Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Presentation (October 2009)
156 slides from Wesfarmers's investor presentation, Oct 23, 2009
Slide 1: Investor Briefing
Investor Briefing g 23 October, 2009 InterContinental Hotel, Sydney
Slide 2: Richard Goyder, Managing Director
Richard Goyder Managing Director, Wesfarmers Limited
Slide 3: Agenda
Agenda g 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 – Industrial Businesses In 3:00 Q&A 3:30 Close 3
Slide 4: Management Team
Management g 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 G R Guy Russo sso
Slide 5: Long-term, consistent strategies
Long-term, g , consistent strategies g 5
Slide 6: The Wesfarmers Way
The Wesfarmers Way… y Portfolio of High Performing Quality Assets Value creating business model Autonomy Stand alone businesses High calibre leadership teams with operational control Lean corporate office O t t di g P Outstanding People l A Accountability t bilit R Reporting ti S Systems t D li Deli
Slide 7: Providing satisfactory returns over time
Providing g satisfactoryy 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 Gr
Slide 8: Coles renewal
Coles renewal… Ian McLeod 8
Slide 9: Agenda
Agenda g 1. 1Q performance update 2. Renewal progress 3. Trading outlook 9
Slide 10: Solid 1Q performance
Solid 1Q Q performance* p • Growth in food and liquor sales – Total food & liquor sales up 7.3% – Comparable food & liquor sales up 6 6.1% 1% New supermarket at Flemington (Vic) • Growth in fuel & convenience sales – Comparable shop sales up 6.5% – Comparable fuel volumes up 1 1.3% 3% * 13 weeks end
Slide 11: F&L 1Q sales drivers
F&L 1Q Q sales drivers… • Solid volume growth F&L Volume V l Growth G th 7% – Customer transactions up 6% 5% • Better fresh quality 4% – Double Double-digit digit volume growth 3% 2% • Improving service 1% 0% – Customer satisfaction up 1Q09 2Q09 3Q09 4Q09 1Q10 -1% • Stronger g value offer -2% – Infl
Slide 12: Planning for phase two
Planning g for phase p two… Building a Solid Delivering Driving the Coles Foundation Consistently Well Difference Performance • Create a strong top team • Embed the new culture • Culture of continuous • Cultural change improvement p • Team member development • Availability & store • Strong customer
Slide 13: Building strength & depth of top team
Building g strength g & depth p of top team … • New executive appointments – Tony Buffin – Finance Director (Group Aeroplan Inc & Boots, UK) – Simon McDowell – Marketing g Director ((Sony y Entertainment, US)) – Sharry Cramond – GM, Marketing Communications (Tesco, UK) – Charlotte Maxwell – GM Baker
Slide 14: Culture change & team member development
Culture change g & team member development… A more engaged workforce Increased training & development • Better incentives for store management • Expanded ‘Retail Leaders’ program • Labour turnover down • More graduates for store positions • Absenteeism falling • Craft skills program 14
Slide 15: Improving customer service
Improving p g customer service… • Fixing the basics – Open entries & clutter free – Focus on shorter customer queues B f Before… – Roll-out of self check-out • Investing in better stores – Capital support guidelines – Unique q facilities management g agreement – Consolidated contractors to improve s
Slide 16: A more appealing fresh food offer
A more appealing pp g fresh food offer… • Focus on Australian-made Australian made produce • Improving fresh through local sourcing • B tt quality Better lit through th h direct di t supply l • Market atmosphere in store – New fruit & vegetable presentation – Open meat preparation – Seafood counters
Slide 17: Stronger value & customer trust
Stronger g value & customer trust… • Stronger value focus Increase in targeted customer – Better quality fresh food satisfaction scores since May 2008 Rewarded For Being Regular – Giant Gift Card Give-Away Customer 15% – Feed the family for under $10 Has Great Fresh Food 13% endorsed by Curtis Stone
Slide 18: Private label rebranding
Private label rebranding g… • New private label branding – You’ll Love Coles replaced by ‘Coles’ – Listened to Mum’s Panel feedback • Introducing Quality Seal and Promise on front of pack – 100% satisfied or 100% refunded • Repackaging whole range – Over 1,600 product lines by March 2010 • Launching
Slide 19: Liquor renewal gaining traction with customers
Liquor q renewal ggaining g 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
Slide 20: Roll-out of store renewal formats
