Aust. Govt. consumer stimulus in past year • Improving trade contribution as economy recovers – multiple Aust. Govt. stimulus programmes • Maintaining intense focus: customer & business improvements • More network expa
Slide 19: Officeworks background and network
Background 1994 2003 2004 First store opens in Richmond, Harris Technology becomes part of Officeworks Acquires Viking Victoria Officeworks portfolio 2005 2007 Today Retail Stores 124 Officeworks 5 Harris Technology Business 24 1 1 11 1 1 4 Fulfilment Centres 8 3 Service Centres 41 2 1 2 38 1 1 1 2
Slide 20: Officeworks Strategic Agenda
Strategic Agenda 1. Improve the customer offer 2. Improve customer service 3. Team development & engagement 4. Make things simple & reduce costs 5. Drive sales & profitability 58 Strategic Agenda 1. Improve the customer offer • Improving the shopping experience • New & improved products / services •
Slide 21: Strategic Agenda: customer service and team
Strategic Agenda 2. Improve customer service • New point of sale system • Driving stronger customer focus • Provide team with tools & training • New labour scheduling system • Operation Blueprint savings invested in customer service – Self-funding via efficiency gains 61 Strategic Agenda 3. Team dev
Slide 22: Strategic Agenda and Trading Update
Strategic Agenda 5. Drive sales & profitability • Open 8 to 10 new Officeworks stores p.a. – new store pipeline progressing well • Upgrade 8 to 10 existing stores p.a. – pleasing results to date • Further website enhancements • Attracting new business customers – corporate, health & education – comp
Slide 23: Outlook
Outlook • Moderate sales growth in retail stores – Small business sector sentiment remains volatile – Pressures on margin and costs • Focus on executing strategic agenda – Drive sales – Improved customer offer & service – Network expansion & upgrade – Reduce CODB & complexity 67 Questions Target Lau
Slide 24: Target Trading Update
Trading Update 3 months to September^ • Sales up 4.3% • Comparable store sales up 1.8% (adjusted up 2.4%*) – July and September flat – August strong • Fragile consumer sentiment – Retail sales from Government stimulus no longer evident – Customers looking for exceptional value • Highly competitive m
Slide 25: Target Strategies
Strategies Store Network Development – FY10 • Planned new stores – 6 new Target stores – 1 Target Country (replacement) • Expansions – 2 Target stores • Investment in existing stores – Around 20 stores – Upgrades range from full refits to a light touch – Projected to spend over $25 million in FY10 7
Slide 26: Supply Chain, Sustainability and Outlook
Supply Chain • Improved efficiencies – Better service to stores – Increased speed to market • Supply Chain cost savings of $10m to date • Benefits realised = financial and non-financial – Principles focused on making it easier for our stores 76 Sustainability Environmental Initiatives • Building sus
Slide 27: Target Store Network
Questions Appendix Target Store Network end September 2009 2 1 32 24 16 10 19 12 52 45 45 23 170 Target stores 116 Target Country stores 4 1 81
Slide 28: Kmart Trading Update 1Q10
Kmart Guy Russo 82 Agenda • Trading Update 1Q10 • Strategy Update • Outlook 83 83 Trading Update – 1Q10* • Successfully exiting unprofitable sales – Comparative store sales decline of 2.3% for 1Q10 – Profitability improving • Inventory below last year and remains well controlled • Pleasing performan
Slide 29: Kmart Strategy Update
Strategy Update 85 A discount department store focussed on serving customers quality products at low prices, in an easy to shop environment Health check - where are we at? Customer Outstanding Customer People Experience Product Best People, Ranges Great Customers Company Want P fit Profit Place Pric
Slide 30: Customer, Product, Price
Customer • Faster, friendlier customer service • Significant increase in customer engagement – Co Compliments p e so on the e rise se • Extended trading hours for enhanced convenience 88 88 Product • Unnecessary products removed – Over 20% SKU reduction in an average store • Stopped discounting prod
Slide 31: Promotion
Promotion • Major investment in customer research • Simple, clearer messages • Clearer, uncluttered catalogues • Promoting items rather than ‘% off’ 91 91 Old 92 92 New 93 93
Slide 32: Place, People, Summary
Place • Actively looking for new sites – Additional resources added • Making it easier for our customers – Clear race tracks • Network refresh – ~60 over next 2 years 94 94 People • Building a customer focussed culture – develop capabilities focusing on customer • Store Managers in store on weekends
Slide 33: Kmart Outlook
Outlook 97 Kmart Outlook • Continue to cycle category exits and promotional changes • Cycling Government stimulus packages • Ongoing profitability improvements • Changes g over the next six months will be even more significant g • Internal focus will begin to shift from renewal to growth 98 98 Quest
Slide 34: Kmart Store Network
Appendix 100 Kmart Store Network at 30 September 2009 185 Kmart stores 252 KTAS centres 2 3 36 52 21 28 13 19 50 71 12 43 73 5 6 3 101 Insurance Rob Scott 102
Slide 35: Insurance: Market Conditions and Underwriting Strategies
Broking Underwriting Australia New Zealand Income GWP $218m $1,358m EBITA Margin COR 27.9% 103.2% Financial results are for FY 09 103 Market Conditions Benign weather conditions through Q1 FY2010 Modest rate increases in some classes Rate hardening more prevalent in NZ than Australia Busines
Slide 36: Trading Update and Personal Lines Initiatives
