Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Presentation (November 2003)
125 slides from Wesfarmers's investor presentation, Nov 5, 2003
Slide 1: Investor Briefing
Investor Briefing The Westin Hotel 5 November 2003
Slide 2: Wesfarmers Energy 2003/04 Q1 Results
Wesfarmers Energy 2003/04 Q1 Results David Robb
Slide 3: Wesfarmers Energy
Wesfarmers Energy Wesfarmers 3
Slide 4: Wesfarmers Energy 2003 Snapshot
Wesfarmers Energy 2003 Snapshot Coal ¾ Production 12 million tonnes ¾ Sales 12 million tonnes ¾ Customers 25 ¾ Employees 886 Gas / Power ¾ LPG Production 0.33 million tonnes ¾ LPG Sales 0.60 million tonnes ¾ Direct customers 115,000 ¾ Generation 378 Gwh ¾ Employees 946 Wesfarmers 4
Slide 5: Coal Sales
Coal Sales 2003/04 Domestic Export Export Total (million tonnes) Steam Steam Coking Premier, WA 3.4 3.4 Bengalla*, NSW 0.8 1.7 2.5 Curragh, QLD 2.4 4.6 7.0 Total 6.6 1.7 4.6 12.9 *Wesfarmers 40% share Wesfarmers 5
Slide 6: Strategy Summary
Strategy Summary ¾ KHG - “focus on fundamentals” ¾ WLPG - supply post 2005 ¾ ALWA - securing major projects ¾ StateWest - off-grid, BOO, national ¾ Premier - new markets and unit costs ¾ Curragh - volume growth, Curragh as “hub” ¾ Bengalla - sales mix, volume security Wesfarmers 6
Slide 7: Energy 2003/04 Q1 Environment
Energy 2003/04 Q1 Environment Gas ¾ International prices 10% higher ¾ Excise uncertainty Coal ¾ Western Power deliveries up ¾ Coking coal prices lower, steam improving ¾ Demand firm, logistics bottlenecks ¾ Adverse exchange rate movement Wesfarmers 7
Slide 8: Energy 2003/04 Q1 Environment: Saudi Contract Price
Energy 2003/04 Q1 Environment Saudi Contract Price US$/t 400 350 300 250 200 150 100 US$312 US$320 US$318 50 0 Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- 93 94 95 96 97 98 99 00 01 02 03 PROPANE BUTANE AV. PROPANE PRICE Wesfarmers 8
Slide 9: Hard Coking Coal Price
Energy 2003/04 Q1 Environment Hard Coking Coal Price JRP US$/Tonne FOB nominal 60 55 50 45 40 35 30 83 85 87 89 91 93 95 97 99 01 03 Japanese Financial Year Wesfarmers 9
Slide 10: Thermal Coal Prices
Energy 2003/04 Q1 Environment Thermal Coal Prices US$/Tonne FOB nominal 40 30 20 10 - Jul- Jun- May- Apr- Apr- Mar- Feb- Jan- Dec- 95 96 97 98 99 00 01 02 02 Spot Price Source: Barlow Jonker Wesfarmers 10
Slide 11: Exchange Rates
Energy 2003/04 Q1 Environment Exchange Rates $A/$US 1.0 0.9 0.8 0.7 0.6 0.5 0.4 Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- 87 89 91 91 95 97 99 01 03 USD/AUD exchange rate Wesfarmers 11
Slide 12: Wesfarmers Curragh Hedging Profile
Wesfarmers Curragh Hedging Profile Average Proportion of USD AUD/USD hedge revenue hedged * rate 2003/4 90% 0.5730 2004/5 70% 0.5767 2005/6 50% 0.5621 2006/7 30% 0.5798 2007/8 10% 0.5872 • Calculated after adjusting for USD capital and operational expenditure and USD royalty payments. Wesfarmers 12
Slide 13: Logistics Bottlenecks
Logistics Bottlenecks September-02 September-03 Newcastle Vessels Queued 6 30 Turnaround Time (days) 3.9 10 Demurrage (YTD) $0.1m $0.6m Gladstone Demurrage (YTD) $0.04m $1.6m Wesfarmers 13
Slide 14: Health + Safety + Environment
Health + Safety + Environment The #1 Priority •Drug and Alcohol Testing •No Lost Time Injuries •Environmental Award Wesfarmers 14
Slide 15: Production
Production WLPG Coal Kt Mt 400 14 12 300 10 8 200 6 4 100 2 0 0 1999 2000 2001 2002 2003 1Q 04 1999 2000 2001 2002 2003 1Q 04 Wesfarmers 15
Slide 16: Production
Production Mine Beneficial Coal Type Quarter ended Interest Sep-02 Sep-03 ('000 tonnes) Premier 100% Steam 847 877 Curragh 100% Coking 803 1,068 Steam 501 593 Bengalla 40% Steam 491 449 Wesfarmers 16
