Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Day (May 2006)
123 slides from Wesfarmers's investor day presentation, May 10, 2006
Slide 1: Presentation at Investor Briefing, Sydney
«o Wesfarmers Limited AGN 28 008 984 049 PSG/pe 9 May 2006 The Manager Company Announcements Office Australian Stock Exchange Limited Level 4 20 Bridge Street SYDNEY NSW 2006 Dear Sir/Madam PRESENTATION AT INVESTOR BRIEFING, SYDNEY — 10 MAY 2006 Following is a presentation that is to be given at an
Slide 2: Wesfarmers
Wesfarmers
Slide 3: TAA
TAA
Slide 4: Agenda and presenters
| Wesfarmers Industrial and Safety Terry Bowen _ 9:50 : Chemicals and Fertilisers Keith Gordon - omens cere 5 : Wesfarmers Insurance Bob Buckley Energy David Robb | Home Improvement John Gillam ) Other Businesses and Capital Management Gene Tibrook Richard Goyder _ Q&A Gene Tilbrook
Slide 5: Industrial and Safety
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Slide 6: Overview
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Slide 7: Overview
e New Business Unit structure and leadership team « Business environment e New strategies to reconnect with growth - Departure from previous plans e Improvements underway e Outlook
Slide 8: Australian and New Zealand businesses
af TNA (4 Hn AUSTRALIAN BUSINESSES Blackwoods Protector Alsafe Motion Mullings NEW ZEALAND BUSINESSES No. NZ Safety 24 Protector Safety 22 Blackwoods Paykels (NZ) 21 Packaging House 10
Slide 9: Business brands
Blackwoods Blackwoods © Paykels BAKERS Li Atkins Wi NZ, Safety Sposcislitts in Safety & Prkeetion Wiullings Fasteners OTE ASTENEH SPOGALISTS” Building partnerships, delivering solutions: r% | Packaging House w MM Otfon LEASES OS
Slide 10: Business unit structure
andl) Mullings Fasteners NZ Safety Motion Industries Protector Safety Supply Blackwoods Paykels Packaging House Finance | Business Development
Slide 11: New strategies
Jumbe ¢ Improve focus on core generalist Blackwoods business e Position specialist businesses for growth - Dedicated management to develop each business * Implement shared support services in IT, HR, Accounting - Centres of excellence and low cost « Enhance business’ management skill set - 6 leaders
Slide 12: Business Environment
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Slide 13: Business environment
OTT T'i iii iit annnnninT « Strong competition in Safety - Commoditisation of some product categories e Mixed industry trends in Australia - Continued pressure in some traditional markets (e.g. Manufacturing) - Growth in mining, construction and infrastructure continuing e Economic slow down in New
Slide 14: Strategies
I My in du i
Slide 15: Performance
Performance ry = « “Enabling” initiatives « Business simplification « Improvement programs —- « Further expansion — ¢ Growth: customers & markets, network « Supply chain, distribution channels optimisation « Further improvements in capital, sourcing Opportunities
Slide 16: Enabling initiatives to position business streams for growth
« “Enabling” initiatives to clearly position business streams for growth Business Unit structure implemented Overhead cost reduction program underway (5% of employees) Most management systems reviewed Warehousing infrastructure upgrade continuing OH&S programme introduced (GetSAFE) « New strategic i
Slide 17: Outlook
AAA i & tl ook
Slide 18: Outlook: YTD sales trends across businesses
Very different YTD sales trends across Businesses Continued mixed industry/geographic market conditions expected FY06 results will be impacted by a number of significant items New initiatives to deliver over time
Slide 19: FY06 significant items
Item $m ¢ Redundancies 2.4 e Obsolete stock provision review 2.0 - 4.4 ¢ Doubtful debt provision review 1.7 e Employee share plan accounting impact 3.2 e New Zealand exchange rate movement 1.0 Total 10.3 - 12.7
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Slide 21: Chemicals and Fertilisers
