Wesfarmers Limited · ASX:WES
Wesfarmers — Investment Conference - Citigroup London and Goldman Sachs JBWere New York 2008
67 slides from Wesfarmers's conference presentation, March 2008
Slide 1: Investment Conference: Philosophy, Performance and Direction
Investment Conference Philosophy, Performance and Direction Citigroup – London Goldman Sachs JBWere – New York March 2008
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Wesfarmers Limited. The information contained in this presentation is for information purposes only and does not constitute an offer to issue or arrange to issue, securities or other financial products, nor is it intended to constitute legal, tax or
Slide 3: Philosophy Based On A Single Focus
Philosophy Based On A Single Focus Satisfactory Returns To Shareholders
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; • 1H08 Cash comp of 12.2%; Home Improvement Range expansion Leading in sectors 5 year EBITA CAGR of & Office Supplies 12.6% p.a. • Network investment • National store networ
Slide 6: Key Attributes
Key Attributes Growth Quality Earnings Opportunities Assets Improvement • Strong demand; Curragh & • Sizeable production • Maintaining lowest quartile Bengalla feasibility studies capacity; Consistent cash cost production of Resources quality, low costs export coal • Broker consolidation; • Diverse
Slide 7: Sustainability
Sustainability • Financial performance • Safe and rewarding workplaces • Good value products and services • Respect for customers and suppliers • Environmental responsibility • Ethical dealings • Community contribution 7
Slide 8: Sustainability
Sustainability Sustainability Reporting Sustainability Report since 1998/99 Four business units are members of Greenhouse Challenge Plus, a voluntary emissions reduction programme Wesfarmers was a respondent to the 2006 & 2007 Carbon Climate Change Disclosure Project surveys (www.cdproject.net) Coal
Slide 9: Management Team
Management Team Managing Director Richard Goyder Finance Director Gene Tilbrook Divisional Managing Directors Home Improvement & Office Supplies John Gillam Coles Ian McLeod* Target Launa Inman Kmart Larry Davis Insurance Rob Scott Chemicals & Fertilisers Ian Hansen Coal Stewart Butel Industrial & S
Slide 10: Coles Transaction
Coles Transaction Wesfarmers
Slide 11: A unique opportunity
A unique opportunity 1. Leading positions in a highly attractive industry structure 2. Unique retail platform with an irreplaceable store Coles is a very network attractive acquisition for Wesfarmers 3. Wesfarmers’ retail sector know-how 4. Substantial opportunity to create value from the Coles busi
Slide 12: Outcomes
Outcomes 9 DIVISIONS 545M ORDINARY SHARES 152M WPPS SHARES WES > 200,000 EMPLOYEES > 400,000 SHAREHOLDERS 12 ADDITIONAL BRANDS 12
Slide 13: Pro-forma EBIT Contribution
Pro-forma EBIT Contribution Coles FY07 EBIT Contribution Wesfarmers FY07 Pro-Forma EBIT Contribution1 Other 7% Kmart 7% Other Chemicals & Fertilisers Energy 7% Coles 3% 4% Coles Target 58% 28% 22% Industrial & Safety 4% Officeworks Insurance 6% 4% Wesfarmers FY07 EBIT Contribution Resources 12% Othe
Slide 14: Business Restructure
Business Restructure Wesfarmers Board Managing Director: Richard Goyder Finance Director: Gene Tilbrook Divisional Board Divisional MD Divisional CFO Home Improvement & Coles Kmart Target Office Supplies Tailored Approach Strategic Review RETAIL OPERATIONS Industrial & Chemicals & Resources Energy I
Slide 15: Divisional Autonomy
Divisional Autonomy • Coles’ shared service support functions are being restructured in line with Wesfarmers’ model of divisional autonomy to create a more accountable business model Wesfarmers’ Divisional Autonomy Business Model Key Benefits • Specialist support from small central 9 Cultural shift
Slide 16: Implementation of Management Plan
Implementation of Management Plan Wesfarmers Managing Director • Ian McLeod appointed MD of Coles; extensive international retailing experience Coles • Terry Bowen appointed as CFO; Mick McMahon continues as COO • Divisional Board will include executives with international retail experience • The Of
Slide 17: Overview and Culture
Overview and Culture • Change of ownership created an environment for management to realise the full potential of the Coles businesses Implementation of Cultural Change Specific Plans for Management • Removal of external distractions - focus • Streamline head and divisional offices management on ope
Slide 18: Plans for the Businesses