Slide 17: Sales Volumes
Sales Volumes 2003/04 Q1 versus 2002/03 Q1 ¾ Kleenheat Gas +1% ¾ Wesfarmers LPG -3% ¾ Air Liquide* +0% ¾ Premier +3% ¾ Curragh +36% ¾ Bengalla +22% *Pipeline Sales Wesfarmers 17
Slide 18: Profitable Growth – Energy Division
Profitable Growth – Energy Division Financial Performance EBITA % $m EBITA/Capital 300 35 30 250 25 200 20 150 15 100 10 50 5 0 0 1999 2000 2001 2002 2003 1Q 04 1999 2000 2001 2002 2003 R12 * Excludes Girrah $80.5m in 2003 Sept Wesfarmers 18
Slide 19: Wesfarmers Energy Highlights Q1
Wesfarmers Energy Highlights Q1 ¾ Curragh 20 year milestone, export award ¾ Curragh North EIS ¾ Premier Coal environmental award ¾ Kleenheat volumes increase against PCP ¾ Hismelt, MidWest project progress ¾ Oracle system implementation Wesfarmers 19
Slide 20: Curragh Production
Curragh Production mtpa ROM tonnes 12 10 8 6 4 2 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Curragh plus Curragh North Curragh stand-alone Wesfarmers 20
Slide 21: Curragh Business Model 2010
Curragh Business Model 2010 Coal mining Central Sales processing Curragh Thermal Curragh North CSA 3 mt To SCL Modified Curragh Contract to 2025 Curragh CHPP Curragh 5 mt “Curragh” East Export Metallurgical Brand Wesfarmers 21
Slide 22: 2003/04 Coal Issues
2003/04 Coal Issues ¾ Curragh ¾ Export volumes (+0.6 mt) ¾ Export prices -/+ ¾ AUD/USD exchange rate ¾ $14 m dragline shutdown ¾ Bengalla ¾ Export volumes (+0.5 mt) ¾ Export prices ¾ Premier ¾ Flat sales ¾ Work practice reform (EBA) Wesfarmers 22
Slide 23: 2003/04 Gas Issues
2003/04 Gas Issues ¾ LPG prices ¾ Excise decision ¾ Kleenheat volumes, margins ¾ WLPG Post 2005 Wesfarmers 23
Slide 24: Chemicals and Fertilisers
Chemicals and Fertilisers John Gillam Managing Director
Slide 25: CSBP Chemicals Fertilisers
Af CSBP QiN|P Chemicals Fertilisers
Slide 26: CSBP’s Objective
CSBP’s Objective Wesfarmers 26
Slide 27: CSBP Background
CSBP Background ¾ Established 1910 ¾ Member of Wesfarmers Group since 1980 ¾ Only major fertiliser supplier in WA until ~ 1990 ¾ Diversification into chemicals from 1987 ¾ Major chemicals investments post 1996 ¾ Post 1999, around 60% of EBITA generated from chemicals activities ¾ WA’s leading fertil
Slide 28: CSBP Background
CSBP Background ¾ Manufacturer of mining & processing chemicals • ammonia, ammonium nitrate, sodium cyanide, chlorine ¾ Manufacturer and importer of fertilisers • phosphate, nitrogen, potassium and compounds ¾ Manufacturing operations at: • Kwinana, Albany and Esperance - WA • Moura, QLD (joint vent
Slide 29: EBITA and EBITA/Capital
EBITA and EBITA/Capital 5 Year Trend EBITA EBITA/Capital $m % 100 18 16 80 14 12 60 10 8 40 6 20 4 2 0 0 1999 2000 2001 2002 2003 EBITA EBITA/Capital Wesfarmers 29
Slide 30: CSBP July 2003 – Sept 2003 Results
CSBP July 2003 – Sept 2003 Results ¾ Chemicals • volumes in-line with last year • steady production performance • short term softness in local ammonia demand ¾ Fertilisers • increased volumes • strong market focus and good seasonal conditions ¾ Revenue and earnings • revenue:$72.9m ($67.6m pcp) • EB
Slide 31: Chemicals
Chemicals
Slide 32: Ammonia/Ammonium Nitrate
Ammonia/ Ammonium Nitrate Natural Gas Ammonia Plant Ammonia sales to nickel industry Nitric Acid and export Water Plant Air AN Solution AN Solution Plant sales to Dyno for explosives Prilling AN Prill sales Plant to Dyno for explosives Fertiliser Production Sodium Cyanide Production Wesfarmers 32
Slide 33: Ammonia