Roll-out of store renewal formats… Successful renewal store concepts • Customer response very encouraging • Pilot program provides important insights • 20 plus renewal stores across the country • Strongest company sales densities • 50+ stores targeted in FY10 50 • Further roll-out planned in FY11 20
Slide 21: Improving store & supply chain efficiency
Improving p g store & supply pp y chain efficiency… 500 Gaps on shelves 450 • Easy store ordering 400 350 – 200 stores by end of FY10 300 250 200 • Less gaps on shelves 150 100 – Improved ordering focus 50 0 • Stronger replenishment focus Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-0
Slide 22: Trading outlook
Trading g 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
Slide 23: Questions
Quest o s Questions
Slide 24: Appendices
Appendices
Slide 25: Our national footprint
Our national footprint… p 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 q stores 96 Hotels 625 Convenience 25
Slide 26: Improving our franchise
Improving p g our franchise… Open at Open at Opened Closed 30 June 2009 30 Sept 2009 Supermarkets Coles 705 4 3 706 Bi-Lo 58 - 1 57 Total Supermarkets p 763 4 4 763 Liquor 1st Choice 64 4 2 66 Vintage Cellars 80 - - 80 Liquorland 631 3 3 631 Hotels 95 1 - 96 Total Liquor 870 8 5 873 Convenience 625
Slide 27: Home Improvement & Office Supplies
Home Improvement p & Office Supplies John Gillam
Slide 28: Agenda
Agenda g 1. Bunnings • Background & market trends • g agenda Strategic g • Trading update & outlook 2. Officeworks • Background • Strategic agenda • g update Trading p & outlook 3. Q&A 28
Slide 29: Bunnings
‘BUNNINGS aeeeivns
Slide 30: History
History • 123 years • timber & building sector origins • consumer & DIY f focus ffrom 1980’ 1980’s • long term growth 30
Slide 31: Background: Strategic platform
Background: g Strategic platform 31
Slide 32: Background: Long-term growth drivers
Background: g 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 4. Achieving growth in every store & by expansion 32
Slide 33: Aust. & NZ market trends
Aust. & NZ market trends • Dynamic evolution across 3 decades – “hardware” to “home improvement & outdoor living” – attractive personal tax benefits driving DIY – competitor changes • 1980: two hardware markets … commercial or retail • 1990: big box formats enter • today: one much larger market – Ho
Slide 34: Market evolution: traditional hardware
Aust. & NZ market trends … evolution across 3 decades … et Size Marke “Traditional” Hardware 1980 - 2010 34
Slide 35: Market evolution: home improvement
Aust. & NZ market trends … evolution across 3 decades … et Size Marke Home Improvement 1980 - 2010 35
Slide 36: Market evolution: home improvement & outdoor living
Aust. & NZ market trends … evolution across 3 decades … Aust market today over $36b Bunnings u gs 14%% et Size Marke Home Improvement & Outdoor Living 1980 - 2010 36
Slide 37: 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 $36 billion – homogenous; g ; major j p players y ‘verticallyy capable’ p – long term growth anticipated
Slide 38: Bunnings sales & EBIT growth
Bunnings g sales & EBIT g growth Sales ($m) EBIT ($m) Acquisition of BBC 1st Warehouse 38
Slide 39: Store & trade centre network
Store & trade centre network at October 2009 2 179 Warehouse stores 57 Small format stores 23 Trade Centres 29 5 8 22 7 3 9 3 1 54 16 5 13 25 44 5 4 2 1 1 39
Slide 40: Strategic agenda
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Slide 41: Strategic Agenda
Strategic g Agenda g 1. Profitable sales growth 2 2. Better stock flow 3. Engaging and developing a stronger team 4. Improving productivity and execution 5. Sustainability Agenda driving growth & business fitness 41
Slide 42: Strategic Agenda: Profitable sales growth
Strategic g Agenda g 1. Profitable sales growth A. Lifting customer service • Continued priority; largest improvement & growth opportunity • Work focused on 3 key areas – coverage, knowledge k l d & product d t availability il bilit B. Enhanced merchandising • New product ranges & category expansion
Slide 43: Strategic Agenda: Network expansion
Strategic g Agenda g 1. Profitable sales growth C. Network expansion & enhancement • O Ongoing go g rollout o ou o of new e sstores o es & trade ade ce centres es a) more ‘Bunnings Warehouse’ stores • long term plans: open 10 to 14 annually • shorter term: likely to exceed top-end of forecast b)) op
Slide 44: Strategic Agenda: Merchandising update
