Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Day (November 2007)
156 slides from Wesfarmers's investor day presentation, Nov 27, 2007
Slide 1: Presentation to be given at Investor Briefing - Sydney
For personal use only 27 November 2007 The Manager Company Announcements Office Australian Securities Exchange Dear Sir, PRESENTATION TO BE GIVEN AT INVESTOR BRIEFING - SYDNEY Following is a presentation that is to be given at an investor briefing on 27 November 2007. Yours faithfully, L J KENYON CO
Slide 2: Investor Briefing
For personal use only Investor Briefing 27 November 2007 InterContinental Hotel, Sydney
Slide 3: Richard Goyder, Managing Director
For personal use only Richard Goyder Managing Director, Wesfarmers Limited
Slide 4: Agenda
Agenda 8:30 Coles Update For personal use only 9:30 Home Improvement & Office Supplies 10:10 Morning Tea 10:30 Insurance 11:00 Chemicals & Fertilisers 11:25 Coal 11:55 Lunch 12:30 Industrial & Safety 12:55 Energy 1:20 Q&A 1:50 Other Business / Capital Management 3
Slide 5: Management Team
Management Team For personal use only Managing Director & CEO Richard Goyder Finance Director Gene Tilbrook Business Integration Director Keith Gordon Divisional Managing Directors Home Improvement & Office Supplies John Gillam Insurance Rob Scott Chemicals & Fertilisers Ian Hansen Coal Stewart Bute
Slide 6: Richard Goyder, Managing Director
For personal use only Richard Goyder Managing Director, Wesfarmers Limited
Slide 7: The Coles Transaction – Recent Milestones
The Coles Transaction – Recent Milestones For personal use only RECENT MILESTONES 7 November 9 November 12 November 23 November Shareholder Vote Court Approval WESN & WESNA Payment Date Coles shareholders vote Supreme Court WESN (WPPS) and Payment of cash overwhelmingly in favour of Victoria WESNA c
Slide 8: The Coles Transaction - Outcomes
The Coles Transaction - Outcomes For personal use only 9 DIVISIONS 541M ORDINARY SHARES 153M WPPS SHARES WES > 200,000 EMPLOYEES > 400,000 SHAREHOLDERS 12 ADDITIONAL BRANDS 7
Slide 9: Business Restructure
Business Restructure For personal use only Wesfarmers Board Managing Director: Richard Goyder Finance Director: Gene Tilbrook Divisional Board Divisional MD Divisional CFO Food, Liquor & Home Improvement & Kmart Target Convenience Office Supplies Tailored Approach Strategic Review RETAIL OPERATIONS
Slide 10: Implementation of Management Plan
Implementation of Management Plan For personal use only Wesfarmers Managing Director • Terry Bowen appointed as CFO; Mick McMahon will continue as COO Food, Liquor & • Announcement regarding MD expected soon Convenience • Divisional Board will include executives with international retail experience
Slide 11: Overview and Culture
Overview and Culture For personal use only • Change of ownership creates 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 off
Slide 12: Reporting
Reporting For personal use only • Financial year end will remain 30 June • Bi-annual briefing days in April and October – Focus on strategies update and outlook within each division – Retail operations to provide sales growth update including like-for-like • Non-food retail operations likely to repo
Slide 13: Archie Norman
For personal use only Archie Norman
Slide 14: Keith Gordon, Business Integration Director
For personal use only Keith Gordon Business Integration Director
Slide 15: Integration programme overview
Integration programme overview Support the integration and transformation of Coles Group into the Wesfarmers business model For personal use only to ensure that full value for the transaction is captured Corporate Head Office and Shared Services Food, Liquor & Officeworks Target Kmart Convenience Co
Slide 16: Integration programme overview
Integration programme overview Support the integration and transformation of Coles Group into the Wesfarmers business model For personal use only to ensure that full value for the transaction is captured Corporate Office During the journey Insurance • Respect for individuals Food, Home Coal • Open a
Slide 17: Overall integration approach
Overall integration approach For personal use only Integration Coles Group Management ‘Integrate’ ‘Create’ • Tax Develop divisional structures - what and who goes where • Treasury Identify initiatives to further streamline • Accounting • Company secretary • Investor relations • Insurance and risk Fo
Slide 18: Home Improvement - John Gillam
For personal use only Home Improvement John Gillam
Slide 19: For personal use only
For personal use only 18
Slide 20: Agenda
Agenda For personal use only • Bunnings - Background - Trading Update - Strategies - Outlook • Officeworks Integration 19
Slide 21: Background
Background For personal use only WIDEST RANGE LOWEST PRICES BEST SERVICE 20
Slide 22: Background
For personal use only Background 21
Slide 23: Store Network
Store Network at October 2007 For personal use only 2 159 warehouse stores 63 small format stores 3 HouseWorks stores 28 5 19 10 6 3 3 48 18 12 25 40 1 2 2 1 Excludes Trade Operational Sites 22
Slide 24: Store Network Movements
Store Network Movements For personal use only June 2007 Opened Closed Oct 2007 Under construction Bunnings Stores Warehouse format 155 5 1 159 9 Smaller format 65 - 2 63 1 Bunnings trade operations Distribution Centres 8 - - 8 3 Trade focused stores 3 1 - 4 - Frame & Truss plants 8 - - 8 - HouseWork
Slide 25: Home Improvement Performance Summary
Home Improvement Performance Summary For personal use only Year ended 30 June ($m) 2007 2006 % Revenue 4,938.9 4,275.5 15.5% EBIT 528.4 420.5 25.7% ROC (R12 %) 28.1 22.9 5.2 pt Safety (R12 LTIFR) 14.5 12.4 16.9% Trading Revenue* ($m) 4,689.8 4,193.0 11.8% Net property contribution ($m) 53.7 5.3 907.