Ammonia Background ¾ Sole WA manufacturer and supplier ¾ New plant commissioned in 2000 • original plant capacity 650 tpd / 225,000 tpa • debottlenecked to 240,000 tpa • further expansion May 2004 ¾ 40,000 tonnes import / export storage terminal ¾ External customers • primarily nickel industry and e
Slide 34: Ammonium Nitrate
Ammonium Nitrate Background ¾ Sole WA manufacturer ¾ 160,000 tpa nitric acid plant / 200,000 tpa AN plant commissioned 1997 ¾ AN plant debottlenecked to 230,000 tpa • distribution for mining explosives via Dyno Nobel • Flexi-N liquid fertiliser consumes balance of production ¾ Queensland Nitrates pl
Slide 35: Sodium Cyanide
Sodium Cyanide Natural Sodium Cyanide Gas Solution Plants 1 & 2 Solution sales to WA gold mines Ammonia Caustic Soda Sodium Cyanide Solid sales to Solids Plant Australian and overseas gold mines Wesfarmers 35
Slide 36: Sodium Cyanide
Sodium Cyanide Background ¾ Australian Gold Reagents - sole WA manufacturer ¾ 75 : 25 joint venture with Coogee Chemicals • plant operation and marketing by CSBP ¾ First solution plant commissioned in 1988 • progressively expanded to ~ 48,000 tpa solution ¾ Investment in solid sodium cyanide plant i
Slide 37: Chlor Alkali
Chlor Alkali Salt Chlor Alkali Hydrogen sales Plant Electricity Hydrochloric Acid Hydrochloric Acid Production sales to industry Water Chlorine sales for water treatment Sodium Hypochlorite Hypo sales for Production water treatment Caustic Soda sales to industry Wesfarmers 37
Slide 38: Industrial Chemicals
Industrial Chemicals Background ¾ 5,000 tpa chlorine plant commissioned 1987 • baseload production for WA Water Corporation • co-production of caustic soda, hydrochloric acid, sodium hypochlorite, hydrogen ¾ Traded products • Sulphuric acid • Industrial urea • Fluorosilicic acid • Sulphur • Ammonium
Slide 39: Chemicals: Current Influences
Chemicals Current Influences ¾ Strong resource sector conditions • short term softness in local ammonia offtake • export excess ammonia production ¾ Good ammonia / AN plant performances • continued lift in Queensland Nitrate operations ¾ Sodium cyanide solids plant at expectations Wesfarmers 39
Slide 40: Chemicals: Strategies
Chemicals Strategies ¾ Profitably build on existing businesses • examining production expansion opportunities • simplify Queensland Nitrates joint venture structure ¾ Evaluating growth opportunities that exploit core competencies • expand product range in existing markets • assess opportunities in n
Slide 41: CSBP Fertilisers
NA CSBP Fertilisers
Slide 42: Fertilisers: Background
Fertilisers Background ¾ Only major fertiliser supplier in WA until ~ 1990 • manufacturing focus at that time ¾ Market share and profit erosion in last decade • emergence of import-based competitors ¾ Post 2000, market share and profit stabilisation • strong market and distribution focus • working c
Slide 43: Fertilisers: Background
Fertilisers Background ¾ Unmatched infrastructure in WA market • volume growth readily handled ¾ Extensive distribution network • commission based reward structure • AWB Landmark, Elders & independents • all collections ex-CSBP facilities ¾ CSBP market support • field staff supporting distribution n
Slide 44: Fertilisers: WA Infrastructure
Fertilisers WA Infrastructure Manufacture Facility Import Facility Distribution Centre Inland Depot Geraldton Regional Sales Reps Dongara Soil and Plant Lab Carnamah (Not Including Sales Agents) Moora Dalwallinu Wongan Hills Goomalling Northam Merredin Kwinana Corrigin Narrogin Lake Grace Wagin Bunb
Slide 45: Fertilisers Year Sales Volumes