Strategic g Agenda g 1. Profitable sales growth Merchandising Update – wider & deeper ranges 1. New / expanded p across p past 36 mths outdoor leisure, kitchens, flooring, play equipment, fencing, sustainability special orders sustainability, orders, steel steel, lighting lighting, plumbing 2. Revam
Slide 45: ; Line, Meee
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Slide 47: Strategic Agenda: Better stock flow & team
Strategic g Agenda g 2. Better stock flow • Improving end-to-end supply chain – lift in-stock levels, higher productivity, reduced cost 3. Engaging & developing a strong team • M More effective ff ti safety, f t ttraining i i & other th d development l t programmes • Higher team retention 47
Slide 48: Strategic Agenda: Effectiveness & sustainability
Strategic g Agenda g 4. Lifting effectiveness & efficiency • Reducing the cost of doing business – systems, business improvement and productivity projects 5. Sustainability focus • Ongoing commitments: less water, energy & wastage • Improving affordability of sustainability for customers 48
Slide 49: Strategic Agenda Summary
Strategic g Agenda g 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
Slide 50: Bunnings trading
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Slide 51: Trading update
Trading g update p 1 July to 30 September 2009 • Cash store-on-store growth 15% • cycled against weakest relative trading pcp • Improved trade market conditions • Ongoing network re-investment & expansion • 6 stores & 2 trade centres opened in July to October period • 8 stores under construction at
Slide 52: Home Improvement Outlook
Home Improvement p Outlook • Cash sales growth to continue – tempered for impact of Aust Aust. Govt Govt. consumer stimulus in past year • Improving trade contribution as economy recovers – multiple Aust. Govt. stimulus programmes • Maintaining M i t i i iintense t ffocus: customer t &b business i i
Slide 53: Office Supplies
Office Supplies Wesfarmers
Slide 54: ise
ise tt aoa J Officeworks' Prk Ladies Auxihiory, One Wrasand Dotto Cutting Trimming Paperclips Rubber Bands | MTP | Tapes |} Staplers fi Glue
Slide 55: Background
Background g 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 24 1 1 Business 11 1 1 4 Fulfilment Centres 8 3 Service Centres 41 2 1 2 38 1 1 1
Slide 56: Strategic Platform
Strategic Platform & z= lewest — widest yoat prices, vange , Gere ,
Slide 57: Office Supplies Network
Office Supplies pp Network at 30 September 2009 Retail Stores 124 Officeworks 5 Harris Technology 24 1 1 B i Business 11 1 1 4 Fulfilment Centres 8 3 Service Centres 41 2 1 2 38 1 1 1 2 57
Slide 58: Strategic Agenda
Strategic g Agenda g 1. Improve the customer offer 2 Improve customer service 2. 3. Team development & engagement 4. Make things simple & reduce costs 5 Drive sales & profitability 5. 58
Slide 59: Slide 59
Slide 60: Strategic Agenda: Improve the customer offer
Strategic g Agenda g 1. Improve the customer offer • Improving the shopping experience • New & improved products / services • ‘How To’ classes & supplier demonstrations • Eco friendly products & services • Special orders service rollout • New website 60
Slide 61: Strategic Agenda: Improve customer service
Strategic g Agenda g 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
Slide 62: Strategic Agenda: Team development & engagement
Strategic g Agenda g 3. Team development & engagement • Strong focus on team members • Significant lift in ‘cultural cultural engagement’ engagement • Investment in team member training • Reward & recognition • Developing attracting & retaining the best Developing, 62
Slide 63: Strategic Agenda: Simple & reduce costs
Strategic g Agenda g 4. Make things simple & reduce costs • Stock management improvements • Supply chain productivity & CODB gains • Reduction in store support cost base • Processes & procedures simplified, complexity removed 63
Slide 64: Strategic Agenda: Drive sales & profitability
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 F th website b it enhancements h t g new business customers • Attracting – corporate, health &
Slide 65: Special Orders
= | | Special Orders
Slide 66: Trading Update
Trading g Update p 1 July to 30 Sept 2009 • Officeworks retail stores sales growth 12% – Underpinned by strong transaction growth – Positive response to EDLP • OW Business gaining momentum • Ongoing network investment & expansion 66
Slide 67: 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
Slide 68: Questions