Slide 26: Trading Update months to October
Trading Update 4 months to October For personal use only • Cash store-on-store sales growth over 11% − Growth strongest within existing store network − Uplift across all merchandising categories − Good in-store disciplines leveraging +ve external factors • Trade markets remain tight − Modest growth
Slide 27: Strategies
Strategies For personal use only 1. Profitable sales growth 2. Improving customer service 3. Innovation & improvement of the offer 4. Team member performance 5. Business improvements to lower costs 26
Slide 28: Strategies: Profitable Sales Growth
Strategies 1. Profitable Sales Growth For personal use only • Strong focus on “driving the basics” – Range – Format and innovation driving WIDEST RANGE – Expanding market size – Price – Strong cost focus delivering LOWEST PRICES – Productivity loop – Service – Best people and services providing BEST
Slide 29: Strategies: Profitable Sales Growth
Strategies 1. Profitable Sales Growth For personal use only • Two pronged store network investment — Existing stores and new stores • Investment in existing stores — Rollout of new concepts: lighting, kitchen & flooring — Upgrade and refresh around 30 stores this year — Continued rollout of “cleaner
Slide 30: Strategies: Profitable Sales Growth
Strategies 1. Profitable Sales Growth For personal use only • Network expansion continues − 10 to 14 new warehouse stores to open per year in Aust & NZ − Opportunistic openings of small format stores − Adapting warehouse format for inner urban areas • Good progress in 2007/08 warehouse rollout progr
Slide 31: Strategies: Profitable Sales Growth
Strategies 1. Profitable Sales Growth For personal use only • Trade strategy delivering positive outcomes • 2 distinct trade market segments − store network servicing pick-up “tradie” business − DC’s servicing large volume delivered-to-site “builder” business • 12 trade specific sites now open, supp
Slide 32: Strategies: Improving Customer Service
Strategies 2. Improving Customer Service For personal use only • Major focus within business • Lifting investment in Team Member know-how • Redeploying reduced admin hours to customer service − Ongoing focus on lifting effectiveness of in-store processes • New labour scheduling system implemented in
Slide 33: Strategies: Innovating and Improving Our Offer
Strategies 3. Innovating and Improving Our Offer For personal use only • Driving new product ranges • Strong merchandising disciplines lifting existing ranges • Widening special orders through display & brochure programmes • Refreshing & expanding “services” − Developing installation service for spe
Slide 34: Flooring
flooring For personal use only 33 Innovate & improve our offer
Slide 35: Lighting
lighting For personal use only 34 Innovate & improve our offer
Slide 36: D.I.Y. kitchens
D.I.Y. kitchens For personal use only 35 Innovate & improve our offer
Slide 37: Advertising
advertising For personal use only 36 Innovate & improve our offer
Slide 38: Website
website For personal use only 37 Innovate & improve our offer
Slide 39: Strategies: Team Member Performance
Strategies 4. Team Member Performance For personal use only • Significant investment in training to lift service levels • Supporting improved performance − Product and technical knowledge; “expert advice” − Ongoing in-store i-learning investment − Core management skills • Continuing strong safety pr
Slide 40: Strategies: Business Improvements to Lower Costs
Strategies 5. Business Improvements to Lower Costs For personal use only • Major systems upgrade project progressing well − Phase 1 completed successfully across 2006/07 − Phase 2 underway • New store labour scheduling system (well advanced) • New on-line recruiting system (well advanced) • Range ma
Slide 41: Strategies: Business Improvements to Lower Costs
Strategies 5. Business Improvements to Lower Costs For personal use only • Continued supply chain enhancements • Better business disciplines − Ongoing stock management improvements − Shrinkage continuing to reduce • Achieving a lower cost of doing business − Supports core pricing objective for custo
Slide 42: Positioning business for climate change
Strategies 5. Business Improvements to Lower Costs For personal use only • Positioning business for climate change 41
Slide 43: Bunnings Outlook
Bunnings Outlook For personal use only • Continued cash sales growth – Positive retail conditions, some concerns on the horizon • Improving trade performance • Ongoing network development • Maintaining strong focus on core retail drivers – Improving customer service – Reducing the cost of doing busi
Slide 44: Officeworks
Officeworks For personal use only • 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 • Immediate operat
Slide 45: Questions
For personal use only Questions 44
Slide 46: Rob Scott - Insurance
