Wesfarmers Limited · ASX:WES
Wesfarmers — Debt Investor Presentation (September 2011)
41 slides from Wesfarmers's debt investor presentation, September 2011
Slide 1: 2011 Full-Year Results Debt Investor Update
2011 Full-Year Results Debt Investor Update September 2011
Slide 2: Important notice
Important notice This presentation is not an offer, solicitation or recommendation with respect to the purchase or sale of any security in the United States or any other jurisdiction. Securities may not be offered or sold in the United States absent registration under the Securities Act of 1933 (the
Slide 3: Group Performance Highlights
Group Performance Highlights
Slide 4: Group performance highlights
4 Group performance highlights • Operating revenue of A$54.9 billion, up 5.9% • Earnings before interest & tax of A$3,232 million, up 12.7% • Finance costs of A$526 million, down 19.6% • Net profit after tax of A$1,922 million, up 22.8% • Operating cash flows of A$2,917 million, cash realisation rat
Slide 5: Group performance highlights (cont)
5 Group performance highlights (cont) • Coles continued to deliver strong earnings growth, ahead of sales growth, reflecting solid sales momentum supported by operational efficiencies • Bunnings recorded another good result underpinned by good merchandising execution & cost focus; 27 new locations o
Slide 6: Group performance summary
6 Group performance summary Year ended 30 June ($m) 2011 2010 % Revenue 54,875 51,827 5.9 EBITDA 4,155 3,786 9.7 EBIT 3,232 2,869 12.7 Finance costs (526) (654) 19.6 Net profit after tax (post significant items) 1,922 1,565 22.8 Operating cash flows 2,917 3,327 (12.3) Cash interest cover 9.5 6.8 39.
Slide 7: Strength through diversified earnings
7 Strength through diversified earnings Year ended 30 June Divisional EBIT Percentage of 2011 2010 % EBIT ($m) (FY11, $m) Divisional EBIT 3,500 Insurance Insurance 1%; Coles 1,166 962 21.2 (FY10: 4%) WIS Home Improvement 802 728 10.2 WES CEF Office Supplies 80 74 8.1 3,000 Industrial 24%; (FY10: 16%
Slide 8: Portfolio of strong cash generating assets
8 Portfolio of strong cash generating assets • Cash realisation above 100% despite working capital investment • Through the cycle operating cash flows fund dividends & investing activities • Strong phase of growth capital investment underway $m % 4,000 160 3,500 140 3,000 120 2,500 100 2,000 80 1,50
Slide 9: Working capital & other cash flows
9 Working capital & other cash flows • Inventory Cash Movement ($m) Year ended 30 June – HI: Network expansion & increased sales Inflow/(Outflow) 2011 2010 – Coles: Safety stock for supply system Inventory (347) 2 Payables 396 596 change, further centralised delivery & 1 Receivables (312) (171) sale
Slide 10: Strong capital investment phase underway
10 Strong capital investment phase underway Year ended 30 June 2011 2010 % • Continued investment in land & buildings ($m)1 Coles 761 719 5.8 • Increased refurbishments to strengthen Home Improvement & 613 445 37.8 retail networks Office Supplies Target 87 88 (1.1) • Resources investment to expand p
Slide 11: FY2012 Capital expenditure
11 FY2012 Capital expenditure $m Capital expenditure led growth 3,500 Industrial Business Expansion • AN3 260,000tpa increase (subject to board approval); 3,000 FY2012 capex range $2.8 billion to $3.2 billion $150 million - $250 million • Curragh 1.5mtpa increase; Bengalla 1.8mtpa increase 2,500 Ret
Slide 12: Divisional Performance
Divisional Performance
Slide 13: Coles performance summary
Coles 13 Coles performance summary Year ended 30 June ($m) 2011 2010 % Revenue1 32,073 30,002 6.9 EBIT1,2 1,166 962 21.2 Food & Liquor Revenue 25,236 23,731 6.3 Total store sales growth %3,4 6.3 5.6 Comp store sales growth %3,4 6.3 5.0 Trading EBIT 1,066 867 23.0 EBIT Margin % 4.2 3.7 Convenience Re
Slide 14: Turnaround fundamental & far reaching
