Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Day (November 2005)
156 slides from Wesfarmers's investor day presentation, Nov 15, 2005
Slide 1: Investor Briefing
Investor Briefing 15 November 2005 Westin Hotel, Sydney Investor Briefing – November 2005 1
Slide 2: Richard Goyder
Richard Goyder Managing Director, Wesfarmers Limited Investor Briefing – November 2005 2
Slide 3: Agenda
Agenda 9:05 Wesfarmers Industrial and Safety Terry Bowen 9:40 Chemicals and Fertilisers Keith Gordon 10:15 Insurance Bob Buckley 10:50 Morning Tea 11:10 Other Businesses Gene Tilbrook 11:40 Energy David Robb 12:35 Corporate Sustainability Keith Kessell 12:45 Lunch 1:45 Hardware John Gillam 2:30 Inte
Slide 4: Wesfarmers Industrial and Safety
Wesfarmers Industrial and Safety Terry Bowen Managing Director Investor Briefing – November 2005 4
Slide 5: Overview
Overview Investor Briefing – November 2005 5
Slide 6: Market Leader in MRO and Safety Products
Market Leader in MRO and Safety Products Australia New Zealand Investor Briefing – November 2005 6
Slide 7: Distribution Network
Distribution Network QUICK FACTS 100,000 customers 400,000 product lines 2 1 27 11 12,000 vendors 28 13 3,300 employees 7 5 255 locations 28 10 BUSINESSES No. 18 11 Industrial Products 116 46 27 Protector Alsafe 55 11 •999 Protector & NZ Safety 46 6 4 Blackwoods Paykels (NZ) 27 Packaging House 11 In
Slide 8: Broadest MRO Product Offering
Broadest MRO Product Offering QUICK FACTS Broadest MRO range 400,000+ product lines Investor Briefing – November 2005 8
Slide 9: Business Environment
Business Environment Investor Briefing – November 2005 9
Slide 10: Competitive Business Environment
Competitive Business Environment • Highly fragmented market • Intense competition from category specialists • Specialists broadening their MRO product range • Some contraction in key markets (most particularly manufacturing) • Growth in mining, infrastructure & transport • Slowing conditions in New
Slide 11: Financial Performance
Financial Performance ($m) 2002* 2003 2004 2005 CONTRIBUTION TO GROUP EBITA Revenue 1,055.4 1,112.0 1,150.6 1,171.5 10% Revenue Growth 5.4% 3.5% 1.8% EBITA 84.8 117.2 112.0 110.0 ROC A (%) 12.0 14.7 13.8 13.7 * Represents 11 months contribution only Investor Briefing – November 2005 11
Slide 12: Current Year Financial Performance
Current Year Financial Performance • EBITA (YTD) down slightly on last year - Sales ahead, however gross margin slightly down - Expenses higher • Australia – ahead of same time last year - Continued MRO business growth - Improved performance in Protector Alsafe, but more to do • New Zealand – down o
Slide 13: Strategies
Strategies Investor Briefing – November 2005 13
Slide 14: Existing Strategies
Existing Strategies • Grow market share in selected product categories • Reduce expense to sales ratio - business improvement program • Reduce working capital - inventory • Improve safety performance (LTIFR) • Improve employee retention Investor Briefing – November 2005 14
Slide 15: Distribution Centre Upgrades
Distribution Centre Upgrades • Complete - Regency Park SA (IP), Wiri NZ (IP) • In progress - Wiri NZ (Packaging House), Virginia Qld (PA) • In planning - Synergy Park Qld (IP), Smithfield NSW(IP), Blacktown NSW (IP), Christchurch NZ (IP) Investor Briefing – November 2005 15
Slide 16: Store / Trade Centre Upgrades
Store / Trade Centre Upgrades • Upgrade programme continuing • More than 30 upgrades currently planned for 2005/06 Investor Briefing – November 2005 16
Slide 17: Catalogue Updates
Catalogue Updates • New PA Catalogue due Feb 2006 - improved format • Commenced work on new Blackwoods Catalogue due Sept 2006 Investor Briefing – November 2005 17