Fertilisers 3 Year Sales Volumes million tonnes 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2001 2002 2003 Western Australia Other Wesfarmers 45
Slide 46: Fertilisers: Current Influences
Fertilisers Current Influences ¾ Potential record harvest for 2003 • restore farmer financial health • storage and handling pressures from harvest volumes • sales potentially skewed to second half ¾ Solid sales programme • distributor support • competitive pricing • enhanced range of products and se
Slide 47: Fertilisers: Strategies
Fertilisers Strategies ¾ Profitably build core WA business ¾ Strong market focus • widest range of quality fertilisers • best services and technical support • competitive prices ¾ Develop markets beyond WA for proprietary products Wesfarmers 47
Slide 48: Wesfarmers Industrial & Safety
Wesfarmers Industrial & Safety Mr Daryn Deiley Acting Managing Director
Slide 49: Agenda
Agenda ¾ The Wesfarmers Industrial and Safety business ¾ First quarter F2004 results ¾ WIS strategy ¾ Current business outlook Wesfarmers 49
Slide 50: Wesfarmers Industrial & Safety
Wesfarmers Industrial & Safety
Slide 51: Statement of Purpose
Statement of Purpose “To be the first choice of every customer through the provision of innovative industrial distribution solutions and to generate satisfactory shareholder returns” Wesfarmers 51
Slide 52: Wesfarmers Industrial & Safety
Wesfarmers Industrial & Safety ¾ Largest MRO & Safety supplier in Australasia ¾252 outlets (Australia & New Zealand) ¾3,500 employees ¾80,000+ customers ¾15,000+ suppliers ¾400,000+ products Wesfarmers 52
Slide 53: Trading Names
Trading Names ¾ Atkins ¾ Bakers ¾ Blackwoods ¾ Motion Industries ¾ Mullings Fasteners ¾ Protector Alsafe ¾ NZ Safety ¾ Packaging House ¾ Protector Safety Supply (NZ) ¾ Paykels Wesfarmers 53
Slide 54: Distribution Network
Distribution Network TRADING STYLES: Blackwoods 64 Atkins 3 DARWIN Blackwoods Atkins 23 Kunnunurra Bakers 7 Motion 10 Broome CAIRNS Metals 1 TOWNSVILLE Mullings 10 PORT HEDLAND Newman MACKAY Protector Alsafe 49 KARRATHA NZ Safety 24 Blackwoods (NZ) 7 MT. ISA
Slide 55: Major Product Segments
Major Product Segments (descending revenue order) ¾ Safety ¾ Tools ¾ General industrial ¾ Metals ¾ Welding ¾ Fasteners ¾ Power transmission & bearings ¾ Mechanical services ¾ Electrical ¾ Janitorial ¾ Packaging ¾ Materials handling Wesfarmers 55
Slide 56: Wesfarmers Industrial & Safety First Quarter 2004 Results
Wesfarmers Industrial & Safety First Quarter 2004 Results
Slide 57: First Quarter 2003-2004 Results
First Quarter 2003-2004 Results ¾ Revenue ¾4.8% ahead of last year (excluding metals revenue and sales) ¾Strong growth in New Zealand ¾Earnings slightly behind expectations ¾Protector Alsafe integration behind schedule ¾Slower than expected commencement of some infrastructure works Wesfarmers 57
Slide 58: Wesfarmers Industrial & Safety Strategy
Wesfarmers Industrial & Safety Strategy
Slide 59: WIS Strategies
WIS Strategies ¾ Grow real sales and sustain gross margin ¾ Reduce expense to sales ratio ¾ Reduce working capital ¾ Improve safety performance and employee retention Wesfarmers 59
Slide 60: WIS Strategies: Grow real sales
WIS Strategies ¾ Grow real sales and sustain gross margin • Improved brand positioning • Expand network Shopfronts • Alignment of sales force • New catalogues • Leverage e-business • Customer service improvements • Extend import programme Wesfarmers 60
Slide 61: Protector Alsafe Safety Catalogue