For personal use only Rob Scott Insurance 45
Slide 47: WID participation across the general insurance value chain
WID participation across the general insurance value chain For personal use only Policy & Advice & Assessing & Carrying Claims Placement Accepting Risk Risk Administration 46
Slide 48: Overview – Underwriting
Overview – Underwriting For personal use only Company Country Australia New Zealand Australia Business Type General Insurance General Insurance General Insurance Underwriter Underwriter Underwriter Source of Intermediated: Intermediated: Direct: Distribution brokers; agencies; affinity brokers; agen
Slide 49: Overview – Distribution
Overview – Distribution For personal use only Company Country Australia United Kingdom New Zealand Business Type General Insurance General Insurance General Insurance Broking Broking Broking Customers SME and Corporate SME and Corporate Predominantly SME Locations 24 4 13 Key Business Areas Business
Slide 50: Underwriting GWP
Underwriting GWP (GWP FY07) For personal use only LGNZ Long Tail 22% 19% LGA 55% WFI 23% Short Tail 81% Long Tail: product and public liability / workers compensation / builders warranty 49
Slide 51: Broking Revenue
Broking Revenue (annualised estimate) For personal use only UK 12% New Zealand Australia 31% 57% 50
Slide 52: Key Business Drivers
Key Business Drivers For personal use only Internal / Operational External / Market Building the best team Labour market and competitor activity Customer service Insurance Rates Risk management Claims experience and reinsurance Operational excellence Insurer and Broker consolidation 51
Slide 53: Market Conditions
Market Conditions For personal use only Business Environment Details Personal lines profitability improving Commercial lines margins under pressure Varied results across class in Australia Releases from CTP and long tail supporting industry results Extreme weather conditions in July/August Signs of
Slide 54: Broker Benchmarking
Broker Benchmarking For personal use only 5 0.0% Crombie Lockwood EBITA Margin (%) Int 3 Int 1 OAMPS (AUS & UK) Int 4 Int 2 AUB 0.0% 0 3 Year Revenue CAGR (% ) Int. = International brokers (Aust & NZ) Size of bubble = Revenue Source: Annual Financial Statements (Year ending December 06/June 07) 53
Slide 55: Underwriting… targeting profitable growth and improving efficiencies
Underwriting… targeting profitable growth and improving efficiencies For personal use only Key strategies Details Maintain underwriting disciplines Maintain key alliances and relationships Target Profitable growth LGA online initiative WFI expansion via “Yourinsurancegroup” Expansion of fee-based an
Slide 56: Distribution…new growth platforms
Distribution…new growth platforms For personal use only Key strategies Details Integration of OAMPS and Crombie Integration largely complete Lockwood New regional management structure for OAMPS Building the best team Leadership development program Training and mentoring Expansion of products and ser
Slide 57: Outlook
Outlook For personal use only • Intense competition in commercial lines likely to constrain rates firming • Modest price increases in some underperforming classes • Loss ratio affected by weather events • Efficiency improvements from LGNZ initiatives • Consolidation of insurance brokers to continue
Slide 58: Questions
For personal use only Questions 57
Slide 59: Chemicals & Fertilisers - Ian Hansen
For personal use only Chemicals & Fertilisers Ian Hansen 58
Slide 60: Chemicals & Fertilisers - Overview
Chemicals & Fertilisers - Overview For personal use only Business Geography Sector Key Customers Ammonia WA Nickel BHP, Minara Orica, Dyno Ammonium Nitrate WA Iron Ore Nobel, Rio Tinto BMA, AngloCoal, (50%) Ammonium Nitrate Qld Coal Rio Tinto Newmont, (75%) Sodium Cyanide WA/Global Gold Barrick, Ang
Slide 61: Chemicals & Fertilisers - Locations
Chemicals & Fertilisers - Locations For personal use only EBIT CONTRIBUTION (FY07) 7% 4 4 7 730 employees 300 chemical customers ■ CSBP fertilisers Manufacturing plant 4 2 2 major fertiliser Import and distribution centres 5 distributors servicing Depots 6 over 5,000 farmers Regional Sales Represent
Slide 62: Value proposition and competitive position
Value proposition For personal use only • Reliable, competitive local supplier of quality products and services (All) • Reputable, responsible manufacturer and distributor (Chemicals) • Product development and technical service provider (Fertilisers, AV) Competitive position • No 1 or strong No 2 in
Slide 63: Chemicals
For personal use only Chemicals
Slide 64: Ammonium Nitrate (WA)
Ammonium Nitrate (WA) For personal use only • Growing demand – explosives (iron ore) and liquid fertilisers • Current capacity 235,000 tpa (explosives) • Expansion of 235,000 tpa (duplicate NA+AN) – commissioning commenced • Replacement prill plant 350,000 tpa – commissioning due Feb/Mar 2008 • Cape