Slide 18: eBusiness
eBusiness • MRO market leaders in eBusiness • Growing proportion of eBusiness sales • New website being developed Investor Briefing – November 2005 18
Slide 19: Future Strategies
Future Strategies • Strategic Planning process to commence early December - Building on Port Jackson Partners recommendations • Early focus has been on getting to know the business - Reviewing business operations, meeting staff and customers • Scoping study already underway involving all senior mana
Slide 20: Opportunities
Opportunities • Market share in a number of key MRO categories • Performance of Protector Alsafe (Aus) • Performance of Blackwoods-Paykel (NZ) • Cost of doing business - Fulfillment, logistics and administration efficiency - Leveraging technology (eBusiness) • Capital management, particularly invent
Slide 21: Outlook
Outlook Investor Briefing – November 2005 21
Slide 22: Outlook
Outlook • Continued strong conditions in mining (Qld & WA) • Manufacturing activity expected to remain under pressure (NSW, Vic & SA) • Slowing economic conditions in NZ • Growth over time in core MRO business • Continuing improvement in Protector Alsafe • Blackwoods Paykels (NZ) performance will re
Slide 23: Questions
Questions Investor Briefing – November 2005 23
Slide 24: Chemicals and Fertilisers
Chemicals and Fertilisers Keith Gordon Managing Director Investor Briefing – November 2005 24
Slide 25: Overview
Overview Investor Briefing – November 2005 25
Slide 26: Chemicals and Fertilisers
Chemicals and Fertilisers • 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, Albany and Esperance (WA), Moura (Qld) •
Slide 27: EBITA and EBITA/Capital 5 Year Trend
EBITA and EBITA/Capital 5 Year Trend EBITA EBITA/ $m Capital (%) 100 20 90 18 80 16 70 14 60 12 50 10 40 8 30 6 20 4 10 2 0 0 2001 2002 2003 2004 2005 First HY EBITA Full Year EBITA EBITA/Capital (R12) Investor Briefing – November 2005 27
Slide 28: Safety
Safety Injuries R12 LTIFR 100 10 9 80 8 7 60 6 5 40 4 3 20 2 1 0 0 2002 2003 2004 2005 Lost Time Injuries Workplace Injuries R12 LTIFR Investor Briefing – November 2005 28
Slide 29: Business Environment
Business Environment Investor Briefing – November 2005 29
Slide 30: Chemicals
Chemicals • Ammonium Nitrate - Production at Kwinana plant sold out - Kwinana expansion approved - QNP planned shutdown in October 2005 • Sodium Cyanide - Capacity expansion complete - Review of sales contracts - Working capital • Ammonia - Possible shutdown in early 2006 Investor Briefing – Novembe
Slide 31: Fertiliser
Fertiliser • Continued liquid fertiliser growth • Sales and marketing alignment • Historically high prices • Market consolidation Investor Briefing – November 2005 31
Slide 32: General
General • Legacy waste management • Depreciation - Manufacturing assets - Fertiliser storage shed re-cladding • Kwinana infrastructure review - Water infrastructure • Industrial relations Investor Briefing – November 2005 32
Slide 33: Strategies
Strategies Investor Briefing – November 2005 33
Slide 34: Ammonium Nitrate
Ammonium Nitrate Maintain and grow CSBP’s position in AN • 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 mid 2007 • Duplication of QNP being investigated - Two phase fea
Slide 35: Manufacture of Nitrogen Based Products
Manufacture of Nitrogen Based Products Ammonia (NH3) Nitric Acid Liquid Liquid Urea Ammonium Nitrate Prill Tower UAN Solution Granulator Ammonia Nitric Acid Ammonium UAN Solution Solid Urea Nitrate Investor Briefing – November 2005 35
Slide 36: Project Status
Project Status • Board approval • Capex around $200 million • Environmental approval • Other approval processes underway • Long lead items ordered • Negotiation with key contractors underway • Construction anticipated to commence early 2006 • Commissioning mid 2007 Investor Briefing – November 2005