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Slide 23: Chemicals and fertilisers overview
Manufacturer of mining & processing chemicals - ammonia, ammonium nitrate, sodium cyanide, chlorine Manufacturer and importer of fertilisers - phosphate, nitrogen, potassium and compounds Manufacturing operations at: - Kwinana and Esperance (WA), Moura (Qld) 580 employees Post 1999, around 60% of EB
Slide 24: EBITA and EBITA/Capital
EBITA EBITA/Capital Sm % 100 20 18 16 2001 2002 2003 2004 2005 2006 eee First HY EBITA = am Full Year EBITA =~—@~- EBITA/Capital (R12) 3 | |
Slide 25: Injuries and R12 LTIFR
Injuries R12 LTIFR 100 80 60 40 2002 2003 2004 2005 YTD 2006 li! Lost Time Injuries Workplace Injuries -@-R12 LTIFR
Slide 26: Business Environment
Arran onment =
Slide 27: Ammonia and sodium cyanide
« Ammonia Gas curtailments Force majeure event in April 2006 5,000 tonne import in January 2006 15 day shut scheduled for October 2006 ¢ Sodium Cyanide - Improved trading conditions in export market - Boddington development approved
Slide 28: Ammonium nitrate and industrial chemicals
« Ammonium Nitrate Kwinana plant performing well Wet weather in Pilbara and Queensland Kwinana expansion on track QN2 expansion shelved e Industrial chemicals - Chlor alkali plant - extended down time
Slide 29: Farmers terms of trade
Farmers terms of trade - High input prices - High exchange rates - Soft commodity prices Reasonable summer rainfall Seasonal break critical to achieve average volumes Closure of Albany superphosphate manufacturing facility
Slide 30: Strategies
I My in du
Slide 31: Increased demand for AN
e Increased demand for AN - WA iron ore industry - QLD/NSW coal industries - Liquid fertilisers ¢ Duplication of AN capacity at Kwinana to 470,000 tpa - Commissioning anticipated second half calendar 2007 e Duplication of QNP shelved
Slide 32: Kwinana AN expansion progress
e Long lead items on track e« Technology agreements signed e Site EBA agreed and registered e NA / AN construction contract signed « Contractors on site e Prill plant detailed design nearing completion ¢ Procurement plan in line with plan e AN storage design and licensing ongoing
Slide 33: Strategies
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Slide 34: Continue with strategy
e Continue with strategy - Increase penetration of existing products - Develop new products - Infrastructure and logistics ” - Storage capacity at Kwinana and “on-farm - Transport capacity - Benefits of locally manufactured product
Slide 35: Growth opportunities and capital structure
Identify and evaluate growth opportunities Develop improved capabilities Optimal cost and capital structure Maintain “Licence to Operate”
Slide 36: Training and business improvement
Greater investment in training - Leadership - Operational Upgrade of competency management system - Operating procedures - Training manuals Business process improvement programme EBA negotiation
Slide 37: Timeline
| Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
Slide 38: Sustainability and compliance
¢« Development of sustainability concept at CSBP e« Continue management of legacy issues - Bayswater - Ongoing remediation program e Regulatory compliance - Operational focus - Support resources in place
Slide 39: Outlook
AACA i & tl EES ee I I ALLO at
Slide 40: Long term and short term outlook
Long Term * Build capabilities for sustainable performance * Focus on controllable costs and capital * Major chemical plants sold out * Deliver Kwinana AN expansion Short Term « Seasonal break important « Sodium cyanide performance improvement « Review options for AN in Queensland
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Slide 42: Insurance
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Slide 43: Insurance
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Slide 44: Overview
« Overview « Business Environment e Strategies e Outlook ¢ Question and Answer
Slide 45: Insurance business overview