Safety Catalogue \as 1 a WELDING INGS ie =) Decal A Safer Workplace SET Cee iri AAAARARAARAARAARAAAAY (ely . Keeping Industry Working for 125 Years www.protectoralsafe.com.au Fea j = laptae x b/s say, ke | Hard Hats erase i www. protectoralsafe.com.au 5
Slide 62: WIS Strategies: Reduce expense to sales ratio
WIS Strategies ¾ Reduce expense to sales ratio • Extend operation deliver • Rationalise distribution infrastructure • Upgrade information systems ¾ Reduce working capital • Enhance category management • Refine vendor management Wesfarmers 62
Slide 63: WIS Strategies: Safety performance and retention
WIS Strategies ¾ Improve safety performance and employee retention • Improved OHS&E management • Implementation of OHS&E systems • Development of effective performance management systems Wesfarmers 63
Slide 64: Wesfarmers Industrial & Safety Current Business Outlook
Wesfarmers Industrial & Safety Current Business Outlook
Slide 65: WIS Business Outlook
WIS Business Outlook ¾ Strong growth to be delivered from specialist streams – Motion & PA ¾ Efficiencies from new distribution centres ¾ Protector Alsafe integration to contribute strongly in the second half ¾ PeopleSoft implementation to begin delivering efficiencies ¾ Paykels integration in NZ to
Slide 66: Business Outlook
Business Outlook ¾ Look forward: ¾ Industry rationalisation to occur, with surviving independents retaining relative market shares ¾ Increasing level of customer contract outsourcing ¾ Acquisitions & mergers to accelerate ¾ Legislative changes likely to benefit WIS, through increased focus on workpl
Slide 67: Gene Tilbrook, Executive Director, Business Development
Gene Tilbrook Executive Director, Business Development Wesfarmers Limited
Slide 68: Outline
OUTLINE ¾ Australian Railroad Group ¾ Sotico ¾ Gresham Private Equity ¾ Business Development Wesfarmers 68
Slide 69: ARG Performance Drivers
ARG Performance Drivers ¾ Record grain harvest expected Wesfarmers 69
Slide 70: ARG Grain Harvests
ARG Grain Harvests 25 20 Tonnes (milions) 15 10 5 0 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 Western Australia South Australia Wesfarmers 70
Slide 71: ARG Performance Drivers
ARG Performance Drivers ¾ Record grain harvest expected ¾ Safety Team • LTIFR 20+ → 10- • reduced derailments Wesfarmers 71
Slide 72: ARG Performance Drivers
ARG Performance Drivers ¾ Record grain harvest expected ¾ Safety Team ¾ Regulatory outcome ¾ New business – Mt Gibson iron ore ¾ Refinancing Wesfarmers 72
Slide 73: ARG Quarter to September
ARG Quarter to September ¾ Down on previous corresponding period • low grain tonnage • track maintenance charges • Alice Springs – Darwin near completion • provision for remainder of year Wesfarmers 73
Slide 74: ARG Outlook
ARG Outlook ¾ Earnings improvement • grain harvest • minerals tonnages • operational efficiencies ¾ Safety programme remains vital ¾ Logistics improvements Wesfarmers 74
Slide 75: Sotico
Sotico ¾ Sale of Mundijong Pine Treatment Plant and Welshpool land ¾ Wespine and Timber & Panel • volumes strong • yields up • earnings up 6% on pcp ¾ Divestments to continue Wesfarmers 75
Slide 76: Gresham Private Equity
Gresham Private Equity 50% Interest ¾ Net investment by Wesfarmers - $72m ¾ Small dividend income ¾ Divested • Eurogestion ¾ Divesting • Repco Wesfarmers 76
Slide 77: Gresham Private Equity: Remaining Investments
Gresham Private Equity Remaining Investments ¾ Cashcard - ATMs + financial transaction processing ¾ EROC - mining / infrastructure contractor ¾ Norcros - building materials, coatings ¾ Riviera - cruisers ¾ Virgin Active - health clubs ¾ Raywood - vehicle control systems Wesfarmers 77