Questions Wesfarmers
Slide 69: Target, Launa Inman
Target Launa Inman Wesfarmers
Slide 70: 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 71: Managing the Business
Managing g g the Business • Customer behaviour – Evidence of customers ‘bargain hunting’ – I Importance t off entry t price i points i t and d volumes l att these th prices • Capturing reductions from suppliers in product costs – Negotiations g to benefit from FX improvement p – Continuing to broade
Slide 72: Target strategies
Target g strategies g Strategic initiatives Comments Focus on fundamentals 3 Meeting customer needs on range, price and service 3 Evolution of “100% Happy” Brand reinforcement Ongoing Unique philosophy and positioning Ongoing Leveraging an emotional connection Ongoing Bringing the best of what’s new
Slide 73: Strategies: Store Network Development
Strategies g 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 P j t d tot spend d over $25 mill
Slide 74: Differentiation still the key
Differentiation still the keyy • Creating new ways to excite the customer – Pop Up Retail 74
Slide 75: Differentiation still the key
Differentiation still the keyy • Bringing what’s new in the world to Target – Appointment of General Manager, Creative – Build internal Design and Innovation Group – Direct Sourcing g System y 75
Slide 76: Supply Chain
Supply pp y 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
Slide 77: Sustainability
Sustainabilityy Environmental Initiatives • B ilding ssustainability Building stainabilit into o ourr b business siness fabric – Signatory to National Packaging Covenant – Participant in Government’s Energy Efficiency Opportunity program • Taking a leadership role role, but still a long way to go –
Slide 78: Target Outlook
Target g Outlook • Outlook remains cautious – Managing inventory – Cost control – Cycling Dec. Government stimulus package • Customers continuing to seek out value - Entry and mid-price points well stocked - Broaden sourcing base to help reduce costs • Remain nimble to competitor activity • Differen
Slide 79: Questions
Questions Wesfarmers
Slide 80: Appendix
Appendix pp
Slide 81: Target Store Network
Target g 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 82: Kmart, Guy Russo
Kmart Guy Russo Wesfarmers
Slide 83: Agenda
Agenda g • Trading Update 1Q10 • Strategy Update • Outlook 83 83
Slide 84: Trading Update 1Q10
Trading g Update p – 1Q10* • S Successfully f ll exiting iti unprofitable fit bl sales l – Comparative store sales decline of 2.3% for 1Q10 – Profitability improving • Inventory below last year and remains well controlled • Pleasing performance from Kmart Tyre & Auto * 13 weeks to 27 September 2009
Slide 85: Strategy Update
Strategy Update 85
Slide 86: A discount department store focussed on serving customers
A discount department store focussed on serving customers quality products at low prices, in an easy to shop environment
Slide 87: Health check - where are we at?
Health check - where are we at? Customer Outstanding Customer People Experience Product Best People, Ranges Great Customers Company Want P fit Profit Place Price Every Site a Great Value Success Everyday Promotion Clear Communication 87 87
Slide 88: Customer
Customer • Faster friendlier customer service Faster, • Significant increase in customer engagement – Compliments p on the rise • Extended trading hours for enhanced convenience i 88 88
Slide 89: Product
Product • Unnecessary products removed – Over 20% SKU reduction in an average store • Stopped discounting products at below cost • Ongoing execution of supply chain rationalisation – 62 offsites/storage facilities closed – Announced net closure/exit of 5 distribution centres • IImproved d product d
Slide 90: Price
Price • Making good progress on removing excessive category discounting • Simplified pricing communicated – Round prices – Price points on racks • Focussed F d on iimproving i price i perception 90 90
Slide 91: Promotion
Promotion • Major investment in customer research • Si l clearer Simple, l messages • Clearer, uncluttered catalogues • Promoting items rather than ‘% off’ 91 91
Slide 92: Old
Old - 15-20%ff 25 Xf f arn women’s, men’s 7 S%FF & kids’ clothing TVs, TV combos, GPS, LCD TVs, DVD players, set top 25%FF eZ ~ boxes & home theatres Pauto products oA neste nies bein, two. car ys, thar. estos Ses ep orl macnn Sour. rao Onesie Mondoy 24th Moschountil Wednesday 2nd April wwwillimartc
Slide 93: New