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Slide 46: Claims and COR
Sound COR from all business units Higher level of reported claims - Victoria/South Australia bushfires ($2.0m net cost) Cyclone Larry ($4.5m net cost) A number of individual large losses Achieving profitable revenue growth is difficult Commercial portfolios experiencing continued competition
Slide 47: Reinsurance change
e Reinsurance change Year Ended 30 June (%) Reinsurance Expense (%GEP) including AMO 27.4 32.4 37.5 excluding AMO 24.4 28.2 32.1
Slide 48: Revenue growth
Revenue Growth - Acquisition of Parks Insurance by LGA - Enhancement of Lumley Marine Division - WFI alliance with Tasmanian Farmers & Graziers Association - LGNZ system implemented in Westpac branches - Investment in sales capability
Slide 49: Human resources initiatives
« Human resources initiatives - Leadership development - Succession planning - Targeted recruitment
Slide 50: Business Environment
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Slide 51: Insurance cycle
$m 29,000 94% 28,800 J, oN 92% 28,600 7 NN 90% 28,400 eer, al 88% 28,200 por 86% 28,000 ny 84% “On hy — 27,800 82% 27,600 f f f f f f f | go% Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Gross Premium Revenue COR Source: APRA Insurance Cycle « The peak of the insurance cycle was in
Slide 52: Industry profitability and premium rates
e 2005 industry profitability at record levels ¢ Commercial premium rates falling e Personal lines premium rates holding e Industry GWP growth forecast 1% (nominal) e Modest rate reductions expected next year e COR expected to deteriorate in 2006
Slide 53: Industry issues survey
. Compliance Competition/number of players Underwriting discipline Staff training Transparency of earnings to clients 1 1. Regulation/cost of compliance 2 2 3 3 4 4 5. 5. 6. Public perception 6. Skill shortage/recruitment 7 7 8 8 9 9 1 1 Increased competition Push to wind back tort reform Climate ch
Slide 54: Strategies
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Slide 55: Achieve GWP growth and enhance margins
e Achieve GWP growth - Pursue growth though EDI - Bolt-on acquisitions - Maintain underwriting discipline e Enhance margins - Continued focus on profitable niche business - Seek new profitable segments
Slide 56: Increase organisational effectiveness
e Increase organisational effectiveness - Review existing processes - WFI and LGNZ to deploy Koukia system ¢« Complete the Koukia base product - Discussions with implementation partners - Deploy in WFI and LGNZ
Slide 57: Outlook
AAA i & tl ook
Slide 58: Insurance outlook
e Continued pricing pressure in most lines e Claims are reverting to long term averages e Expected full year result satisfactory but below last year
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Slide 60: Energy
Enersy sis ue MLM NG
Slide 61: Energy businesses
rme r En i hil ee Kleenheat an UNIGES Unigas 2, Wesfarmers LPG U2) Air Liquide enGen Premier UNIGAS cy
Slide 62: Production and sales volumes
FY 2004/05 Production Volume mt 3.3 Sales Volume mt 3.3 Customers 2 Inve
Slide 63: Production and sales volumes
FY 2004/05 Production Volume mt 7.0 Sales Volume Export mt 4.6 Domestic mt 2.5 Customers 14
Slide 64: Production and sales volumes
er Production Volume mt Sales Volume Export mt Domestic mt Customers FY 2004/05*| . laa 5.4 1.2 - a } a aia
Slide 65: Sales volumes and sites
FY 2004/05 Sales Volume kt 219 Sites Depots 39 Branches 15 Commission agents 30 Dealers 619 Customers ‘000 229 Inve
Slide 66: Production and sales volumes
Production Volume Sales Volume Export Domestic Customers kt kt kt FY 2004/05 310 ue 110 ee ia 1 HNN a
Slide 67: Air separation and carbon dioxide plants
Air Separation Plants Kwinana Capacity TPD Oxygen Hismeit Capacity TPD Oxygen Carbon Dioxide Plants WMC Capacity TPD CSBP Capacity TPD Cylinder Filling Operations Branches Agents Customers ‘000 FY 2004/05 285 880
Slide 68: Power stations and generation