Slide 78: Gresham Private Equity: Potential Fund
Gresham Private Equity Potential Fund 2 ¾ $300-350m targeted ¾ Accommodate VCLP regime ¾ Wesfarmers’ planned involvement: • foundation investor; • investment committee membership; • staff secondments ¾ Continuation of earnings Wesfarmers 78
Slide 79: Business Development
Business Development 4 Wesfarmers
Slide 80: Business Development
Business Development ¾ Business as usual ¾ Transactions • Lumley • Landmark • small divestments ¾ Staff • recruiting • development • group skill base Wesfarmers 80
Slide 81: Wesfarmers Insurance Division
Wesfarmers Insurance Division R J Buckley Chief Executive Officer
Slide 82: Wesfarmers
Wesfarmers 82
Slide 83: Agenda
Agenda ¾ Wesfarmers Insurance Division overview ¾ Description of business units ¾ Insurance industry analysis ¾ Historical financial performance ¾ YTD financial performance ¾ Prospects ¾ Priorities Wesfarmers 83
Slide 84: Wesfarmers Insurance Division
Wesfarmers Insurance Division WESFARMERS INSURANCE DIVISION (LGA) (LTL) Lumley General Lumley Australia Technology (LGNZ) Lumley General Koukia Pty Ltd New Zealand (WFI) Wesfarmers Federation Insurance Wesfarmers 84
Slide 85: Lumley General Australia
Lumley General Australia ¾ Specialised skills and products ¾ Short tail focussed ¾ Ranked 9th in Australian market ¾ 2003 GWP of $540m ¾ Reliance on reinsurance ¾ Superior returns to industry Wesfarmers 85
Slide 86: LGA – GWP by line of business
LGA – GWP by line of business Total GWP for 2003 = $539.9m AMO Other 17% 9% Liability 12% Commercial Personal Lines Motor 6% 26% Engineering 4% Marine 5% Commercial 21% Wesfarmers 86
Slide 87: Lumley General New Zealand
Lumley General New Zealand ¾ Specialised skills and products ¾ Short tail focussed ¾ Number 3 in New Zealand market ¾ 2003 GWP of A$201m ¾ Reliance on reinsurance ¾ Experiencing significant growth Wesfarmers 87
Slide 88: LGNZ – GWP by line of business
LGNZ – GWP by line of business Total GWP for 2003 = A$201.0m Other Liability 21% 9% Personal Lines 10% Engineering Commercial 6% Motor Marine Commercial 36% 8% 10% Wesfarmers 88
Slide 89: WFI
WFI ¾ Specialist niche insurer ¾ Focussed on rural and small business sectors in Australia ¾ Ranked 14th in Australian market ¾ Ranked 2nd in rural market after IAG/CGU ¾ 2003 GWP of $227m Wesfarmers 89
Slide 90: WFI – GWP by line of business
WFI – GWP by line of business Total GWP for 2003 = $226.7m FIRE LIABILITY 13% 13% COMMERCIAL ACCIDENT MOTOR 12% 16% CROP 5% EMPLOYERS PRIVATE MOTOR LIABILITY 14% MARINE HOUSEHOLDERS 9% 2% 16% Wesfarmers 90
Slide 91: Industry Analysis: Largest Insurers
Industry Analysis Largest 14 Insurers Gross Earned Premium $m 6,000 5,000 4,000 3,000 2,000 1,000 0 U y G nz G ds p y AC na h Q E BE FI le G le ric or IN AI AC AC lia W oy om um /C m nc R Q Zu Al Ll Lu R G Su Pr /L IA FI W Source : Deloitte and Trowbridge 2003 Wesfarmers 91
Slide 92: Insurance Industry Analysis
Insurance Industry Analysis • Combined Operating Ratio 120% 115% 110% 105% 100% 95% 90% 85% 80% 1998 1999 2000 2001 2002 Industry CGU QBE RSA Lumley WFI Source : APRA 2002 Wesfarmers 92
Slide 93: Premium Funding
Premium Funding ¾ Number 4 in Australian market Number 1 in New Zealand ¾ Loans secured against insurance policy ¾ Assists in broker relationship and support ¾ Australian market highly competitive Wesfarmers 93
Slide 94: Life Insurance
Life Insurance ¾ Niche specialist focussed on risk products ¾ Strong performance in 2003 ¾ Sold to Prefsure, the Australian arm of Johannesburg listed Capital Alliance on 4 October 2003 ¾ Completion expected December 2003 Wesfarmers 94
