Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Presentation (November 2003)
125 slides from Wesfarmers's investor presentation, Nov 4, 2003
Slide 1: os ne l It Lo Ta SME LD a | Lo To GU ae
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Slide 3: Wesfarmers Energy
Wesfarmers Energy as 4 Premier Coal _ H H AIR LIQUIDE VBE TERM BLL AGUA ALIA. LJ R R AG | =e INANUNNNNANNNRNITE STATEWEST POWER oO . 3
Slide 4: 2003 Snapshot
2003 Snapshot Coal >» Production 12 million tonnes » Sales 12 million tonnes » Customers 25 » Employees 886 Gas / Power >» LPG Production 0.33 million tonnes >» LPG Sales 0.60 million tonnes » Direct customers 115,000 » Generation 378 Gwh » Employees 946
Slide 5: Coal Sales
CoalSales Yo } 2003/04 = Oo. eo A —r—“‘—O—s / Domestic | _ Export Total (milliontonnes) 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 | 2 5
Slide 6: Energy business priorities
a eP KHG WLPG ALWA StateWest Premier Curragh Bengalla supply post 2005 securing major projects off-grid, BOO, national new markets and unit costs volume growth, Curragh as “hub” sales mix, volume security
Slide 7: Energy 2003/04 Q1
Energy 2003/04 Q1 E == // WY ia Gas >» International prices 10% higher — Se >» Excise uncertainty Coal >» Western Power deliveries up >» Coking coal prices lower, steam improving >» Demand firm, logistics bottlenecks >» Adverse exchange rate movement Wesfarmers 7
Slide 8: Saudi Contract Price
Saudi Contract Price US$/t 400 350 300 250 200 - 150 4 100 50 pUsss42 | ee ee 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 $$320_
Slide 9: Hard Coking Coal Price
Hard Coking Coal Price sis JRP US$/Tonne FOB nominal .. 60 55 50 45 40 35 30 83 89 91 93 95 97 99 O1 Japanese Financial Year
Slide 10: Thermal Coal Prices
Energy 2003/04 Q: Thermal Coal Prices US$/Tonne FOB nominal — 40 | 30 5 20 5 10 5 | | | I I | i} i} | | Jul- = Jun- May- Apr- Apr- Mar- 95 96 97 98 99 oo === Spot Price Source: Barlow Jonker 1 Feb- 01 Jan- 02 Dec- 02 LD 10
Slide 11: Exchange Rates
LEE Wee Energy 2003/04 Q1 Environ Exchange Rates — << e $A/$US et 1.0 5 : ee 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 vmx WSD/AUD exchange rate
Slide 12: Curragh hedging
Wesfarmers Curra Proportion of USD revenue hedged © AUD/USD. hedge _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 e Calculated after adjusting for USD capital and operational expenditure and USD royalty payments. 12
Slide 13: Logistics
Logistics Bottler n nec! LLL TET aa Ge A 7 _ Te ae ~~ es CAAA EE ead Newcastle Vessels Queued Turnaround Time (days) Demurrage (YTD) Gladstone Demurrage (YTD) Ty, RAT VM ELE Le IN “mn os - YJ; 7 ZL LG 13
Slide 14: Safety and environment
as @ Gi y, Ui Yay Wy Ly, Wiig ye NOME Saas Le eDrug and Alcohol Testing eNo Lost Time Injuries eEnvironmental Award y Me AEH. Y
Slide 15: WLPG production
15 i < vt i) o | © =] i=} N N : °o . o Sn . .. Nn : a i=] i] N i=] i=] o N 2) 2] a wa aii vii RE Gy ey 02 2003 1Q 04 t) 2 1 0 Oo ion WLPG 1999 2000 2 Kt Product 400 300 200 100
Slide 16: Coal production and sales
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Slide 17: Sales Volumes
Sales Volumes OY . 2003/04 Q1 versus 2002/03 .Q » Kleenheat Gas +1% i. >» Wesfarmers LPG -3% — > Air Liquide* +0% » Premier +3% » Curragh +36% » Bengalla +22% *Pipeline Sales a 17
Slide 18: Profitable Growth - Financial Performance
1G Profitable Growth — Financial Performance $m EBITA % 300 35 250 30 25 200 20 4 150 15 4 100 10 5 50 | 5 - 0 7 T T T T T 0 q T T T T T 1999 2000 2001 2002 2003 1Q 04 1999 2000 2001 2002 2003 R12 Sept is
Slide 19: Wesfarmers Energy Highlights
Wesfarmers Energy Hic f in » Curragh 20 year milestone, export awal >» Curragh North EIS | >» Premier Coal environmental award » Kleenheat volumes increase against PCP » Hismelt, MidWest project progress » Oracle system implementation 19
Slide 20: Curragh Production
Curragh Prod uc mtpa 2 _ UU tion — & Gy aa . a y Y 7. 12 10 _ 2004 2008 a ° ° fo 2003 2005 2006 5 2007 2010 2011 urragh ao) Wesfarmers _ / - oe - | / / / - co / i oo. oo a _ / / / - a i HT i i a . - ' . - / / - . - . - / - . - _ i | | | | ee _ _ a - _ . . _ | / | - . . - . / . - - / - | _ | | |. cc.