Slide 65: QNP and Ammonia (WA)
QNP – 50% For personal use only • Strong demand for AN from Bowen Basin coalfields • Integrated ammonia/NA/AN/prill plant – 180,000 tpa capacity • Upgrade to 200,000 tpa planned for major shutdown in Sept 2008 – capex ~ $20 million – subject to customer and supplier contracts Ammonia (WA) • Strong d
Slide 66: AGR and Australian Vinyls
AGR • Strong demand driven by gold price For personal use only - export earnings constrained by high exchange rate • Solution capacity ~ 57,000 tpa; solid capacity ~30,000 tpa (export) - consistent plant performance since July • 6,000 tpa solution expansion due Nov 2008 to supply Boddington Gold Min
Slide 67: Fertilisers
For personal use only Fertilisers
Slide 68: Fertilisers
Fertilisers For personal use only • Difficult seasonal conditions – 2 successive years - Market share maintenance - Increasing wheat prices • 70% of sales in second half FY • Dependent on opening and ongoing winter rainfall • Continued liquid fertiliser growth strategy (displace imports with AN expa
Slide 69: Predicted WA wheat yields
Predicted WA wheat yields For personal use only 68
Slide 70: Progress on strategies - Chemicals
Progress on strategies - Chemicals For personal use only Strategic initiatives Comment Maintain and grow AN business 3 • Kwinana duplication (+235,000 tpa) WIP • Upgrade of QNP (+20,000 tpa) Improve performance of sodium 3 • Focus on plant performance cyanide business and identify achieving better o
Slide 71: Progress on strategies - Fertilisers
Progress on strategies - Fertilisers For personal use only Strategic initiatives Comment Continue to develop liquid 3 • Ongoing product development fertilisers 3 • Local manufacture from 2007/08 3 • Expanded regional manufacturing capability 3 • Continued strong marketing Optimise cost and capital 3
Slide 72: Progress on strategies - General
Progress on strategies - General For personal use only Strategic initiatives Comment Identify and evaluate growth WIP • Sectors undergoing significant change opportunities 3 • AV acquisition 3 • Dedicated Business Development team Improved capabilities and people WIP • Upgrade business systems devel
Slide 73: Questions
For personal use only Questions 72
Slide 74: Coal - Stewart Butel
For personal use only Coal Stewart Butel 73
Slide 75: Wesfarmers Coal
Wesfarmers Coal For personal use only Export metallurgical and domestic steaming coal Domestic steaming coal Export and domestic steaming coal 74
Slide 76: Wesfarmers Coal - locations
Wesfarmers Coal - locations For personal use only EBIT CONTRIBUTION (FY07) 25% 660 employees 3 coal mines 24 coal customers Coal Premier Coal 28% Curragh Bengalla (40%) 75 75
Slide 77: Coal production
Coal production For personal use only Mine YTD ended ('000 tonnes) Beneficial Interest Coal Type Sep 2007 Sep 2006 Curragh, QLD 100% Metallurgical 1,558 1,591 Steaming 722 523 Premier, WA 100% Steaming 763 917 Bengalla*, NSW 40% Steaming 558 647 Total 3,601 3,678 * Wesfarmers attributable production
Slide 78: Curragh metallurgical sales growth
Curragh metallurgical sales growth For personal use only tonnes (m) 7 CAGR = 16% 6 5 Wesfarmer’s ownership 4 3 2 1 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008F 77
Slide 79: Business environment
For personal use only Business environment
Slide 80: Industry facing challenges…
Industry facing challenges… For personal use only • Constrained export coal chain • Cost increases (opex and capex) • Appreciating Australian dollar • Industry consolidation • Climate change But…. • Strong market fundamentals and customer demand • Spot coal prices increasing • Feasibility studies to
Slide 81: Strategies
For personal use only Strategies
Slide 82: Coal strategies
Coal strategies For personal use only 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
Slide 83: Seaborne metallurgical coal market
Seaborne metallurgical coal market For personal use only CONSTRAINED STRONG SUPPLY DEMAND Australia rail & port issues New importer growth Brazil, India Seaborne Metallurgical Canada production issues Coal Market High levels of Low coal stocks steel production Increasing spot prices Robust steel pri
Slide 84: Australian hard coking coal prices
Australian hard coking coal prices For personal use only US$/Tonne (Nominal) FOB Australia (annual verse spot) 160 140 120 100 80 60 40 20 0 2003 2004 2005 2006 2007 Spot Price Annual Reference Price Source: Barlow Jonker, Tex Report 83
Slide 85: Australian steaming coal prices
Australian steaming coal prices For personal use only US$/Tonne (Nominal) FOB Australia (annual verse spot) 90 80 70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007 Spot Price JPU Reference Source: Barlow Jonker 84
Slide 86: Wesfarmers Curragh hedging profile