Slide 37: Liquid Fertilisers
Liquid Fertilisers Develop and capture growth in liquid fertilisers • Continue with strategy - Increase penetration of existing products - Develop of new products - Infrastructure and logistics - Storage capacity at Kwinana and “on-farm” - Transport capacity - Benefits of locally manufactured produc
Slide 38: Liquid Fertilisers
Liquid Fertilisers Develop and capture growth in liquid fertilisers 160 CSBP Liquid Fertilisers 16 140 14 % of Total Sales Tonnes 120 12 000's Tonnes 100 10 80 8 60 6 40 4 20 2 0 0 2000 2001 2002 2003 2004 2005 Liquid Fertiliser tonnes (LHS) % of Total Fertiliser tonnes (RHS) Investor Briefing – Nov
Slide 39: Other Strategies
Other Strategies • Identify and evaluate growth opportunities • Develop improved capabilities • Optimal cost and capital structure • Maintain “Licence to Operate” Investor Briefing – November 2005 39
Slide 40: Outlook
Outlook Investor Briefing – November 2005 40
Slide 41: Outlook - Chemicals
Outlook - Chemicals • Resource sector demand continues to underpin demand for key chemicals: - Ammonium Nitrate – WA and Queensland - Ammonia - Plants sold out • Opportunities to improve performance and grow sodium cyanide business • Continue to evaluate business growth opportunities Investor Briefi
Slide 42: Outlook - Fertilisers
Outlook - Fertilisers • 2005 harvest • Fertiliser prices • Prices of other inputs • Commodity prices Investor Briefing – November 2005 42
Slide 43: Questions
Questions Investor Briefing – November 2005 43
Slide 44: Wesfarmers Insurance Division
Wesfarmers Insurance Division Bob Buckley Managing Director Investor Briefing – November 2005 44
Slide 45: Overview
Overview Investor Briefing – November 2005 45
Slide 46: Insurance
Insurance Australia New Zealand Australia Australia New Zealand Hong Kong Investor Briefing – November 2005 46
Slide 47: Insurance - Financial Performance
Insurance - Financial Performance EBITA ROCA CONTRIBUTION A$m % TO GROUP EBITA 150 70 60 120 12% 50 90 40 60 30 QUICK FACTS 20 30 1,463 employees 10 105 branches 0 0 2001 2002 2003 2004 2005 EBITA ROCA *Lumley included since date of acquisition of 14 October 2003 Investor Briefing – November 2005 47
Slide 48: Financial Performance (Y/E 30 June)
Financial Performance (Y/E 30 June) ($m) 2004* 2005 % Gross Written Premium 787.3 1,019.9 29.5 Net Earned Premium 508.1 700.4 37.8 Net Claims (295.8) (412.1) (39.3) Net Commission and Expenses (142.5) (189.6) (33.1) Underwriting Result 69.8 98.7 41.4 Investment Income on TR 15.4 23.1 50.0 Insurance
Slide 49: Financial Performance (Y/E 30 June)
Financial Performance (Y/E 30 June) (%) 2004* 2005 % Gross Earned Loss Ratio 53.2 56.5 (3.3) Net Earned Loss Ratio 58.1 58.8 (0.7) Reinsurance Expense (%GEP) 37.5 32.4 5.1 Exchange Commission (%RI Cost) 21.1 24.1 3.0 Commission Expense (%GWP) 13.2 13.9 (0.7) Total Expenses (%GWP) 25.1 26.5 (1.4) Com
Slide 50: Business Environment
Business Environment Investor Briefing – November 2005 50
Slide 51: Business Environment
Business Environment $m Australian General Insurers – Gross Earned Premium (Australia) 6,000 5,000 4,000 3,000 2,000 1,000 0 b E h rs y p E G nz ds CQ G FI a Su U ID le ub or in ric AC QB IN CG AI de W W oy lia RA m om nc Ch Zu El G/ Ll Al Lu Pr IA Source: Deloitte 2004 Investor Briefing – November
Slide 52: Business Environment
Business Environment • Sep 2005 YTD claims experience comparable to last year • Competition is affecting GWP growth • All business units experiencing increased competition • NEP positively impacted by reduced RI expense • RI market tightening due to US hurricane season Investor Briefing – November 2