Te) Oo = vt Q [=] aq > u. 94 MW talled ins MW 415 GWh generated per annum GWh 14 Power stations Customers
Slide 69: Wesfarmers Energy objective
armers En farmers Enersy Obiective —s__” PGT Profitable Growth Over Time Inve
Slide 70: Financial performance and EBIT/Capital
ma Financi EBIT/Capital we wi o 1 > wn ! 300 250 200 150 100 1999 2000 2001 2002 2003 2004 2005 1999 2000 2001 2002 2003 2004 2005 mat * Excludes Girrah $80.5m in 2003
Slide 71: Coal milestones timeline
First coal from Record Won Curragh Curragh North Curragh Purchase North tender March 2005 Exports of eaten Dec 2002 Curragh Mar 2006 North mining Record Jun 2000 Sale of Girrah lease issued export coal Dec 2002 Aug 2004 ae 2005/06 @ a a ue a a : © 1 July 1 July 1 July 4 July 1 July 1 Jul Today 2000
Slide 72: Gas and power milestones timeline
enGen enGen acquisition 65% acquisition 100% Sep 2001 <P Feb 2004 WLPG WLPG Upgrade EnGen Construction Fractionation compteted of Train 2 Trays Midwest Project Dec 2000 Nov 2001 Dec 2003 @ teh eh r a 1 July 1 July 1 July 1 July 1 July 1 July | Today 2000 2001 2002 2003 2004 2005 Record CP’s Feb 2006
Slide 73: Export and Wesfarmers ownership
xport Wesfarmers Ownership | —_—_——> oO -A~ M&W Rh oD “ ! 1991 1993 1995 1997 1999 2003 2005 2001 2006 F
Slide 74: Business Environment
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Slide 75: Availability and cost of key inputs
Availability and cost of key inputs Global shortage of earthmover tyres Availability and cost of skilled labour Industry-wide capital over-runs and delays
Slide 76: Curragh mine comparison
ann ha Area Disturbed by Mining ha 3,860 5,945 Deposit Strike Length km 13 30 Total Overburden Removal mbcm 97.3 131.7 Tonnes Mined mt 8.7 12.1 CHPP Capacity t/hr 1,200 1,600 Resource Complexity - raw coal types no. 3 6 Average Workforce (FTE incl contractors) no. 544 789 Activity Man-hours (FTE inc
Slide 77: Unit rate increase by major category
Unit Rate Increase by Major Category % Increase 30 25 20 4 15 Contractor T&S Maintenance Explosives Fuel Labour Materials
Slide 78: Production costs and volume
¢ Total cash production costs +40% ¢ Total production volume +34% ¢ Metallurgical coal production +41% e Cost curve position maintained CY2005 vs CY2004 e« CY2006 peak, CY2007 improvement likely
Slide 79: Mining strip diagram
———__ Surface 2°4 Strip \ Boxcut (inclusive of 1% strip) coal Seam 3°4 Strip = > = ro) aad Highwall
Slide 80: Rebate accounting
¢ Accounted for as a part of acquisition CN e Asset and liability offset ¢ Rebate profit impact for 05/06 = $93m (est) « Rebate payment to Stanwell for 05/06 = $89m (est) ¢ Potentially higher payment in 06/07
Slide 81: Thermal Coal Prices
Slide 82: Saudi Aramco Contract Price (CP)
Slide 83: WLPG Feed Gas LPG Content and Flow Rate
Slide 84: Production
Slide 85: Coal Production
Slide 86: Strategies and Outlook
Slide 87: Energy BU Strategy Summaries
Slide 88: Indicative Coal Price Settlement Range
Slide 89: Curragh Export Sales Contract Duration 2006/07
Slide 90: Curragh Export Sales Mix Estimate
Slide 91: Gladstone Coal Delivery System Upgrade Delays
Slide 92: Energy Outlook
Slide 93: Questions
Slide 94: Home Improvement
Slide 95: Home Improvement
Slide 96: Agenda
Slide 97: Background
Slide 98: Store Network - April 2006
Slide 99: Store Network Movements
Slide 100: Trading Results
Slide 101: Trading Update - YTD April 2006
Slide 102: Strategies
Slide 103: Strategies: Focus on core retail drivers
Slide 104: Strategies: Focus on core retail drivers
Slide 105: Strategies: Store network development
Slide 106: Strategies: Store network development
Slide 107: Strategies: Store network development
Slide 108: Strategies: Trade business
Slide 109: Strategies: Trade business
Slide 110: Strategies: Team members
Slide 111: Strategies: Business systems
Slide 112: Strategies: Business improvement
Slide 113: Outlook
Slide 114: Questions
Slide 115: Gene Tilbrook, Finance Director
Slide 116: ARG - Operations
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