New On sale Thursday 22nd until Wednesday 28th October 2009 www.kmart. 93
Slide 94: Place
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
Slide 95: People
People p • Building a customer focussed culture – develop capabilities focusing on customer • Store Managers in store on weekends • People accountable for focussing on customers and results 95 95
Slide 96: Summary
Summaryy • R Renewal l progressing i wellll and d att pace – Removing unnecessary and unprofitable sales is working – Right prices results in significant growth in volume – Customers are responding p g well to in-store changes g • Confident we are creating solid foundations for future growth 96 96
Slide 97: Outlook
Outlook 97
Slide 98: Kmart Outlook
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
Slide 99: Questions
Questions Wesfarmers
Slide 100: Appendix
Appendix 100
Slide 101: Kmart Store Network
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
Slide 102: Insurance, Rob Scott
Insurance su a ce Rob Scott 102
Slide 103: Broking and Underwriting FY09 results
Broking Underwriting Australia New Zealand Income GWP $218m $1,358m EBITA Margin COR 27 9% 27.9% 103 2% 103.2% Financial results are for FY 09 103
Slide 104: Market Conditions
Market Conditions Benign weather conditions through Q1 FY2010 Modest rate increases in some classes Rate hardening more prevalent in NZ than Australia Business confidence and spending p g still fragile g Positive signs emerging in Australia NZ remains flat 104
Slide 105: Key Strategies - Underwriting
Keyy Strategies g - Underwriting g Fundamental Profitable growth through leadership in chosen Objective segments Keyy Strategies g Stronger partnerships Disciplined underwriting and pricing Managing claims effectively Growth in chosen segments Building g a culture of achievement 105
Slide 106: Trading Update
BUSINESS Trading Update FARM HOME & CAR Premium growth across all classes STRATA Benign B i weather th conditions diti in i 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
Slide 107: Trading Update
Trading Update Australia New management team in place Strong business retention Re Re-branding branding well received in broker market Exit from Builders warranty insurance Launch L h off my.place l on-line li b broker k system t New Zealand New distribution partners Positive claim
Slide 108: Personal Lines Initiatives
Personal Lines Initiatives 108
Slide 109: Key Strategies - Broking
Keyy Strategies g - Broking g Fundamental To understand our clients, 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
Slide 110: Trading Update
Trading Update BUSINESS INSURANCE PERSONAL LINES Positive start to year FINANCIAL SERVICES LIFE DISABILITY & HEALTH Distribution arrangement through ANZ Business SCHEMES Banking CLAIMS MANAGEMENT SME Express trial in progress PREMIUM FINANCING Growth in ancillary lines – Life Lif and d healt
Slide 111: Trading Update
BUSINESS INSURANCE Trading Update PERSONAL LINES SUPERANNUATION Yet to see material benefits from rate hardening LIFE & INCOME PROTECTION New premium funding arrangement (Monument) SCHEMES FINANCIAL MANAGEMENT Improvements to business support capabilities ENVIRONMENTAL CONSULTING – OAMPS Centr
Slide 112: Developing our team
Developing p g our team .....step step into the Wesfarmers Insurance Leadership Development (W.I.L.D.) is a suite of leadership programs g with ith customised t i d content t t tto meett th the d development l t needs d off our iinsurance leaders today & build leaders for tomorrow We believe that gr
Slide 113: Outlook 2010
Outlook 2010 Positive momentum in Lumley turnaround Premium rate increases being achieved in NZ Recent benign weather a positive but future uncertain Higher interest rates will improve investment returns Continue investment in people and management systems Bolt-on acquisitions being asse
Slide 114: Questions
Questions Wesfarmers
Slide 115: Resources, Stewart Butel
Resources Stewart Butel
Slide 116: Wesfarmers Resources
Wesfarmers Resources Export metallurgical and domestic steaming g coal QLD Domestic steaming coal WA Export and domestic NSW steaming coal (40% ownership) 116
Slide 117: Business environment
Business environment • Strong signs of emergence from global economic crisis – Customers – Significant increase in global steel production – Increased metallurgical coal demand and spot prices – Traditional T diti lAAustralian t li exportt market k tddemand d returns t – Suppliers – Rail and port in
Slide 118: Seaborne metallurgical coal market