Slide 53: Strategies
Strategies Investor Briefing – November 2005 53
Slide 54: Strategies
Strategies Growth opportunities • Developing new strategic alliances • Acquisition of small portfolios • Continued focus on profitable niche business • Optimise broker relationships Investor Briefing – November 2005 54
Slide 55: Strategies
Strategies Increase risk retention Year Ended 30 June (%) 2004 2005 Including AMO Reinsurance Expense (% GEP) 37.5 32.4 Excluding AMO Reinsurance Expense (% GEP) 32.1 28.2 • Further reductions in 2005/06 Investor Briefing – November 2005 55
Slide 56: Strategies
Strategies Implement enhanced IT systems • Gennetica rollout completed at LGA - Improvements in data collection and rating information • WFI and LGNZ to implement Koukia in late 2006 - Cost reductions from maintaining legacy systems - Improved flexibility - Provision of timely information to agents
Slide 57: Outlook
Outlook Investor Briefing – November 2005 57
Slide 58: Outlook
Outlook • Challenging outlook • NEP growth to continue – reduced reinsurance • Margins to decline • Continuation of compliance burden • Koukia enquiries growing Investor Briefing – November 2005 58
Slide 59: Questions
Questions Investor Briefing – November 2005 59
Slide 60: Other Businesses
Other Businesses Gene Tilbrook Finance Director Investor Briefing – November 2005 60
Slide 61: ARG
ARG 50% Interest with Genesee and Wyoming Investor Briefing – November 2005 61
Slide 62: ARG Overview
ARG Overview • Previously delayed tonnage growth now occurring • Continuing cost pressures – fuel and labour • Major track upgrade complete • Regulatory milestones reached • Safety outcomes near target Investor Briefing – November 2005 62
Slide 63: ARG Business Environment
ARG Business Environment • Buoyant minerals industry • Shortages of labour and services • Indications of lower fuel prices • Mature regulatory environment Investor Briefing – November 2005 63
Slide 64: Fuel Prices
Fuel Prices cpl Cost/bbl $1.15 $120 $1.10 $100 $1.05 $80 $1.00 $60 $0.95 $40 $0.90 $0.85 $20 $0.80 $0 ct ul ov ar pr ug an an ay ep un eb -J -O -A -M -N -J -J -A -M -S -J -F 18 03 31 25 10 12 20 28 28 15 07 23 Week Ending AUD$ Cost/bbl Average cpl Investor Briefing – November 2005 64
Slide 65: ARG Outlook
ARG Outlook • Continuing minerals growth • 2005/06 grain Investor Briefing – November 2005 65
Slide 66: ARG Outlook: Grain Harvest
ARG Outlook 25 Grain Harvest 20 Tonnes (milions) 15 10 5 0 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 Western Australia South Australia Investor Briefing – November 2005 66
Slide 67: ARG Outlook
ARG Outlook • Continuing minerals growth • 2005/06 grain • Measures to overcome cost pressures • Continuing safety and incident focus • Management changes Investor Briefing – November 2005 67
Slide 68: Gresham Private Equity
Gresham Private Equity Investor Briefing – November 2005 68
Slide 69: Gresham Private Equity – Fund 1
Gresham Private Equity – Fund 1 EROC mining / infrastructure contractor Norcros UK based building materials, coatings Virgin health clubs in Europe and South Africa Active Raywood vehicle control systems Riviera ocean cruisers Investor Briefing – November 2005 69
Slide 70: Gresham Private Equity Fund 2 Structure
Gresham Private Equity Fund 2 Structure Co-investment (Investor Pool WES Investors Fund for GPEF2) Gresham Private Equity (Manager) (Investment GPEF2a GPEF2b GPECF Vehicles) Investee Companies Investor Briefing – November 2005 70
Slide 71: Gresham Private Equity – Fund 2