BUSINESS Trading Update FARM HOME & CAR Premium growth across all classes STRATA Benign weather conditions in Q1 WFI re-branding well received by market Changes in market players Elders/QBE acquisition Exit from rural market: SUN, ACE and Zurich Good start to agricultural season Lowe
Slide 37: Key Strategies - Broking
Key Strategies - Broking Fundamental To understand our clients, earn their trust and provide Objective solutions to enable them to financially survive any insurable event Key Strategies Support our brokers in being client focused Improve efficiency and productivity Develop engaged and highly c
Slide 38: Developing our team; Outlook 2010
Developing our team .....step into the Wesfarmers Insurance Leadership Development (W.I.L.D.) is a suite of leadership programs with customised content to meet the development needs of our insurance leaders today & build leaders for tomorrow We believe that great leadership is Being Commercial funda
Slide 39: Resources: Business environment
Resources Stewart Butel Wesfarmers Resources Export metallurgical and domestic steaming coal QLD Domestic steaming coal WA Export and domestic NSW steaming coal (40% ownership) 116 Business environment • Strong signs of emergence from global economic crisis – Customers – Significant increase in glob
Slide 40: Seaborne metallurgical coal market
Seaborne metallurgical coal market CONSTRAINED SUPPLY REBOUNDING DEMAND Australia rail & port China imports continue constraints re-emerging (August YTD 32mtpa rate) (Hay Point ship loader down / 70 vessels DBCT) Higher rates of steel production US high cost mines closed (ex China) Seaborne Metallur
Slide 41: Curragh focus on cost control and expansion study
Curragh focus on cost control • Aggressive cost reduction program in place • Strategies targeted include – Mining and processing practices, equipment utilisation and productivities – Procurement optimisation on key input costs – Optimisation of contractor usage and roles – Truck and shovel overburde
Slide 42: Resources outlook
Resources outlook • Strong signs of global steel production recovery • JFY2010 price negotiations to commence around January 2010 • Forecast Curragh metallurgical sales of 6.2 – 6.7mt in FY10 – Estimated sales mix (Hard 47 - 50%; Semi-Hard 20%; PCI 30 - 33%) • Significantly g y reduced earnings g in
Slide 43: Australian coal market prices; Hedging profile
Australian coal market prices Steaming coal Hard coking coal US$/Tonne (Nominal) FOB Australia (annual verse spot) US$/Tonne (Nominal) FOB Australia (annual verse spot) 200 400 350 160 300 120 250 200 80 150 100 40 50 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2003 2004 2005 2006 2007 2008 2009 201
Slide 44: Coal port congestion
Coal port congestion East Coast Australia as at 9 October 2009 No. of ships at anchor 180 160 140 120 100 80 60 40 20 0 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Gladstone Newcastle Other Ports Source: McCloskey Fax 130 Industrial Businesses 131 Chemicals & Fertili
Slide 45: Chemicals & Fertilisers Overview and Operational Update
Chemicals & Fertilisers Overview Business Geography Sector Key Customers Ammonia WA Nickel BHP, Minara Orica, Dyno Ammonium Nitrate WA Iron Ore Nobel, Rio Tinto BMA, AngloCoal BMA AngloCoal, (50%) Ammonium Nitrate Qld Coal Rio Tinto Newmont, (75%) Sodium Cyanide WA/Global Gold Barrick, AngloGold PVC
Slide 46: Chemicals & Fertilisers Outlook; Industrial & Safety trading update
Chemicals & Fertilisers Outlook CHEMICALS • Strong demand for ammonia and AN from Nickel and Iron Ore producers. • High gold price has increased sodium cyanide demand. • Water infrastructure spend in eastern Australia should lift PVC demand. FERTILISER • Global fertiliser prices stabilised. • Low co
Slide 47: Industrial & Safety Strategic agenda
Strategic agenda Invest for the future Strengthen Push Manage downturn leadership position boundaries Performance • Further expansion • Profitable growth • Business model 1. Increasing sales to existing customers • Consolidate positions 2. SME penetration 3. Higher growth sectors 4. Margin managemen
Slide 48: Strategies and Industrial & Safety outlook
Strategies 4. Managing margin • Facing lagging FX impact on inventory • Leveraging improved pricing capability • Strengthening relationships with key suppliers • Continuing to invest in direct sourcing capability 5. Improving competitiveness • Reducing organisation complexity and cost • Continuing t
Slide 49: Industrial & Safety Business Portfolio and Distribution Network
Industrial & Safety Business Portfolio Australia New Zealand “All your Safety Industrial workplace Specialist Specialists needs” (1) (1) Manufacturing and services 145 Industrial & Safety - Distribution Network 239 locations (162 Australia, 77 New Zealand) Australia No. 2 70 MRO, “All your workplace
Slide 50: Energy Overview
Energy 148 Overview Business Geography Products Key customers Gas production & NSW, Vic, Qld, distribution SA Metal solutions, manufacturing, Oxygen, nitrogen, acetylene, utilities, water, healthcare, food, argon, carbon dioxide, etc hospitality, pharmaceuticals, Gas production & research and educat
Slide 51: Energy Key Strategies and Trading Report
Key Strategies Update on Strategies Develop WA heavy duty vehicle • Broadening heavy duty vehicle customer base and progressing with refueller market to sell remaining rollout production capacity Raise awareness on east coast and • Identified target fleets, aggregating customer information, seeking
Slide 52: Questions
Questions 154 Q&A Richard Goyder Managing Director, Wesfarmers Limited Terry Bowen Finance Director, Wesfarmers Limited For all the latest news visit www.wesfarmers.com.au 156