Coles 14 Turnaround fundamental & far reaching • Divisional EBIT growing three 7.8% times faster than sales – 40 bps EBIT margin expansion in FY2011 5.9% • Increasing divisional ROC at an accelerating pace – Strong cash flow & returns focus – 130 bps ROC expansion in FY2011 • $1.5 billion incrementa
Slide 15: Better value and quality fresh food
Coles 15 Better value and quality fresh food • $800 million+ savings for Australians in FY2011 – 6,000+ prices reduced in the last 12 months • Coles brand sales growth at double branded rate – 1,000+ new Coles brand products launched in FY2011 – Strong growth in transactions – Basket penetration at
Slide 16: Efficiency improvements
Coles 16 Efficiency improvements • $100 million+ wastage reduction in FY2011 – Better promotional planning to reduce overstock & markdowns – Removal of duplication in ranges – Demand led ordering • Consistent improvement in supply chain efficiency – Easy Ordering grocery & dairy roll-out 100% comple
Slide 17: A better customer experience
Coles 17 A better customer experience • A consistently better customer experience – 94 renewal stores landed in FY2011 – ~100 renewal stores planned for FY2012 – Majority of renewal stores with double digit sales growth • Better choice, broader range, more engagement – Continued strong performance o
Slide 18: HIOS performance summary
Home Improvement & 18 Office Supplies HIOS performance summary Year ended 30 June ($m) 2011 2010 % Revenue Home Improvement 6,780 6,413 5.7 Office Supplies 1,471 1,409 4.4 8,251 7,822 5.5 EBIT Home Improvement 802 728 10.2 Office Supplies 80 74 8.1 882 802 10.0
Slide 19: Home Improvement highlights
Home Improvement & 19 Office Supplies Home Improvement highlights • Trading revenue growth 5.7% – 5.8% consumer sales growth – 5.6% total store sales growth (Store-on-store growth of 3.0%) – 5.1% lift in commercial sales • Strong focus on customer improvements, expansion, ‘range reset’ work & better
Slide 20: Office Supplies highlights
Home Improvement & 20 Office Supplies Office Supplies highlights • Pleasing sales growth – Retail store sales up 5.2% – Strong transaction growth maintained – B2B growing with strategies gaining traction • Solid earnings growth in challenging market conditions • Investment & improvement focus delive
Slide 21: Target performance summary
Target 21 Target performance summary Year ended 30 June ($m) 2011 2010 % Revenue 3,782 3,825 (1.1) EBIT 280 381 (26.5) EBIT margin (%) 7.4 10.0 Total sales growth1 (%) (1.2) 0.9 Comparative store sales growth1(%) (1.2) (0.9) 1 2011 for the 52 weeks 27 June 2010 to 25 June 2011, 2010 for the 52 weeks
Slide 22: Target highlights
Target 22 Target highlights • Solid EBIT margin in a challenging trading period • Sustained increase in customer transactions & sales volumes – 2H FY2011 comparable store sales growth of 1.7% – Delivery of in-house designs in homewares & childrenswear • Sales assisted by a positive customer response
Slide 23: Kmart performance summary
Kmart 23 Kmart performance summary Year ended 30 June ($m) 2011 2010 % Revenue 4,036 4,019 0.4 EBIT1 201 190 5.8 EBIT margin (%) 5.0 4.7 Total sales growth2 (%) 0.4 0.4 Comparative store sales growth2 (%) 0.3 (0.1) 12011 excludes $3m earnings relating to Coles Group Asia overseas sourcing operations
Slide 24: Kmart highlights
Kmart 24 Kmart highlights • Solid earnings growth through product sourcing improvements & reductions in cost of doing business • Strong continued growth in volumes & customer transactions • Subdued comparable store sales growth in challenging retail environment • Fully operating under everyday low p
Slide 25: Insurance performance summary
Insurance 25 Insurance performance summary Year ended 30 June ($m) 2011 2010 % Total Revenue 1,739 1,698 2.4 Gross Written Premium Underwritten 1,426 1,347 5.9 EBITA Underwriting (29) 75 n.m. EBITA Broking 62 59 5.1 EBITA Other (3) (3) - EBITA Insurance Division 30 131 (77.1) EBIT Insurance Division
Slide 26: Insurance highlights (cont.)