Wesfarmers Curragh hedging profile For personal use only Year end Current proportion of USD Average 30 September revenue hedged AUD/USD hedge rate 2008 91% 0.75 2009 77% 0.77 2010 50% 0.75 2011 26% 0.73 2012 10% 0.73 * Calculated using existing contracts and conservative long run pricing and volume
Slide 87: Curragh production costs
Curragh production costs Year ending September 2007 vs year ending September 2006 For personal use only • Continued pressure on costs • Curragh maintains position in lowest quartile of industry cost curve Increase Total cash production cost * 6% Total production volume (1)% Cash production cost per
Slide 88: Coal port congestion
Coal port congestion East Coast Australia as at 2 November 2007 For personal use only No. of ships at anchor 180 160 140 120 64 65 100 80 49 19 60 9 68 76 40 46 41 20 40 20 17 3 10 10 0 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Gladstone Newcastle Other Ports Source: McCloskey Fax 87
Slide 89: Gladstone Coal Delivery System
Gladstone Coal Delivery System Performance update For personal use only • Port capital works now completed • Wiggins Island Terminal proposed 2012 • Restricted rail capacity in 2007/08 – Capacity de-rated to about 88 per cent of contract • Forecast ongoing rail constraints into 2008/09 – Additional
Slide 90: Blackwater track duplication
Blackwater track duplication For personal use only Wycarbah to Stanwell Gregory Mine Commissions Apr 2009 To Goonyella System (proposed) CURRAGH Kestrel To Rockhampton Duaringa to Aroona Blackwater Commissions Oct 2007 Ensham Burngrove Bluff Duaringa Tunnel Aroona Westwood Wycarbah Dingo Windah Gran
Slide 91: Newcastle Coal Delivery System
Newcastle Coal Delivery System Performance update For personal use only • Restricted system capacity ongoing – Large vessel queues and demurrage expense • Capacity balancing system expires 31 December 2007 – Shippers de-rated for 2007 to about 80 per cent – Further 2.2mt capacity reduction October t
Slide 92: Curragh expansion study
Curragh expansion study For personal use only • Feasibility study to expand exports to 8.0mtpa to 8.5mtpa • Target study completion mid 2008 • Additional export volume in second half 2009 91
Slide 93: Curragh expansion study
Curragh expansion study For personal use only • Upgrade of CHPP to 2,200tph • Additional overburden removal capacity required – Truck and shovel or inpit conveying options • Blackwater Creek diversion – Additional coal reserve • 8.5mtpa rail and port capacity in place • Market development proceeding
Slide 94: Bengalla expansion
Bengalla expansion For personal use only • Development consent approval granted • Potential expansion from 8.7mtpa to 10.7mtpa ROM • Expansion timing dependent on infrastructure constraints 93
Slide 95: Coal strategies
Coal strategies For personal use only Opportunities / Challenges 2007/08 Strategic initiatives Maximise export sales Long-term export contracts in place Strong export customer demand Optimise sales mix Export price relativity Curragh North conveyor Cost pressures Dragline upgrades Business improveme
Slide 96: COAL21
For personal use only COAL21 • Initiated by the Australian Coal Industry • Collaborative partnership between industry, governments and the research community COAL21 Fund • $1 billion plus fund contributed from Australian coal industry • Supports low and zero emissions research, development and demon
Slide 97: Outlook
For personal use only Outlook
Slide 98: Coal outlook
Coal outlook For personal use only • Strong market outlook for 2008/09 • Constrained export coal chains • Spot coal prices increasing • Appreciating Australian dollar • Curragh coal price negotiations to commence soon • Significant Curragh carryover tonnage impact in Q4 2007/08 • Curragh metallurgic
Slide 99: Questions
For personal use only Questions
Slide 100: Industrial & Safety - Terry Bowen and Olivier Chretien
For personal use only Industrial & Safety Terry Bowen and Olivier Chretien
Slide 101: Our business portfolio
Our business portfolio For personal use only Australia New Zealand MRO “All your MRO, Hose & workplace needs” Conveyor Safety Safety Materials Handling, Lifting, Rigging Packaging & Fasteners Hygiene Engineering MRO: Maintenance, Repair and Operating 100
Slide 102: Branch locations in Australia and New Zealand
A total of 239 branch locations 161 in Australia, 78 in New Zealand For personal use only NEW ZEALAND BUSINESSES No. NZ Safety 24 Protector Safety 22 2 1 Blackwoods Paykels (NZ) 22 1 17 12 Packaging House 10 4 4 16 10 6 1 1 5 7 5 5 6 17 6 3 1 1 4 1 AUSTRALIAN BUSINESSES No. 11 7 24 22 Blackwoods 75
Slide 103: Bullivants transitioned smoothly
Bullivants transitioned smoothly For personal use only • Acquired December 2006 • #1 Materials Handling, Lifting & Rigging Specialist in Australia • 18 branches, 310 staff • Smooth integration into WIS portfolio • Results ahead of plan – product and service growth – integrated supply with Blackwoods