Seaborne metallurgical g coal market CONSTRAINED SUPPLY REBOUNDING DEMAND Australia rail & port China imports continue constraints re-emerging g g (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 Me
Slide 119: Resources strategies
Resources strategies g Strategic initiatives Comments • Long-term contracts ongoing Maximise export sales and • Price relativity maintained optimise sales mix • Maximise higher value products • Improve operational performance • Cost reduction programs in place Cost reduction programs • People, proce
Slide 120: Coal production volumes
Coal – p production volumes YTD ended Mine Beneficial Coal Type (('000 000 tonnes) Interest Sep-09 Sep-08 Curragh QLD Curragh, 100% Metallurgical 1 711 1,711 1 809 1,809 Steaming 618 774 Premier, WA 100% Steaming 802 938 B Bengalla, ll NSW 40% St Steaming i 587 519 Total* 3,718 4,040 * Wesfarmers at
Slide 121: Curragh focus on cost control
Curragh g 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 overbur
Slide 122: Curragh expansion study
Curragh g expansion p studyy • Feasibility st Feasibilit study d to e expand pand e exports ports to 8.0mtpa to 8.5mtpa completed • Curragh expansion study includes – New 1,200tph CHPP – Additional overburden removal capacity – Rail and p port capacity p y in p place – Market development • Recommend
Slide 123: Blackwater Creek diversion
Blackwater Creek diversion • Access to additional metallurgical coal • Capital estimate $130 million • Civil works completed September 2009 • Rehabilitation and project completion estimated mid CY2010 • Ahead of budget and timeline 123
Slide 124: Resources outlook
Resources outlook • Strong signs of global steel production recovery • JFY2010 price negotiations to commence around January 2010 • Forecast Curragh g metallurgical g sales of 6.2 – 6.7mt in FY10 – Estimated sales mix (Hard 47 - 50%; Semi-Hard 20%; PCI 30 - 33%) • Significantly g y reduced earnings
Slide 125: Questions
Q Questions 125
Slide 126: Appendices
Appendices pp 126
Slide 127: Australian coal market prices
Australian coal market prices p Steaming coal Hard coking coal US$/Tonne (Nominal) FOB Australia (annual verse spot) US$/Tonne (Nominal) FOB Australia (annual verse spot) 200 400 350 160 300 120 250 200 80 150 100 40 50 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2003 2004 2005 2006 2007 2008 2009 2
Slide 128: Hedging profile as at 30 September 2009
Hedging g gp profile as at 30 September p 2009 Curragh – Open Contracts Bengalla – Open Contracts Current US$ Average Current US$ Average Year end Year end sold forward A$ / US$ sold forward A$ / US$ 30 Jun 30 Jun (US$m) hedge rate (US$m) hedge rate 2010* 281 0.80 2010* 66 0.79 2011 285 0.79 2011 65
Slide 129: Coal delivery systems
Coal deliveryy systems y • Gladstone – Short-term rail capacity constrained due to increased coal demand – Ongoing rail duplication projects – Adequate port capacity in place – Wiggins Island Coal Terminal feasibility study continues • Newcastle – Port o coconstraints s a s continue co ue into o 200
Slide 130: Coal port congestion
Coal p port congestion g East Coast Australia as at 9 October 2009 No. of ships p 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 Gl d t Gladstone N Newcastle tl Oth Ports Other P t Source: McCloskey Fax 130
Slide 131: Industrial Businesses
Industrial Businesses Wesfarmers
Slide 132: Chemicals & Fertilisers
Chemicals & Fertiliser Wesfarmers
Slide 133: Chemicals & Fertilisers Overview
Chemicals & Fertilisers Overview B i Business G Geography h S t Sector K C Key Customers t 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 Barr
Slide 134: Operational Update
Operational p Update p • Ammonia, ammonium nitrate plants ran at maximum production in Q1 FY10. – Record production from all plants, with significant AN exports. – No p planned ammonia p plant shutdowns in FY10. – 49 day planned maintenance shutdown of 50 per cent AN capacity in late October. • Sodi
Slide 135: Strategy Update
Strategy gy Update p Strategic Initiatives Comment Growth WIP Improve ammonia plant production performance 9 Sodium cyanide expansion (+8,000 tpa) WIP Identify additional AN capacity opportunities Optimise cost and capital 9 Refinance QNP – cash to sponsors WIP Inventory management (fertilisers) WIP
Slide 136: Chemicals & Fertilisers Outlook
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 137: Industrial & Safety
Industrial dust al & Safety Sa ety
Slide 138: Trading update
