Wesfarmers Limited · ASX:WES
Wesfarmers — Investment Conference, Citigroup London, Goldman Sachs JBWere New York, JPMorgan Singapore (March 2009)
70 slides from Wesfarmers's conference presentation, March 2009
Slide 1: Investment Conference: Philosophy, Performance and Direction
Investment Conference Philosophy, Performance and Direction Citigroup, London – 9 & 10 March Goldman Sachs JBWere, New York – 12 & 13 March JPMorgan, Singapore and Hong Kong – 16 & 17 March March 2009 Discussion Pack 1
Slide 2: Index
Index 1 Philosophy, Performance and Direction 3 2 Sustainability 8 3 Group Overview 12 4 2009 Half Year Results 16 5 Operating Divisions 30 6 Capital Management 65 7 Outlook 69 8 Investor Relations Contacts and Information 70 2
Slide 3: Philosophy, Performance and Direction
Philosophy, Performance and Direction
Slide 4: Long-term, consistent strategies
Long-term, consistent strategies MANAGING BALANCE SHEET EFFECTIVELY 4
Slide 5: Key Attributes
Key Attributes Growth Quality Earnings Opportunities Assets Improvement • Continued store roll-out; • National store networks; • Bunnings 1H09 cash sales Range expansion; Leading in sectors comp of 7.7%; EBIT up 14% Home Improvement Officeworks turnaround • Officeworks 1H09 retail & Office Supplies
Slide 6: Key Attributes
Key Attributes Growth Quality Earnings Opportunities Assets Improvement • Long term demand; • Sizeable production • Maintaining lowest quartile Resources Curragh & Bengalla capacity; Consistent cash cost production of feasibility studies quality, low costs export coal • Broker consolidation; • Diver
Slide 7: A History of Strong Returns
A History of Strong Returns EPS WES Share (cents per share) Price(A$) 300 50 250 40 200 30 150 20 100 50 10 0 0 98 99 00 01 02 03 04 05 06 07 08 EPS (AGAAP) Girrah EPS Landmark EPS EPS (AIFRS) ARG EPS Wesfarmers Share Price * Adjusted for capital reconstructions Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Ju
Slide 8: Sustainability
Sustainability
Slide 9: Sustainability
Sustainability Financial performance • All our actions are directed towards satisfying our corporate objective of providing a satisfactory return to shareholders. To be sustainable, Wesfarmers must continue to achieve high standards of financial performance thereby allowing us to make the most meani
Slide 10: Sustainability
Sustainability Environmental responsibility Wesfarmers is a • Our diverse range of businesses expose us to a number of challenging or member of the Dow potentially challenging environmental issues, including waste disposal, contamination and greenhouse gas emissions. We set legal compliance as a Jon
Slide 11: Sustainability
Sustainability Sustainability reporting • Voluntarily publicly reporting on sustainability issues since 1998/99. The stand-alone Sustainability Report is published to coincide with the company's Annual General Meeting. The 2008 report runs to more than 130 pages of very detailed information on our e
Slide 12: Group Overview
Group Overview
Slide 13: Financial Summary
Financial Summary FY07 FY08 1H09 % Change pcp Operating Results Revenue A$m 9,754 33,584 26,363 168.8 EBITDA A$m 1,650 2,897 2,236 76.6 Earnings before interest and tax A$m 1,305 2,243 1,759 68.2 Net profit after tax A$m 786 1,069 879 46.3 Financial Position Total assets A$m 12,076 37,249 38,786 4.5
Slide 14: Divisional Summary – 1H09
Divisional Summary – 1H09 1H09 Activities 1H09 EBIT^ Revenue (A$m) (A$m) Australia and New Zealand's leading supplier of home improvement Home Improvement & and outdoor living products, office products, and a major supplier of 3,611 395 Office Supplies building materials. The division comprises one
Slide 15: Divisional Summary (cont.)