Slide 21: Curragh Business Model 2010
Curragh Business Model 2010 Coal mining ———* Central ~——* ~ Sales a ng Mg processing A Thermal -- : is. Modified CELELGLO reer ae Contract to 2025 a Co ‘eu , MMA Na Le Ly | : Wesfarmers _ Uh Ctéi‘ 21
Slide 22: 2003/04 Coal Issues
Zn 2003/04 Coal Issues Curragh oe » Export volumes (+0.6 mt) — >» Export prices -/+ » AUD/USD exchange rate i » $14 m dragline shutdown Bengalla » Export volumes (+0.5 mt) » Export prices Premier » Flat sales » Work practice reform (EBA) UO 22
Slide 23: 2003/04 Gas Issues
2003/04 Gas Issues _ LL a rey, Wey ~ Lc orices “ — — » Excise decision » Kleenheat volumes, margins » WLPG Post 2005 Te Wesfarmers Ue Lg Q LLL MMOE. 23
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Slide 25: Wesfarmers Chemicals and Fertilisers
Wesfarmers = es 7) ay a LL Le ae i en Chemicals nl CSBP Fertilisers CWE: Wi Gay Le eG 2 a | 5 Hy
Slide 26: CSBP's Objective
Wesfarmers 1 Akl aol CSBP’s Objective ‘S ‘ Bi yg LU oy LZ y) 2 WMO 7 tal Ly 26
Slide 27: CSBP Background
CSBP Backg round = le vow w Established 1910 Member of Wesfarmers Group since 1980 Only major fertiliser supplier in WA until ~ 1990 Diversification into chemicals from 1987 Major chemicals investments post 1996 Post 1999, around 60% of EBITA generated from chemicals activities WA's leading fertilis
Slide 28: CSBP Background
CSBP Background » Manufacturer of mining & processing - e ammonia, ammonium nitrate, sodit chlorine >» Manufacturer and importer of fertilisers e phosphate, nitrogen, potassium and compounds >» Manufacturing operations at: e Kwinana, Albany and Esperance - WA e Moura, QLD (joint venture) >» 540 empl
Slide 29: EBITA and EBITA/Capital Trend
5 Year Trend a rrs—sS EBITA and EBITA/Capital | % 100 15 1999 2000 2001 2002 2003 Wesfarmers rr rrr oo 29
Slide 30: CSBP July-Sept 2003 Results
CSBP July 2003 -— Sept 2003 Results » Chemicals e volumes in-line with last year . e steady production performance e short term softness in local ammonia demand » Fertilisers e increased volumes e strong market focus and good seasonal conditions >» Revenue and earnings e revenue:$72.9m ($67.6m pcp)
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Slide 32: Ammonia / Ammonium Nitrate
Ammonia/ — Ammonium Nitrate to nickel indus and export AN Solution sales to Dyno for explosives AN Prill sales to Dyno for explosives 32
Slide 33: Ammonia
Ammonia Background >» Sole WA manufacturer and supplier >» New plant commissioned in 2000. ° original plant capacity 650 tpd / 225,000 tpa e debottlenecked to 240,000 tpa e further expansion May 2004 » 40,000 tonnes import / export storage terminal >» External customers e primarily nickel industry a
Slide 34: Ammonium Nitrate
Ammonium Nitrate Background » Sole WA manufacturer » 160,000 tpa nitric acid plant / 200,000 tpa N plant commissioned 1997 » AN plant debottlenecked to 230,000 tpa e distribution for mining explosives via Dyno Nobel e Flexi-N liquid fertiliser consumes balance of production » Queensland Nitrates pla
Slide 35: Sodium Cyanide
i ) Yj in Sodium Cyanide ss Solution sales to WA gold mines 7. Ammonia Caustic Soda 5 P Solid sales to ee Australian and overseas gold mines jaa : 35
Slide 36: Sodium Cyanide
Sodium Cyanid Background » Australian Gold Reagents - sole WA mi >» 75: 25 joint venture with Coogee Chemicals e plant operation and marketing by CSBP » First solution plant commissioned in 1988 ® progressively expanded to ~ 48,000 tpa solution » Investment in solid sodium cyanide plant in 2002 e 20
Slide 37: Chlor Alkali
Chior Alkali Electricity/— Hydrochloric Acid sales to industry > Chlorine sales for water treatment -—— Hypo sales for water treatment > Caustic Soda sales to industry 37
Slide 38: Industrial Chemicals
Industrial Chemicals Background » 5,000 tpa chlorine plant commissio e baseload production for WA Wate © co-production of caustic soda, hydrochloric. acid, sodium hypochlorite, hydrogen >» Traded products e Sulphuric acid e Industrial urea e Fluorosilicic acid e Sulphur e Ammonium sulphate 38
Slide 39: Chemicals - Current Influences
Chemicals ——— ie Current Influences >» Strong resource sector conditions e short term softness in local ammonia o e export excess ammonia production >» Good ammonia / AN plant performances e continued lift in Queensland Nitrate operations » Sodium cyanide solids plant at expectations 39