Trading g update p • Solid FY09 result given challenging market conditions – Impact partially mitigated by expense and capital management focus – Strong performance from Bullivants and resources & infrastructure segments – Most competitors more severely impacted • Slowdown still impacting first quar
Slide 139: Strategic agenda
Strategic g agenda g Invest for the future Strengthen Push Manage downturn leadership position boundaries ance Performa • Further expansion • Profitable growth • Business model 1. Increasing sales to existing i ti g customers t • Consolidate positions 2. SME penetration 3. Higher growth sectors 4. M
Slide 140: Strategies: Increasing sales to existing customers
Strategies g 1. Increasing sales to existing customers • Sales to top 15 customers up 7% over 12 months • Security of supply - DIFOT > 94% • Leveraging specialist offering • Improving sales effectiveness • Product range extensions • Expanding range of value-added services • Substantial growth in e-b
Slide 141: Strategies: SME penetration and growth sectors
Strategies 2. Increasing SME penetration • Strong customer service focus • Network upgrade program • Improved marketing and merchandising • Developing more efficient channels 3. Investing g in higher g growth g sectors • Construction and infrastructure • Oil & gas g • Selected offshore markets • Foo
Slide 142: Strategies: Margin and competitiveness
Strategies g 4. Managing margin • Facing lagging FX impact on inventory • Leveraging improved pricing capability • Strengthening relationships with key suppliers • Continuing Co u g to o invest es in d direct ec sou sourcing c g capab capability y 5. Improving competitiveness • Reducing organisation
Slide 143: Industrial & Safety outlook
Industrial & Safetyy outlook • Strengthening growth platform – Increasing share of customers’ spend and exposure to growth industries – Improved competitiveness – Healthy acquisition pipeline • Challenging g g market conditions and margin g p pressure expected p until 2H10 – Subdued manufacturing an
Slide 144: Appendices
Appendices Wesfarmers
Slide 145: Industrial & Safety Business Portfolio
Industrial & Safetyy Business Portfolio Australia New Zealand “All your Safety Industrial workplace Specialist Specialists needs” (1) (1) Manufacturing and services 145
Slide 146: Industrial & Safety - Distribution Network
Industrial & Safetyy - Distribution Network 239 locations (162 Australia, 77 New Zealand) Australia No No. 2 70 MRO, “All your workplace needs” 1 1 17 5 Electrical 14 5 12 7 9 5 9 3 Safety 42 2 1 54 22 Materials handling, lifting, rigging 4 2 17 1 6 4 Fasteners 16 4 1 7 Engineering 11 5 New Zealand
Slide 147: Mid term outlook
Mid term outlook Significant customer investment pipeline 5 Selected ANZ projects Oil & gas Infrastructure & Construction Utilities (inc. telecommunication) Resources Source: ABARE, NZIER, Industry Capability Network (NZ), State governments’ resources and primary industries websites, WIS 147
Slide 148: Energy
Energy Wesfarmers
Slide 149: Overview
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 education. WA, NT
Slide 150: Key Strategies Update on Strategies
Key Strategies Update on Strategies • Following capacity investments in 2009, continuing targeted marketing and Focus business on increasing sales effort with expanded product portfolio market share • Renewed focus on effectiveness of sales force • Improving DIFOT, cylinder scanning performance and
Slide 151: Key Strategies Update on Strategies
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 152: Key Strategies Update on Strategies
Key Strategies Update on Strategies • Diversifying and optimising supply sources Improve East Coast Supply Chain • Improve distribution marketing efficiencies Grow market share • Improve marketing efficiencies Trading Report • Q1 traditional volumes slightly down on prior year Trading Update • Margi
Slide 153: Key Strategy Update on Strategy
Key Strategy Update on Strategy • Negotiating most suitable gas supply for ongoing operation Maximise LPG production • Evaluating minor investment in plant to improve operating efficiency Trading Report • Q1 production above expectations due to higher than budgeted LPG content in DBP Trading Update
Slide 154: Questions
Quest o s Questions 154
Slide 155: Q&A
Q&A Richard Goyder y Managing Director, Wesfarmers Limited Terry Bowen Finance Director, Wesfarmers Limited
Slide 156: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au 156