Slide 104: WIS Businesses leverage stronger platforms
WIS Businesses leverage stronger platforms built over the past 18 months For personal use only Re-base the Grow Leverage business selectively positions Performance • Further expansion • Customer experience • Accountability • Growth • Culture - Metropolitan Mid-market • Cost / capital control - Share
Slide 105: Stronger Platforms Built
Stronger Platforms Built For personal use only Strategic Progress Achievements Initiatives Accountability for results 9 National business units, supported by stronger Group Support Services Reposition businesses WIP Culture Safety programme and investments: Lost Time Injuries YTD 15% lower Enhanced
Slide 106: Supply chain effectiveness lifted
Supply chain effectiveness lifted For personal use only • Objectives – Deliver consistent service across our networks – Drive efficient door to door outcome from supplier to customer • Information transparency, quality processes and systems • Strong capital management focus • Partnerships with quali
Slide 107: Enhanced focus on growth
Enhanced focus on growth For personal use only Re-base the Grow Leverage Performance business selectively positions • Further expansion • Customer experience • Accountability • Growth • Culture - Metropolitan Mid-market • Cost / capital control - Share of spend • Simplicity - Higher growth sectors •
Slide 108: Growth strategy #1
Growth strategy #1 Improve metropolitan sales performance For personal use only Strategic Progress Achievements Initiatives Small customer targeting 9 (ongoing) • 30 additional sales resources over past 6 months • Blackwoods sales force reorganised by market • More attractive incentive schemes • Sal
Slide 109: Promotions and online channels
Promotions and online channels For personal use only Regular promotions New websites with enhanced functionalities 108
Slide 110: Growth strategy #2
Growth strategy #2 Increase sales to existing customers For personal use only Strategic Progress Achievements Initiatives Continuously improving customer service 9 • New user-friendly contract platform (ongoing) • Technical and industry expertise • Supply chain efficiency Increase • Delivery perform
Slide 111: Delivery performance continues to rise
Delivery performance continues to rise Ongoing focus on a better customer experience For personal use only DIFOT % Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Recognised by the 2007 Best Industrial Supply Chain Management Award in Australia (IBIS World / Logistics Magazine)
Slide 112: Robust pricing infrastructure in place
Robust pricing infrastructure in place For personal use only Vendor Price Lists Historic Trading Prices • Relative positioning of products Competitor Web + Catalogue Price Scraping Pricing Competitor Price Audit •in-house web scraping tool Engine •Manual data entry in India Purchasing Costs • Price
Slide 113: General catalogues supplemented by market-specific catalogues
General catalogues supplemented by market, product and customer-specific catalogues For personal use only 112
Slide 114: Growth strategy #3
Growth strategy #3 Target higher growth sectors For personal use only Strategic Progress Achievements Initiatives Develop range of products and services WIP • Protector Alsafe OH&S training services • Blackwoods On-Site Services (BOSS) Target higher growth sectors Networks expansion and acquisitions
Slide 115: Developing national services
Developing national services For personal use only National standard of competency based training • Rolling-out in each capital city onsite Protector Alsafe and/or training facility Accredited Training services Developing training offer • Height safety, confined space, use of correct PPE, fire fight
Slide 116: WIS is in a stronger position going forward
WIS is in a stronger position going forward For personal use only • Leading supplier of engineering , industrial consumables and safety products to industry and government across Australia and New Zealand – “All your workplace needs” Blackwoods offering – Complemented by leading specialists • Logist
Slide 117: Going forward
Going forward For personal use only Re-base the Grow Leverage Performance business selectively positions • Further expansion • Customer experience • Accountability • Growth • Culture - Metropolitan Mid-market • Cost / capital control - Share of spend • Simplicity - Higher growth sectors • Improvemen
Slide 118: Outlook
Outlook For personal use only • Market conditions remain mixed − Continued demand from resources and infrastructure in QLD and WA − Manufacturing conditions remain subdued in Australia and New Zealand • Ongoing strong competition and commoditisation pressures • Scarcity of skilled labour • However s
Slide 119: 2007/08 Priorities