Divisional Summary (cont.) 1H09 Activities 1H09 EBIT^ Revenue (A$m) (A$m) Resources Mining of metallurgical and steaming coal to domestic and export markets 1,427 686 Provider of underwriting, broking, premium funding, software development and Insurance financial services activites in Australia, New
Slide 16: 2009 Half Year Results
2009 Half Year Results
Slide 17: 2009 Half Year Results Performance Highlights
2009 Half Year Results Performance Highlights Group Performance Highlights Half Year ended 31 December ($m) 2008 2007* % Operating revenue 26,363 9,808 168.8 • Significant increases in revenue and EBITDA 2,236 1,266 76.6 earnings EBIT 1,759 1,046 68.2 – Inclusion of full period of Coles, Target, Net
Slide 18: Provisions and write-downs
Provisions and write-downs Period ended 31 December ($m) 2008 Comment Coles (65) Coles Property writedown DC Closure and Kmart (14) restructure costs Non-trading items (79) Self Insurance (48) Increase in provisions Investments (21) Mark-to-market of investments One-off trading items (69) Total Sign
Slide 19: 2009 Half Year Results Performance Highlights
2009 Half Year Results Performance Highlights Divisional Performance Overview Half Year ended 31 December ($m) 2008 2007* % • 1H09 includes a full period of ownership Home Improvement & Office Supplies 395 332 19.0 Coles 431 130 n.m. of Coles, Target, Kmart and Officeworks Target 215 118 n.m. compar
Slide 20: Home Improvement & Office Supplies 2009 Half Year Performance
Home Improvement & Office Supplies 2009 Half Year Performance Highlights Financial Performance Half Year ended 31 December ($m) 2008 2007 % Home Improvement • 10.3 % cash sales growth Revenue Home Improvement 3,009 2,795 7.7 Office Supplies 602 115* n.m. • 1.6% lift in trade sales • Opened 6 warehou
Slide 21: Coles – 2009 Half Year Performance
Coles – 2009 Half Year Performance Highlights Financial Performance Half Year ended 31 December ($m) 2008 2007* • Food & Liquor Sales Revenue 14,626 2,919 – Q2 comparative stores sales growth of 3.8% EBITDA 628 175 Depreciation & Amortisation (197) (45) – Improving growth trend driven by rising EBIT
Slide 22: Target – 2009 Half Year Performance
Target – 2009 Half Year Performance Highlights Financial Performance • EBIT margin strength maintained at 10.3% Half Year ended 31 December ($m) 2008 2007* • Comp Store sales growth for the half 4.0% (Q2 growth Revenue 2,094 605 4.8%) EBITDA 245 123 • Outstanding Christmas trading reinforced market
Slide 23: Kmart – 2009 Half Year Performance
Kmart – 2009 Half Year Performance Highlights Financial Performance • Average trading performance Half Year ended 31 December ($m) 2008 2007* – Christmas trading helped deliver 2Q09 comp Revenue 2,249 692 growth of 1.0% EBITDA 100 106 – Apparel and toys were the strongest performers Depreciation & A
Slide 24: Resources – 2009 Half Year Performance
Resources – 2009 Half Year Performance Highlights Financial Performance • Record half year production and sales levels Half Year ended 31 December ($m) 2008 2007 % Revenue 1,427 530 169.2 • Record prices for metallurgical and steaming coal EBITDA 791 179 341.9 • Significant increase in earnings Depr
Slide 25: Insurance – 2009 Half Year Performance
Insurance – 2009 Half Year Performance Highlights Financial Performance • Turnaround of Lumley New Zealand Half Year ended 31 December ($m) 2008 2007 % • Rate increases achieved in motor portfolios Gross Written Premium Underwritten 679 618 9.9 EBITA Underwriting 44 38 15.8 • Higher than expected cr
Slide 26: Industrial & Safety – 2009 Half Year Performance
Industrial & Safety – 2009 Half Year Performance Highlights Financial Performance • Continued focus on safety resulting in reduction in lost Half Year ended 31 December ($m) 2008 2007 % days and severity of injuries Revenue 687 642 7.0 • Customer service and delivery performance initiatives EBITDA 7