Plans for the Businesses Medium Term Value Creation Value Accretive from Date of Acquisition Coles Target • Stabilise the business • Continuation of strong • Focus on retail basics performance • Deliver supply chain cost savings • Support current margin mix and overhead reductions initiatives • Rest
Slide 19: Group Results
Group Results
Slide 20: Group Performance Summary
Group Performance Summary Half Year ended 31 December ($m) 2007 2006 % Operating revenue 9,808 4,718 107.9 EBITDA 1,266 791 60.1 EBIT 1,046 613 70.6 Net profit after tax 601 392 53.3 Operating cash flow 1,241 477 160.2 Earnings per share (excl. employee res. shares) 134.9 105.8 27.5 Earnings per sha
Slide 21: Cash Flow & Dividend (Half Year to 31 Dec)
Cash Flow & Dividend (Half Year to 31 Dec) (per share) cents 280 240 200 160 120 80 40 0 2003# 2004 2005 2006 2007 EPS^ Operating Cashflow* Dividend # EPS and Cash flow exclude sale of Landmark * WANOS includes employee reserved shares ^ AGAAP excl. goodwill amortisation (2003), AIFRS excl. employee
Slide 22: Divisional EBIT
Divisional EBIT Half Year ended 31 December ($m) 2007 2006 % Home Improvement & Office Supplies 332 270 23.0 Coles 130 - n/a Target 118 - n/a Kmart 101 - n/a Resources 112 168 (33.3) Insurance 64 60 6.7 Industrial & Safety 61 51 19.6 Chemicals & Fertilisers 48 28 71.4 Energy 48 38 26.3 Other 72 34 1
Slide 23: Return on Shareholders' Funds
Return on Shareholders’ Funds (rolling 12 months to 31 December) % 35 30 25 21.4 20 15 30.2 27.7 10 20.2 17.0 18.4 5 0 2003 2004 2005 2006 2007 AGAAP^ A-IFRS # Excludes sale of Landmark, Girrah (2003) and ARG (2006) ^ Before goodwill amortisation 23
Slide 24: Divisional Performance
Divisional Performance 2007 2006 Half Year ended 31 December EBIT ROC* ROC* $m % % Home Improvement & Office Supplies 332 31.4^ 25.1 Coles 130 n.m. n/a Target 118 n.m. n/a Kmart 101 n.m. n/a Resources 112 30.3 52.9 Insurance 64 11.2 24.6 Industrial & Safety 61 16.9 13.7 Chemicals & Fertilisers 48 16
Slide 25: Home Improvement & Office Supplies
Home Improvement & Office Supplies WIDEST RANGE LOWEST PRICES BEST SERVICE 25
Slide 26: Store Network
Store Network at December 2007 2 160 Bunnings Warehouse Stores 63 Small format Bunnings Stores 112 Officeworks Stores 28 5 20 19 10 7 3 8 10 48 18 37 35 12 25 40 1 2 1 2 2 Excludes 12 Trade operational sites and 10 Harris Technology stores 26
Slide 27: Home Improvement & Office Supplies Financial Performance
Home Improvement & Office Supplies Financial Performance EBIT A$m ROC % 600 35 PRO-FORMA EBIT CONTRIBUTION 30 (FY07PF) 500 25 23% 400 20 300 15 200 335+ stores 10 100,000+ product lines 100 5 26,000+ employees 31% 0 0 31% 44% 2004 2005 2006 2007 2008 First HY EBIT Full Year EBIT Return on Capital (R
Slide 28: Home Improvement - Strategies
Home Improvement - Strategies Strategies Details Strong focus on “driving the basics” – Price, Range & Service Two-pronged store network investment – existing and new Profitable sales growth Warehouse store rollout continues – 10 to 14 warehouse store pa 2 distinct trade market segments – 12 trade s
Slide 29: Office Supplies - Strategies
Office Supplies - Strategies Strategies Details Re-establish authorities in core categories Enhance competitive position Improve in-store execution – product availability and service Accelerate store roll-out programme Position for future growth Drive category authority Focus on business fundamental
Slide 30: Office Supplies Integration Update
Office Supplies Integration Update • Now part of expanded “Home Improvement & Office Supplies” Division • Integration work proceeding to plan – 2 businesses, 2 executive teams • New OW executive team settled – blend of OW & Bunnings expertise – Mark Ward appointed Managing Director • Separation acti
Slide 31: Coles
ln — 2 Coles coles © Be °S. WHY PAY MORE!
Slide 32: Coles Store Network
Coles Store Network at December 2007 PRO-FORMA EBIT 10 8 11 CONTRIBUTION (FY07PF) 28% 152 228 79 77 91 5 116 68 66 31 5 44 236 248 4 2,000+ stores & hotels 208 110,000 + employees 158 1.8m+ m2 selling area 193 155 748 Supermarkets 761 Liquor stores 14 16 93 Hotels 621 Convenience 32
Slide 33: Coles Performance Summary
Coles Performance Summary 23 November to 31 December ($m) 2007 Revenue 2,919 EBITDA 175 Depreciation & Amortisation^ (45) EBIT 130 Food & Liquor Revenue 2,271 Comparative store sales growth % 2.0 Trading EBIT* 118 Convenience Revenue 648 Comparative store sales growth % 6.2 Trading EBIT# 12 ^ Incl.