Slide 40: Chemicals - Strategies
Chemicals _— _— Strategies > Profitably build on existing businesse e examining production expansion opportu e simplify Queensland Nitrates joint venture structure >» Evaluating growth opportunities that exploit core competencies ® expand product range in existing markets e assess opportunities in n
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Slide 42: Fertilisers Background
Fertilisers Background > Only major fertiliser supplier in e manufacturing focus at that tim . » Market share and profit erosion in last decade e emergence of import-based competitors >» Post 2000, market share and profit stabilisation e strong market and distribution focus e working capital, cost b
Slide 43: Fertilisers Background
Fertilisers Background » Unmatched infrastructure in W © volume growth readily handled >» Extensive distribution network e commission based reward structure e AWB Landmark, Elders & independents e all collections ex-CSBP facilities >» CSBP market support e field staff supporting distribution network
Slide 44: Fertilisers - WA Infrastructure
Fertilisers | WA Infrastructure Import Facility Distribution Centre. Geraldton
Slide 45: Fertilisers - Sales Volumes
Fertilisers — 3 Year Sales Volumes million tonnes 1.2 1.0 0.8 5 0.6 | 0.4 5 0.2 5 2001 2002 2003 @ Western Australia @ Other 45
Slide 46: Fertilisers - Current Influences
Fertilisers | Current Influences > Potential record harvest for 2003 e restore farmer financial health e storage and handling pressures from harvest. volumes e sales potentially skewed to second half > Solid sales programme e distributor support ® competitive pricing e enhanced range of products and
Slide 47: Fertilisers - Strategies
Fertilisers | Strategies » Strong market focus e widest range of quality fertilisers e best services and technical support e competitive prices » Develop markets beyond WA for proprietary products 47
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Slide 49: Agenda
Do) Agenda a >» The Wesfarmers Industrial and Safety » First quarter F2004 results » WIS strategy » Current business outlook Wesfarmers lc cl oo fs 49
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Slide 51: Statement of Purpose
Statement of Purpose — Ds “To be the first choice of every customer through the provision of innovative — industrial distribution solutions and_ to generate satisfactory shareholder returns” yo) 51
Slide 52: Wesfarmers Industrial & Safety
(oo Y Mee gil Wesfarmers Industrial & S » Largest MRO & Safety supplier in _ Australasia 252 outlets (Australia & New Zealand) »3,500 employees 80,000+ customers »15,000+ suppliers 400,000+ products yo) 52
Slide 53: Trading Names
Trading Names » Atkins » Bakers » Blackwoods » Motion Industries MS tion APADUSTIIOS » Mullings Fasteners Mullings Fasteners i » Protector Alsafe » NZ Safety Yi NZ Safety > Packaging House aj Packaging House » Protector Safety Supply (NZ) Pr tector Safety Suppiy PAYKELS ter your engineering sunplios
Slide 54: Distribution Network
Distribution Network __ \ os @ Motion 7 @ Metals 4 ® Mullings — NZ Safety a . SS Protector (NZ) ) LL Rm ® Pkg House . Ll ® Paykels URISUANE socrarom TOTAL TWEED HEADS Cons announ @ BRANCHES @ NSW vic @aLD WA OSA i TAS camsToHURH @NT - NZ (| ha Ray KES esto Oo foparr @TOTAL yore a a Protector Alsafe
Slide 55: Major Product Segments
Major Product Segr (descending revenue order) Safety Tools General industrial Metals Welding Fasteners VV VW WwW v W Power transmission & bearings Mechanical services Electrical Janitorial Packaging Materials handling VvVvV Vv v 55
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Slide 57: First Quarter
First Quarter 20 » Revenue >» 4.8% ahead of last year (excluding metals revenue and sales) » Strong growth in New Zealand »Earnings slightly behind expectations » Protector Alsafe integration behind schedule » Slower than expected commencement of some infrastructure works 57
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Slide 59: WIS Strategies
WIS Strategies a » Grow real sales and sustain g m argin : _ Ss » Reduce expense to sales ratio - » Reduce working capital » Improve safety performance and employee retention aaa 59