Slide 27: Chemicals & Fertilisers – 2009 Half Year Performance
Chemicals & Fertilisers – 2009 Half Year Performance Highlights Financial Performance % • Six months successful operation of AN Expansion Half Year ended 31 December ($m) 2009 2008 Revenue Chemicals 291 218 33.5 • Debottlenecking of QNP complete. Commissioning Fertilisers 167 173 (0.3) underway (+30
Slide 28: Energy – 2009 Half Year Performance
Energy – 2009 Half Year Performance Highlights Financial Performance Half Year ended 31 December ($m) 2008 2007 % • Western Australian LNG project operational Revenue 322 281 14.6 • Growth in industrial gas sales EBITDA 52 66 (21.2) • Maintained LPG supply through Varanus Island gas Depreciation & A
Slide 29: Other Businesses – 2009 Half Year Performance
Other Businesses – 2009 Half Year Performance Highlights Financial Performance Holding Half Year ended 31 December (A$m) 2008 2007 % Gresham Private Equity – Fund 1 Associates: Gresham Private Equity - Fund 1 51 (2) 3 • Riviera only remaining investment Gresham Private Equity - Fund 2 67 2 23 • Wesf
Slide 30: Operating Divisions
Operating Divisions
Slide 31: Home Improvement & Office Supplies
Home Improvement & Office Supplies WIDEST RANGE LOWEST PRICES BEST SERVICE 31
Slide 32: Store Network
Store Network at December 2008 2 171 Bunnings Warehouse Stores 59 Small format Bunnings Stores 112 Officeworks Stores 29 5 22 20 9 8 2 8 11 51 17 38 38 12 25 43 2 1 4 2 Excludes 19 Trade operational sites and 5 Harris Technology stores 32
Slide 33: Home Improvement & Office Supplies Performance
Home Improvement & Office Supplies Performance EBIT A$m ROC % GrowthStrategies Growth Strategies 700 35 HomeImprovement Home Improvement Strategies Strategies 600 30 Improvingservice Improving service Continuedoffer Continued offerimprovement improvement 500 25 Profitablesales Profitable salesgrowth
Slide 34: Office Supplies
Office Supplies Officeworks Strategies New concept store trial Re-establishing range authority Improving the customer offer Replenishment process enhancements Website being re-built Investment in additional in-store wages Non-sell task reviews generating face-to-face service hours Lifting service Ne
Slide 35: Coles
oi hs WHY PAY MORE! Good times start at ST pmcacercns)| CHOICE vorsce cans Liquor Superstore
Slide 36: Coles Store Network
Coles Store Network at December 2008 Selling Area Supermarkets (sqm) 1,591,279 7 8 11 Liquor (sqm) 273,181 154 232 77 81 90 5 116 67 63 31 6 43 252 248 5 208 161 765 Supermarkets 194 163 772 Liquor stores 93 Hotels 14 15 621 Convenience 36
Slide 37: Coles – Strategy
Coles – Strategy 5 years – 3 phases of recovery Building a Solid Delivering Driving the Coles Foundation Consistently Well Difference Performance • Culture of continuous • Embed the new culture improvement • Create a strong top team • Team member development • Strong customer trust and • Cultural ch
Slide 38: Coles – Strategy
Coles – Strategy Phase 1 Progress Create a strong top team 100% of leadership team new to Coles/role with over 125 years of retailing experience. 45% of top 200 managers new to Coles/role. Cultural change 1,500+ non-store positions removed. Store manager authority improved. Store and store manager c
Slide 39: Target
Target 39
Slide 40: Target Store Network
Target Store Network at December 2008 3 54 31 25 97 68 283 Target stores (incl 116 Target Country) 5 40
Slide 41: Target - Strategies
Target - Strategies Strategies Details Focus on fundamentals Meeting customer needs on Range, Price and Service Evolution of “100% Happy” Brand relaunch Unique philosophy and positioning Leveraging an emotional connection Bringing the best of what’s new in the world to Target Differentiation “Design