Slide 34: Coles - Strategies
Coles - Strategies Strategies Details Increase store efficiencies Greater focus on space and category management Innovate and improve product offer Execute revised Fresh and house brand strategies Food Improve in-store execution – product availability and customer service Enhance customer service Em
Slide 35: Target
Target 35
Slide 36: Target Store Network
Target Store Network at December 2007 PRO-FORMA EBIT CONTRIBUTION 2 (FY07PF) 11% 54 31 25 93 64 274 Target stores (incl 118 Target Country) 5 36
Slide 37: Target Performance Summary
Target Performance Summary 23 November to 31 December ($m) 2007 Revenue 605 EBITDA 123 Depreciation & Amortisation (5) EBIT 118 Comparative store sales growth (%) 3.1 EBIT margin (%) 19.5 Store numbers 274 37
Slide 38: Target - Strategies
Target - Strategies Strategies Details Further enhance leading position in Strengthen position in key categories through product extensions market Access operational efficiencies Create more flexible in-store space management Target higher growth sectors and Grow network through store roll-out posit
Slide 39: Kmart
Kmart where good times start | as Tyre & Auto Service «0
Slide 40: Kmart Store Network
Kmart Store Network at December 2007 PRO-FORMA EBIT CONTRIBUTION 2 3 (FY07PF) 4% 37 54 20 31 13 20 450 stores 49 74 12 42 80 183 Kmart stores 5 5 3 267 KTAS centres 40
Slide 41: Kmart Performance Summary
Kmart Performance Summary 23 November to 31 December ($m) 2007 Revenue 692 EBITDA 106 Depreciation & Amortisation (5) EBIT 101 Comparative store sales growth (%) 5.0 EBIT margin (%) 14.6 Store numbers (incl. Kmart Tyre & Auto) 450 41
Slide 42: Kmart – Strategic Review
Kmart – Strategic Review • Strategic review of Kmart underway – Completion expected March 2008 • Wesfarmers is confident that one or a combination of these options will deliver value in excess of that assumed in Wesfarmers’ valuation Strategic Review Options 1. Improving the trading performance of t
Slide 43: Resources
Resources a a ( UWURRAGSF 404 Premier Coal BENGALLA
Slide 44: Resources Financial Performance
Resources Financial Performance EBIT A$m ROC % 700 90 PRO-FORMA EBIT 600 80 CONTRIBUTION (FY07PF) 70 500 60 400 50 40 13% 300 200 30 660 employees 20 3 coal mines 100 10 24 coal customers 0 0 27% 2004 2005 2006 2007 2008 First HY EBIT Full Year EBIT Return on Capital (R12) 44
Slide 45: Resources - Strategies
Resources - Strategies Opportunities / Challenges 2007/08 Strategic initiatives Maximise export sales Long-term export contracts in place Strong export customer demand Optimise sales mix Maintain export price relativity Curragh North conveyor Cost pressures Dragline upgrades Business improvement pro
Slide 46: Insurance
Insurance WESFARMER INSURAWCE LIMITED CROMBIE @ LOCKWOOD New Zealand's Insurance Brokers
Slide 47: Insurance Financial Performance
Insurance Financial Performance EBIT A$m ROC % PRO-FORMA EBIT 160 35 CONTRIBUTION (FY07PF) 140 30 4% 120 25 100 20 80 15 60 10 3,000 employees 40 146 locations 10% 20 5 0 0 2004* 2005 2006 2007 2008 First HY EBIT Full Year EBIT Return on Capital (R12) 47
Slide 48: Insurance - Strategies
Insurance - Strategies Opportunities / Challenges Strategies Maintain underwriting disciplines Maintain key alliances and relationships Target Profitable growth LGA online initiative Underwriting WFI expansion via “Yourinsurancegroup” Expansion of fee-based and value added services Integration of AI
Slide 49: Industrial & Safety Portfolio
Industrial & Safety Portfolio Australian market leader in distribution of Maintenance, Repair and Operating supplies (MRO) National Specialist Businesses Australia New Zealand 49
Slide 50: Industrial & Safety Financial Performance
Industrial & Safety Financial Performance PRO-FORMA EBIT EBIT A$m ROC % CONTRIBUTION 140 18 (FY07PF) 16 120 4% 14 100 12 80 10 60 8 3,200 employees 40 6 238 locations 4 100,000+ customers 20 2 190,000 product lines 0 0 8% 2004 2005 2006 2007 2008 First HY EBIT Full Year EBIT Return on Capital (R12)
Slide 51: Industrial & Safety - Strategies
Industrial & Safety - Strategies Opportunities Strategic Initiatives Networks expansion Target higher growth New product ranges and services sectors Acquisitions complementing organic growth Ongoing focus on customer service and delivery performance Increase sales to • technical and industry experti