2007/08 Priorities For personal use only • Customer experience − Delivery performance − Preferred suppliers complemented by quality home brands − Clear, competitive and consistent pricing − Technical support − Expanded service offering to further improve value proposition • Continued business simpli
Slide 120: Questions
For personal use only Questions
Slide 121: Tim Bult - Energy
For personal use only Tim Bult Energy 120
Slide 122: Wesfarmers Energy
Wesfarmers Energy For personal use only Delivering long term sustainable growth Industrial and medical gases (40%) Production, distribution and marketing of LPG and LNG Power generation 121
Slide 123: Wesfarmers Energy
Wesfarmers Energy For personal use only EBIT CONTRIBUTION (FY 07) 5% 950 employees 279,500 gas customers 23 remote power stations Gas and Power 3 air separation units Coregas 1 LPG extraction plant Air Liquide WA 1 hydrogen plant Wesfarmers LPG Kleenheat Gas enGen 122
Slide 124: Highlights – YTD
Highlights – YTD 08 For personal use only • Divisional performance broadly in line with expectations • Coregas integration now complete • WA LNG project implementation remains: – on budget and – on schedule • Record high energy prices • Agreement to sell UNIGAS interest 123
Slide 125: Current market conditions
Current market conditions For personal use only • Experiencing subdued market activity for industrial gases in NSW • Record USD Saudi CP – continuing pressure on Kleenheat Gas – improving WLPG sale prices • LPG content in DBP remains uncertain • LPG export volumes lower 124
Slide 126: World LPG Prices – Saudi CP
World LPG Prices – Saudi CP For personal use only Average USD/tonne Jul 07 - Nov 07 Propane USD 617 800 600 400 200 Average Jul 06 - Nov 06 USD 508 0 Nov-91 Nov-93 Nov-95 Nov-97 Nov-99 Nov-01 Nov-03 Nov-05 Nov-07 Continued cost pressure on Kleenheat Gas 125
Slide 127: WLPG Production
WLPG Production For personal use only kt Ave t/TJ 350 2.5 300 2.0 250 200 1.5 150 1.0 100 0.5 50 0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 (YTD Sept) WLPG production (kt) LPG content (t/TJ) YTD LPG content (t/TJ) Year to date WLPG production 14% below previous year 126
Slide 128: Strategies
Strategies For personal use only Strategies Sector Status Industrial gas growth in: Underway • eastern states sales; and • oil and gas sector Improve – Existing Maximise LPG production Exploring options Businesses LPG distribution: Ongoing • customer focus; and • controllable costs Pursue new power
Slide 129: Improve – existing businesses: Industrial & medical gases
Improve – existing businesses: Industrial & medical gases For personal use only Coregas • Integration now complete • Increased emphasis on safety • Business improvement programme Air Liquide WA (40%) • Supply chain optimisation • Enhanced sales focus Matthew Peacock - Coregas 128
Slide 130: Improve – existing businesses: LPG - production
Improve – existing businesses: LPG - production For personal use only • Exploring options to: – improve certainty – maintain or increase content • Optimise exports • Manage inventory • Plant performance: – availability – LPG recovery 129
Slide 131: Improve – existing businesses: LPG - distribution
Improve – existing businesses: LPG - distribution For personal use only • Customer focus – continuing technology enhancement – ‘Territory Model’ benefits being realised • Controllable costs – rationalisation/upgrade of facilities – streamlining processes Kleenheat Gas’ Bob Carey 130
Slide 132: Improve – existing businesses: Power generation
Improve – existing businesses: Power generation For personal use only • Remote Aboriginal Communities – four power stations complete – last to be completed December • Assessing opportunities: – build, own, operate (BOO) Warmun Aboriginal Remote Community Power – design and construct (D&C) Station op
Slide 133: Expand – deliver projects: Industrial & medical gas
Expand – deliver projects: Industrial & medical gas For personal use only Coregas • Liquid nitrogen plant at commissioning • Acetylene plant construction underway Air Liquide WA (40%) • North west oil and gas opportunities • Upgrade of ASU Air Liquide (WA)’s ASU 132
Slide 134: Expand – deliver projects: LNG – WA Project - plant
Expand – deliver projects: LNG – WA Project - plant For personal use only 133
Slide 135: Expand – deliver projects: LNG – WA Project - distribution
Expand – deliver projects: LNG – WA Project - distribution For personal use only • LNG road tanker construction on track • First refueller installed with other installations progressing • Vessels installed at mine-sites 60 kl refueller at Peak Truck stop, Kewdale 134
Slide 136: Expand – deliver projects: LNG – WA Project - customers
Expand – deliver projects: LNG – WA Project - customers For personal use only • Power stations – all generation sets received – construction at Darlot well advanced Darlot power station under construction – Sunrise Dam construction underway • Heavy duty vehicle (HDV) – customer conversions ramping u