Slide 42: Kmart
Kmart where good times start | oa Tyre & Auto Service Xs
Slide 43: Kmart Store Network
Kmart Store Network at December 2008 2 3 36 52 20 32 13 20 50 73 12 183 Kmart stores 42 77 263 KTAS centres 5 6 3 43
Slide 44: Kmart – Strategies
Kmart – Strategies The renewal of Kmart • Fix the customer experience • Significantly reduce cost base • Rebuild customer trust • Make every site a success • Right people and accountability 44
Slide 45: Resources
Resources lle —— UWRRASFH 40 Premier Coal
Slide 46: Resources - Locations
Resources - Locations Coal Premier Coal Curragh Bengalla (40%) 46
Slide 47: Resources - Performance
Resources - Performance EBIT A$m ROC % Growth Strategies 800 100 Opportunities / Challenges Strategic initiatives 700 90 Long-term contracts in place 80 Maximise export sales and 600 Price relativity optimise sales mix 70 Maximise higher value products 500 60 Improve operational performance Cost red
Slide 48: Resources - Sales
Resources - Sales Coal Sales Volumes by Mine (FY08) Hard Coking Coal Prices (US$/t FOB Australia) Mine Domestic Export Export 400 Total (mtpa) Steaming Steaming Metallurgical 350 300 250 Curragh, QLD 2.4 6.5 8.9 200 Premier, WA 2.9 2.9 150 100 Bengalla*, NSW 1.0 4.6 5.6 50 0 Total 6.3 4.6 6.5 17.4 2
Slide 49: Hedging profile
Hedging profile as at 31 December 2008 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 2009* 264 0.82 2009* 55 0.80 2010 315 0.78 2010 97 0.79 20
Slide 50: Insurance
Insurance WESFARMERS FEDERATION INSURANCE LIMITED CROMBIE @ LOCKWOOD New Zealand's Insurance Brokers
Slide 51: Insurance - Locations
Insurance - Locations 3 1 1 6 3 13 4 21 1 2 1 1 4 13 8 18 11 6 17 6 2 Lumley General Australia 13 6 10% Lumley General New Zealand 10 3 4 1 Wesfarmers Federation Insurance 85 2 OAMPS 33 Crombie Lockwood 17 51
Slide 52: Insurance - Performance
Insurance - Performance EBIT A$m ROC % Growth Strategies 160 35 Opportunities Strategies 140 30 Australian license/capital consolidation Underwriting Business improvement System alignment and upgrade 120 25 Enhanced focus on risk selection 100 Capital Strengthen MCR to achieve A- ringfencing 20 Your
Slide 53: Insurance – Underwriting Performance
Insurance – Underwriting Performance Key Performance Indicators 1H09 Gross Written Premium by Class of Business Half Year ended 31 December (%) 2008 2007 %pt Total $679m Personal Liability Gross Earned Loss Ratio 68.0 69.6 1.6 $135 $128 Net Earned Loss Ratio 68.9 67.4 (1.5) Reinsurance Expenses (% G
Slide 54: Industrial & Safety
Industrial & Safety Australia New Zealand “All your Safety Industrial workplace needs” Specialist Specialists (formerly Mullings Fasteners) 54
Slide 55: Industrial & Safety – Distribution Network
Industrial & Safety – Distribution Network Australia No. 2 72 MRO, “All your workplace needs” 1 1 17 6 Electrical 15 6 12 7 9 5 9 4 43 Safety 1 1 55 21 Materials handling, lifting, rigging 5 2 17 1 6 3 Fasteners 16 5 1 8 Engineering 11 5 New Zealand No. 7 2 3 1 1 1 20 MRO, hose, conveyor 24 Safety 2
Slide 56: Industrial & Safety - Performance
Industrial & Safety - Performance EBIT A$m ROC % Growth Strategies 140 18 Opportunities Strategic Initiatives 16 120 DIFOT performance continued to improve 14 Increase sales to existing 100 Investment in sales force underway customers 12 Further enhanced value proposition 80 10 Increased industry an
Slide 57: Chemicals & Fertilisers
Chemicals & Fertilisers 57
Slide 58: Chemicals & Fertilisers - Locations
Chemicals & Fertilisers - Locations ■ CSBP fertilisers Manufacturing plant 5 Import and distribution centres 5 Depots 6 Regional Sales Representatives 27 Sales agents 135 ■ CSBP chemicals Manufacturing plants 10 ■ AV Manufacturing plants 2 ■ QNP (50%) Manufacturing plants 4 58