Insurance 26 Insurance highlights (cont.) • Unprecedented number of catastrophe events in Australia & NZ • Net retention on CAT program exceeded six times with event claims & reinsurance reinstatements $110 million over allowances • Continued focus on disciplined underwriting & pricing • Capitalise
Slide 27: Resources performance summary
Resources 27 Resources performance summary Year ended 30 June ($m) 2011 2010 % Revenue1 1,778 1,416 25.6 EBITDA 488 285 71.2 Depreciation & amortisation (119) (120) 0.8 EBIT2 369 165 123.6 Coal Production (‘000 tonnes) 13,599 14,107 1 2011 includes traded coal revenue of $79m (2010: $59m) & no locke
Slide 28: Resources highlights: Curragh
Resources 28 Resources highlights: Curragh • Ongoing production recovery at Curragh from significant weather- related events: – Record rainfall for the year – Major flooding in December – January – Groundwater inflow into mining areas – Associated significant increase in mine cash costs ($/t increas
Slide 29: Resources highlights: Bengalla & Premier
Resources 29 Resources highlights: Bengalla & Premier Bengalla • 14.2% increase in sales volumes on strong export demand • Continued progress of the stage one expansion to 7.5mtpa (9.3mtpa Run of Mine); completion expected Q1 CY2012 Premier • 37.2% increase in sales volumes, reflecting increased dem
Slide 30: Other businesses
30 Other businesses Year ended 30 June ($m) 2011 2010 % Chemical, Energy & Revenue 1,641 1,570 4.5 Fertilisers Industrial & Safety1 1,557 1,412 10.3 Chemical, Energy & EBIT 283 196 44.4 Fertilisers2 Industrial & Safety 166 138 20.3 1 FY2010 restated to include Coregas following the divisional restru
Slide 31: Other businesses
31 Other businesses Chemical, Energy & Fertilisers • Chemicals earnings (excl. insurance recovery) in line with last year with solid production & demand • Kleenheat earnings (excl. insurance recovery) in line with last year despite lower LPG production & sales, & higher gas input costs • Fertiliser
Slide 32: Outlook
Outlook
Slide 33: Outlook
33 Outlook • The Group retains a positive outlook, given solid operating fundamentals & recovery from one-off impacts affecting FY2011 – Subject to any adverse shocks from a fragile global economy • Strong phase of capital investment underway is expected to strengthen financial performance Retail •
Slide 34: Outlook
34 Outlook Insurance • Insurance earnings expected to improve in the absence of numerous catastrophe events; higher reinsurance costs to place pressure on margins Industrials • Strong outlook for industrial divisions, supported by expansion projects & continuing solid demand for chemical & industria
Slide 35: Debt Management
Debt Management
Slide 36: Financial discipline is core to Wesfarmers' strategy
36 Financial discipline is core to Wesfarmers’ strategy Maintaining prudent capital structure and a A-/Baa1 credit rating is important to Wesfarmers • Apr 08: A$2.6 billion equity raising and US$650 million 5 year Rule 144A bond • Jan 09: A$4.6 billion equity raising Ability to raise capital and • S
Slide 37: Strong credit metrics
37 Strong credit metrics Cash interest cover ratio (times) 10.0 8.0 6.0 4.0 2.0 - FY2008 FY2009 FY2010 FY2011 Fixed charges cover ratio (times) 3.0 2.0 1.0 - FY2008 FY2009 FY2010 FY2011
Slide 38: Pro-active debt management
38 Pro-active debt management Borrowing Maturity Profile Debt as at 30 June 2011 $m 2,000 1,500 1,000 Capital Markets Cash at bank & 500 on deposit Syndicated 0 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 Bank Bilaterals (500) (1,000) • No short-term refinancing requirement; no major maturities until
Slide 39: Pro-active debt management
39 Pro-active debt management Focus on extending maturity profile and maintaining liquidity headroom in revolving and bilateral facilities Refinancing • Commitment to diversity of funding sources including the domestic and international debt capital markets objectives • Standard terms and conditio
Slide 40: Through the cycle cash flows
40 Through the cycle cash flows • Dividend policy takes into account through the cycle free cash flow requirements and debt refinancing • Strong phase of capital expenditure led growth - Curragh and Bengalla expansion projects nearing completion during Q1 CY2012 • Potential cash proceeds from future
Slide 41: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au
Wesfarmers — Debt Investor Presentation (September 2011) on 6ix