Slide 137: Evaluate – new opportunities
Evaluate – new opportunities For personal use only • LNG - east coast opportunities • LPG - Kwik-Gas cylinder exchange • Power generation - solar and other renewable energy • Assessing other gas and power opportunities 136
Slide 138: Outlook
Outlook For personal use only • Dependent on Saudi CP and LPG content in DBP • Lower LPG export volumes vs 2007 • Completion of industrial gas supply projects • WA LNG Project – commissioning of Kwinana plant, distribution assets and power stations – contribution from 2009 • Increasing R12 capital e
Slide 139: Questions
For personal use only Questions
Slide 140: Q&A
For personal use only Q&A Richard Goyder Managing Director, Wesfarmers Limited Gene Tilbrook Finance Director, Wesfarmers Limited
Slide 141: Other Businesses - Gene Tilbrook
For personal use only Other Businesses Gene Tilbrook
Slide 142: Wespine (50% owned)
Wespine (50% owned) For personal use only Strategic Issues Strategies and Achievements Long term, consistent supplies • Planning for supply post 2012 • Increased sawmill capacity by 15% to 430,000 m3 pa; now operating Regional competitiveness • Evaluating opportunities to utilise resources better •
Slide 143: Gresham Private Equity Fund
Gresham Private Equity For personal use only Fund 1 • Norcros divested, with some deferred consideration • Current investment $31.4m • Exit of Riviera expected over next several years • Gross cash realised IRR 30+% CURRENT INVESTMENT PORTFOLIO Riviera Ocean Cruisers 142
Slide 144: Gresham Private Equity Fund
Gresham Private Equity For personal use only Fund 2 • Wesfarmers’ current commitment $180m; Capital invested $141m • New Investments: – Barminco – Experiential Group • Revaluations are to Wesfarmers’ earnings 143
Slide 145: Gresham Private Equity Fund
Gresham Private Equity For personal use only 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) W
Slide 146: Capital Management
For personal use only Capital Management 145
Slide 147: Capital Structure
Capital Structure For personal use only Equity Number of Ordinary Shares 541 million Number of WPPS 153 million Average Debt Syndicated Bank Debt $9.5 billion (of $10b facility) Other Debt (Bank, Bonds, CP & MTNs) $2.0 billion 146
Slide 148: Wesfarmers Price Protected Shares (WESN)
Wesfarmers Price Protected Shares (“WESN”) For personal use only Summary of WPPS Terms Form • Class A Wesfarmers ordinary shares, ranking alongside ordinary shares Dividends • Dividends equal to those on ordinary shares (including franking) • At maturity, WPPS convert into Wesfarmers ordinary shares
Slide 149: Debt Funding
Debt Funding For personal use only • Committed corporate debt facilities in Post Acquisition Debt $bn place to fund cash portion of offer Cash component of bid 4.3 • S&P and Moody's ratings BBB+ and Coles net debt1 1.3 Baa1 respectively Refinanced bridge facility 2.1 • Insurance underwriting activit
Slide 150: Ratings Considerations
Ratings Considerations For personal use only • WES becomes more heavily weighted to the more stable food-retailing sector • WES has a strong track record of integrating acquired assets • S&P BBB+; Moody’s Baa1 • Financial metric focus: – FFO to total debt – Total debt to EBITDA – EBITDA interest cov
Slide 151: Syndicated Facility Details
Syndicated Facility Details For personal use only Borrower Wesfarmers Limited Mandated Lead Australia and New Zealand Banking Group Arrangers BNP Paribas nabCapital Security Unsecured, senior ranking with all unsecured loan obligations of the Borrower All material subsidiaries guarantee provided Fac
Slide 152: Indicative Refinancing Options
Indicative Refinancing Options For personal use only Funding Type Currency Tenors Indicative Potential Available Capacity^ Refinancing Syndicated Bank Facility AUD 5 Years 1,500 1,000 Commercial Paper # AUD < 1 Year 1,000 Nil Domestic MTNs AUD 5 Years 1,000 500 Offshore MTNs - USPP (Reg D) USD 5-12
Slide 153: Pro-forma Balance Sheet
Pro-forma Balance Sheet For personal use only Wesfarmers Merged Group Unaudited Pro-forma Balance Sheet – FY07 Wesfarmers Pro-forma Coles Group Pro-forma Pro-forma1 Adjustments Cash 218.5 546.1 - 764.6 Receivables & Inventories 2,860.0 3,416.5 - 6,276.5 Property, plant and equipment 2,715.9 3,467.6
Slide 154: Free Cash Flow
Free Cash Flow For personal use only • Pro-forma combined cash flow is presented on an illustrative basis and is not necessarily representative of Merged Group statutory accounts Wesfarmers & Coles Combined Schedule of Free Cash Flow – FY07 Wesfarmers1 Coles Group2 Combined3 Pro-forma EBITDA 1,650.0
Slide 155: Questions
For personal use only Questions 154
Slide 156: For all the latest news visit www.wesfarmers.com.au
For personal use only For all the latest news visit www.wesfarmers.com.au 155