Slide 95: Lumley Technology
Lumley Technology ¾ Focus on development and support of software for in-house use ¾ Some external revenue ¾ Independent review conducted ¾ Reviewing options to align business with insurance operations Wesfarmers 95
Slide 96: Koukia
Koukia ¾ Insurance software specialist ¾ Following recent acquisition we now hold 53.5% of Koukia ¾ Management retain significant share ¾ Will be deployed as WFI platform ¾ Prospects for sales to other insurers in Australia and overseas Wesfarmers 96
Slide 97: Pro-forma Performance - 2003
Pro-forma Performance - 2003 EBITA COR (%) GWP ($m) ($m) LGA 55.4 85.6 539.9 LGNZ 6.2 95.7 201.0 WFI 25.2 90.9 226.7 Premium Funding 4.1 - - Divisional Overhead (6.0) - - Insurance Division 84.9 - 967.6 Wesfarmers 97
Slide 98: YTD Performance – Q1 2004
YTD Performance – Q1 2004 EBITA COR (%) GWP ($m) ($m) WFI 8.2 87.3 55.8 Wesfarmers 98
Slide 99: Prospects
Prospects ¾ Australian businesses at top of cycle - underwriting becoming more competitive ¾ New Zealand cycle lags Australia by 18 months - strong growth in underwriting profit expected ¾ Lumley Life sale expected to complete in December 2003 ¾ Further insurance industry consolidation Wesfarmers 99
Slide 100: Priorities
Priorities ¾ Achieving satisfactory rates of return ¾ Build on existing operations ¾ Achieve synergies ¾ Resolve Lumley technology issues ¾ Reduce proportional reinsurance cover ¾ FSRA license for WFI/LGA Wesfarmers 100
Slide 101: Peter Davis, Managing Director, Bunnings
Peter Davis Managing Director, Bunnings
Slide 102: Lowest Prices Widest Range Best Service
LOWEST PRICES WIDEST RANGE BEST SERVICE Wesfarmers 102
Slide 103: Agenda
Agenda 1. 1st Quarter Result 2. 1st Quarter Highlights 3. Key Issues 4. Outlook 5. Questions Wesfarmers 103
Slide 104: 1st Quarter Result: Segment Result
1st Quarter Result Segment Result ($m) 2003 2004 Change Revenue* 814.6 888.1 9.0% EBITA* 78.1 80.4 2.9% Amortisation 12.5 12.4 -1.2% EBIT 65.6 68.0 3.7% EBITA/Sales Ratio 9.6% 9.1% -0.5% *Includes Revenue and EBITA from property and other Wesfarmers 104
Slide 105: 1st Quarter Result: Trading Result
1st Quarter Result Trading Result ($m) 2003 2004 Change Revenue* 800.0 886.3 10.8% EBITA* 71.6 79.0 10.4% Amortisation 12.5 12.4 -1.2% EBIT 59.1 66.6 12.7% EBITA/Sales Ratio 8.9% 8.9% 0.0% *Excludes Revenue and EBITA from property and other Wesfarmers 105
Slide 106: 1st Quarter Result
1st Quarter Result ¾ Cash store on store growth 14% • Strong result – Queensland, New South Wales, Western Australia & New Zealand • Difficult trading conditions – Victoria ¾ Water restrictions • NSW Stage 1, Vic Stage 2, ACT Stage 3 • Sales impact $5m/month Wesfarmers 106
Slide 107: Industry Performance
Industry Performance National Retail Sales vs Bunnings Cash Sales (Indexed to 100) 170 150 130 110 90 70 National Retail Sales Bunnings Cash Sales 50 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Wesfarmers 107
Slide 108: 1st Quarter Result
1st Quarter Result ¾ Trade credit sales decreased by 6% (Australia) • Small account rationalisation • Trade, wholesale and manufacturing closures • Strong competition (margin) ¾ Store network refit and upgrade disruption ¾ Inventory • Management • Range alignment Wesfarmers 108
Slide 109: Industry Performance
Industry Performance Bunnings Credit Sales vs National Housing Commencements (Indexed to 100) 120 115 110 105 100 95 90 85 80 Housing Commencements Bunnings Credit Sales 75 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Wesfarmers 109