Slide 60: WIS Strategies
WIS Strategies » Grow real sales and susta margin @ @ Improved brand positioning Expand network « Shopfronts Alignment of sales force New catalogues Leverage e-business Customer service improvements Extend import programme 60
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Slide 62: WIS Strategies
WIS Strategies » Reduce expense to sales ratio e Extend operation deliver e Rationalise distribution infrastructure e Upgrade information systems » Reduce working capital e Enhance category management e Refine vendor management 62
Slide 63: WIS Strategies
WIS Strateg ies ae 7 >» Improve safety performance — employee retention a e Improved OHS&E management oC e Implementation of OHS&E systems e Development of effective performance management systems DU 63
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Slide 65: WIS Business Outlook
WIS Business Outlool » Strong growth to be delivered fron specialist streams — Motion & PA » Efficiencies from new distribution centres W Protector Alsafe integration to contribute strongly in the second half PeopleSoft implementation to begin delivering efficiencies Paykels integration in NZ to pro
Slide 66: Business Outlook
Business Outlook » Look forward: » Industry rationalisation to occur, wi independents retaining relative market shares >» Increasing level of customer contract outsourcing >» Acquisitions & mergers to accelerate >» Legislative changes likely to benefit WIS, through increased focus on workplace safet
Slide 67: ENC
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Slide 68: Outline
A a ZB GLY 5 Uh, Wy OUTLIN E . = _ a“ “<< 4 a ey Vy ey y Hii La) Australian Railroad Group / » Sotico » Gresham Private Equity Business Development Wesfarmers _ 2 DLCUti‘i‘ 68
Slide 69: Performance Drivers
Performance Drivers. == ss Ln Cy >» Record grain harvest expected — wos — Ls: NE rasnioayNoy eee TE ise psiaupnoy He i 0 Ca Wesfarmers Lg GG a -
Slide 70: ARG Grain Harvests
ARG Grain Harvests Tonnes (milions) 25 20 i5 10 Le NIN y ae ai HINT 94/95 95/96 96/97 ™ Western Australia 97/98 98/99 99/00 00/01 01/02 02/03 03/04 @ South Australia
Slide 71: Performance Drivers
Performance Drivers - » Record grain harvest expected . >» Safety Team | e LTIFR 20+ —> 10- e reduced derailments By ee Wesfarmers
Slide 72: ARG Performance Drivers
ARG = Performance Drivers. — . Record grain harvest expected Safety Team Regulatory outcome New business - Mt Gibson iron ore Refinancing ye. ay | oo iy Bie La Cue, LLL TOR Wesfarmers
Slide 73: ARG
ARG - e low grain tonnage e track maintenance charges e Alice Springs — Darwin near completion e provision for remainder of year
Slide 74: ARG Outlook
ARG ee Nie. Outlook ~ >» Earnings improvement eS LLL TOR e grain harvest so e minerals tonnages e operational efficiencies » Safety programme remains vital » Logistics improvements Wesfarmers _ CC
Slide 75: Sotico
Wy, ANN Sotico a Sale of Mundijong Pine Treatment Plant and : Welshpool land >» Wespine and Timber & Panel s e volumes strong e yields up ® earnings up 6% on pcp » Divestments to continue ) SOT! (Ua 75
Slide 76: Gresham Private Equity
Gresham Private 50% Interest —_— » Net investment by Wesfarmers -$72m » Small dividend income < Divested e Eurogestion » Divesting e Repco GRESHAM INVESTMENT. HOUSE Wesfarmers ; 9 j d Zi De 76
Slide 77: Gresham Private Equity
Gresham Priva eE » Cashcard >» EROC » Norcros » Riviera » Virgin Active » Raywood ATMs + financial trans C processing mining / infrastructure contractor building materials, coatings cruisers health clubs vehicle control systems GRESHAM INVESTMENT. HOUSE 77
Slide 78: Gresham Potential Fund
Gresham Priva Potential Fund 2 — » $300-350m targeted » Accommodate VCLP regime >» Wesfarmers’ planned involvement: e foundation investor; e investment committee membership; ® staff secondments » Continuation of earnings GRESHAM INVESTMENT. HOUSE 78
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Slide 80: Business Development
Business Develo » Business as usual Transactions e Lumley e Landmark e small divestments >» Staff ® recruiting e development e group skill base Wesfarmers Ze iy Hanne? Bo LMG WE iG 80
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