Slide 52: Chemicals & Fertilisers
Chemicals & Fertilisers 52
Slide 53: Chemicals & Fertilisers Financial Performance
Chemicals & Fertilisers Financial Performance PRO-FORMA EBIT CONTRIBUTION EBIT A$m ROC % (FY07PF) 120 20 7% 100 16 80 12 60 730 employees 8 300 chemical customers 40 2 major fertiliser 4 distributors servicing 20 over 5,000 farmers 0 0 17 operational 2004 2005 2006 2007 2008 manufacturing plants Fir
Slide 54: Chemicals & Fertilisers - Strategies
Chemicals & Fertilisers - Strategies Opportunities / Challenges Strategies Maintain and grow business Kwinana AN duplication Chemicals Upgrade of QNP Improve performance of sodium Focus on plant performance achieving better output cyanide business and identify $15 million expansion underway opportun
Slide 55: Energy
ze Energy SA kleenheatGas jy (‘yy Wie ence PAAR UQUIDE COMregas 7 WESTERN AUSTRALIA Cf
Slide 56: Energy Financial Performance
Energy Financial Performance PRO-FORMA EBIT EBIT A$m ROC % CONTRIBUTION 80 50 (FY07PF) 3% 70 40 60 50 30 40 950 employees 30 20 279,500 gas customers 23 remote power stations 20 10 3 air separation units 10 1 LPG extraction plant 0 0 1 hydrogen plant 2004 2005 2006 2007 2008 First HY EBIT Full Year
Slide 57: Energy - Strategies
Energy - Strategies Strategies Sector Industrial gas growth in: • eastern states sales; and • oil and gas sector Maximise LPG production Improve – Existing Businesses LPG distribution: • customer focus; and • controllable costs Pursue new power generation projects Industrial gas – supply projects LN
Slide 58: Other Businesses
Other Businesses Gresham: 50% interest in Gresham Partners, an independent investment (A$m) 2006 2007 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 59: Gresham Private Equity
Gresham Private Equity Gresham Private Equity – Fund 1 Gresham Private Equity – Fund 2 • Norcros divested, with some deferred • Wesfarmers’ current commitment $180m; consideration Capital invested $141m • Current investment $31m • New Investments: • Exit of Riviera expected within several years – Ba
Slide 60: Gresham Private Equity
Gresham Private Equity Fund 2 CURRENT INVESTMENT PORTFOLIO Noel Leeming Australian Pacific Paper Products GEON electrical retailer (Pacific Print Group) manufacturer & distributor (New Zealand) leading commercial printing of disposable nappies (Australia) business (NZ + Aust) Witchery Barminco Exper
Slide 61: Capital Management
Capital Management Wesfarmers
Slide 62: Bridge Refinancing Programme
Bridge Refinancing Programme • Wesfarmers has a A$4bn bridge loan as part of the Coles acquisition funding – Due to be repaid October 2008 • A highly flexible approach is being taken given recent market volatility and potential for changing market conditions – A number of refinancing alternatives be
Slide 63: Capital Management
Capital Management • Net Debt / Equity of 70.1% at 31 December 2007 • Cash Interest Cover Ratio (rolling 12 months) of 5.0 times • $4,000 million to be refinanced in 2008 – DIP, Australian and offshore debt, hybrids • Dividend Investment Plan – 75%* underwrite for interim dividend - 1% discount • Fr
Slide 64: Capital Management
Capital Management 1H08 Capital Expenditure Total: A$588m $3m $78m $173m $127m $14m $93m $6m $95m Home Improvement & Office Supplies Coles, Target and Kmart Resources Insurance Industrial & Safety Chemicals & Fertiliser Energy Other 64
Slide 65: Capital Management
Capital Management % Net Debt / Equity (as at 31 December) 100 80 60 55.0 40 74.1 84.2 70.1 20 44.3 47.9 0 2003 2004 2005 2006 2007 times AGAAP A-IFRS 25 Cash Interest Cover Ratio (R12 to 31 December) 20 15 10 22.0 12.4 13.3 13.9 5 5.0 0 2003* 2004 2005 2006^ 2007 * Excludes sale of Girrah and Landm
Slide 66: Outlook
Outlook • Focus on bringing about substantial change in Coles • One-off transaction/restructure costs in 2H08 expected; too early to quantify • Continuing good results in most businesses • Impact of higher interest rates and fuel price volatility • Strengthening coal price outlook • $4bn to be refin
Slide 67: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au 67
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