Slide 59: Chemicals & Fertilisers – Performance
Chemicals & Fertilisers – Performance EBIT A$m ROC % Growth Strategies 140 20 Strategic initiatives Comment 120 16 Growth 3 • Kwinana duplication (+235,000 tpa) 100 WIP • Upgrade of QNP (+30,000 tpa) underway 12 80 WIP • Sodium cyanide expansion 60 Optimise cost and capital 3 • Inventory and expense
Slide 60: Energy
Energy KleenheatGas jy (‘ly \ = if ie enGen AIR LIQUIDE | COregas © WESTERN AUSTRALIA Xo
Slide 61: Energy - locations
Energy - locations Industrial, medical and specialty gases Air separation units (ALWA) Air separation units (Coregas) Hydrogen/acetylene plants (Coregas) 2 1 1 1 Industrial gas depots/branches (ALWA) 1 Industrial gas depots/branches (Coregas) 1 LPG & LNG 14 5 LPG depots/branches 5 1 LPG extraction f
Slide 62: Energy - Performance
Energy - Performance Growth Strategies EBIT A$m ROC % 100 50 Strategies Segment Industrial gas growth in: 90 • eastern states sales; & 80 40 • oil and gas sector 70 Maximise LPG production Improve – Existing Businesses LPG distribution: 60 30 • customer focus; & 50 • controllable costs 40 20 Pursue
Slide 63: Energy - Businesses
Energy - Businesses Activities Activities distributor and marketer of LPG and LNG and Activities Production, distribution and marketing of gas appliances to a broad range of domestic, design, construction, operatation and industrial and medical gases on Australia’s east commercial, autogas and indus
Slide 64: Other Businesses
Other Businesses Gresham: 50% interest in Gresham Partners, an independent investment (A$m) 2007 2008 bank focused on financial advisory services, private equity investment and property investment funds. Wesfarmers also Profit before tax: holds significant investments in Gresham's Private Equity Fun
Slide 65: Capital Management
Capital Management • Net Debt to Equity of 49% at 31 December 2008 (20% on a pro-forma basis*) • Cash Interest Cover Ratio of 5.2 times (rolling 12 month basis) • Well within all debt covenants (pre equity raising) • S&P rating BBB+ (stable), Moody’s Baa1 (stable) • Weighted average cost of debt inc
Slide 66: Maturity Profile Analysis
Maturity Profile Analysis $bn 3 2 1 0 FY09 FY10 FY11 FY12 FY13 Facility B - Syndicated Facilities Bilateral Facilities Working Capital and Bill Facilities Bonds Note: $4.6bn equity raised however graph above reflects current repayments of $2.9bn. Remaining proceeds to be used to make further repayme
Slide 67: Hedging Profile
Hedging Profile • At 31 Dec 08, ~50% of debt hedged for 5 years at average 7.2% (excluding margins) • Rebalancing of hedge positions underway • Post rebalancing, expect debt to be ~50% hedged for 5 years at average 7.2% (excluding margins) • Expect to realise ~$150m of hedge losses as a result of re
Slide 68: Capital Expenditure
Capital Expenditure Half Year ended 31 December (A$m) 2008 2007 • Continued focus on prudent Home Improvement & Office Supplies 214 173 capital expenditure Coles 204 93 • Coles capital expenditure Target 51 - Kmart 41 - weighted towards 2H09 Resources 109 95 • Completion of Ammonia Insurance 6 6 Ind
Slide 69: Outlook
Outlook • Challenging global economic environment • Expect turnaround in Coles to gather pace over next 12 months • Lower export coal prices from April 2009 • Lower borrowing costs from reduced debt levels 69
Slide 70: Investor Relations Contact
Investor Relations Contact Wesfarmer’s Public Affairs and Investor Relations For further information on Wesfarmers including: Anna McPhee 61 8 9327 4478 (media) amcphee@wesfarmers.com.au Annual reports Financial results announcements Tanya Rybarczyk 61 8 9327 4323 Presentations and webcasts (investo