Slide 110: 1st Quarter Highlights
1st Quarter Highlights ¾ Store Network Development • New warehouse openings Dural, Albury, Townsville • Closures Aspley, Townsville (former HWH) Wesfarmers 110
Slide 111: 1st Quarter Highlights
1st Quarter Highlights New Store at Albury Wesfarmers 111
Slide 112: 1st Quarter Highlights
1st Quarter Highlights ¾ Store Network Development • Bunnings Warehouse upgrades Burleigh, Southport, Parafield • Former Hardwarehouse refits Mascot, Norwest • Traditional store upgrade Eltham Wesfarmers 112
Slide 113: 1st Quarter Highlights
1st Quarter Highlights Mascot store after refit Wesfarmers 113
Slide 114: Store Network Update
Store Network Update Totals 2 118 Warehouses 22 Traditional 10 93 Stores 17 8 WA Salvage 4 18 Stores 18 3 39 30 31 3 7 32 As At 30 September 2003 2 1 Excludes Frame & Truss Operations Wesfarmers 114
Slide 115: 1st Quarter Highlights
1st Quarter Highlights ¾ NSW Management Shortfall • 40 new managers appointed • Cultural change processes refreshed • Reduction in labour turnover ¾ Supplier roadshows ¾ Refit benefits ¾ Plastic bag initiative Wesfarmers 115
Slide 116: Key Issues: Store Network Development
Key Issues 1. Store Network Development ¾ Openings • Target 8 – 12 per annum • Series 3000 Warehouse ¾ Departmental and range upgrades • Ex-BBC Electrical and Garden completed • Continuous product range reviews • Import focus Wesfarmers 116
Slide 117: Key Issues: Store Upgrades and Conversions
Key Issues 1. Store Network Development (cont.) ¾ Store Upgrades and Conversions • Upgrade 10% of network per annum • Former Hardwarehouse refits • Bunnings Warehouse upgrades • Traditional store conversions ¾ Closures Wesfarmers 117
Slide 118: Key Issues: Continuous Improvement
Key Issues 2. Continuous Improvement ¾ Consistent offer • Lowest prices • Widest range • Best service ¾ Attracting, developing and retaining the right people • Bunnings recruitment brand • E-learning • Corporate “University” Wesfarmers 118
Slide 119: Key Issues: Safety
Key Issues 2. Continuous Improvement (cont.) ¾ Safety • Clear safety objectives • Safety training and education • Safety management system • Cultural change Wesfarmers 119
Slide 120: Key Issues: Cost and capital management
Key Issues 3. Cost and capital management ¾ Investment in technology • Data Warehouse • International benchmarking ¾ Merchandise / inventory systems and process development • BITS • Supplier rationalisation • Supplier KPI’s ¾ Warehouse Administration Review (“WAR”) Wesfarmers 120
Slide 121: Key Issues: Cost and capital management
Key Issues 3. Cost and capital management (cont) Pre GST Post GST Sales Margin% Total Exp% Sales $m Margin % Total Exp (S+A)% 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 Wesfarmers 121
Slide 122: Key Issues: Trade Business Improvement
Key Issues 4. Trade Business Improvement ¾ Trade Strategy • Trade Hubs • Consistent Offer vs Retail • Market research Wesfarmers 122
Slide 123: Outlook
Outlook ¾ Continued growth in DIY and renovation markets ¾ Slower growth in domestic building trade sector ¾ 5 more warehouse openings pre Xmas ¾ Store development pipeline ¾ Store network upgrades and conversions ¾ Continuous improvement Wesfarmers 123
Slide 124: Outlook: Forecast Annual Growth Rates
Outlook Forecast Annual Growth Rates Indicator 2003/04 2004/05 1. Retail Sales +5.2% +6.1% 2. Housing Starts -3.4% -8.9% 3. Renovation +5.4% +4.1% Expenditure Sources: 1. BIS Shrapnel; 2&3 Housing Industry Association Wesfarmers 124
Slide 125: Wesfarmers
Wesfarmers 125