Gresham Private Equity – Fund 2 Noel Leeming electrical retailer (New Zealand) Australian manufacturer and distributor of Pacific Paper disposable nappies Products Investor Briefing – November 2005 71
Slide 72: Business Development
Business Development Investor Briefing – November 2005 72
Slide 73: Questions
Questions Investor Briefing – November 2005 73
Slide 74: Wesfarmers Energy
Wesfarmers Energy David Robb Managing Director Investor Briefing – November 2005 74
Slide 75: Overview
Overview Investor Briefing – November 2005 75
Slide 76: Wesfarmers Energy
Wesfarmers Energy Investor Briefing – November 2005 76
Slide 77: Wesfarmers Energy
Wesfarmers Energy 2004/05 QUICK FACTS 1,431 employees 3 coal mines 20 coal customers 750 gas locations 264,000 gas customers 14 remote power stations CONTRIBUTION TO GROUP EBITA Gas and power Coal Kleenheat Gas Premier Coal Wesfarmers LPG Curragh Air Liquide Bengalla 28% 28% StateWest Power Investor
Slide 78: Energy Objective: Profitable Growth over Time
Energy Objective Profitable Growth over Time EBITA ROCA A$m % 400 40 35 300 30 25 200 20 15 100 10 5 0 0 2000 2001 2002 2003* 2004 2005 EBITA ROCA * Excludes Girrah A$80.5m in 2003 Investor Briefing – November 2005 78
Slide 79: Sustainability
Sustainability • Premier: Golden Gecko environmental award • Curragh: Blackwater Community Health Centre • KHG: LNG market development • ALWA, WLPG and enGen all LTI free in 2004/05 Investor Briefing – November 2005 79
Slide 80: Business Environment
Business Environment Investor Briefing – November 2005 80
Slide 81: Saudi Aramco Contract Price
Saudi Aramco Contract Price (US$) 600 500 400 300 200 100 0 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Investor Briefing – November 2005 81
Slide 82: WLPG Feed Gas
WLPG Feed Gas LPG Content and Flow Rate Content Flow Rate t/TJ TJ/day 2.5 500 480 2.0 460 1.5 440 1.0 420 400 0.5 380 0.0 360 2001 2002 2003 2004 2005 YTD Oct 05 Financial Year Average LPG Content Average Flow Rate Investor Briefing – November 2005 82
Slide 83: Thermal Coal Spot Prices
Thermal Coal Spot Prices US$/Tonne FOB nominal 70 60 50 40 30 20 10 - I I I I I I I I I I Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Source: Barlow Jonker Investor Briefing – November 2005 83
Slide 84: Curragh Cost Elements
Curragh Cost Elements FY2005 Maintenance Other Materials 5% 16% Contractor Labour 19% Curragh Labour 18% Truck & Shovel Fuel 21% 9% Explosives Electricity 8% 4% Investor Briefing – November 2005 84
Slide 85: Curragh Cash Production Costs
Curragh Cash Production Costs Oct 05 vs Oct 04 % Increase Major Category 40 35 30 25 20 15 10 5 0 Contractor T&S Maintenance Explosives Fuel Labour Materials Unit rate impact on cash costs +16% Volume impact on cash costs +8% Total +24% Investor Briefing – November 2005 85
Slide 86: Exchange Rate
Exchange Rate AUD/USD 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Investor Briefing – November 2005 86
Slide 87: Wesfarmers Curragh hedging profile
Wesfarmers Curragh hedging profile Nov 2005 Period end Current proportion of Average AUD/USD 31 Dec USD revenue hedged * hedge rate 2006 90% 0.6860 2007 70% 0.6839 2008 50% 0.7030 2009 30% 0.7151 2010 10% 0.7116 ∗ Calculated using known contract outcomes, long run pricing assumptions, and after adju
Slide 88: Outlook
Outlook Investor Briefing – November 2005 88
Slide 89: Energy 2005/06 Outlook
Energy 2005/06 Outlook Gas and Power • Margins under pressure • Reduced LPG content • Strong power demand Coal • Curragh export sales 6.4 – 6.8 mt • Bengalla port restrictions to continue • Industry cost and staffing pressures to continue • Coking coal price uncertainty Investor Briefing – November
Slide 90: Saudi Contract Price
Saudi Contract Price US$/t 600 500 400 300 200 100 0 Jul Sep Dec Mar Jun Propane 2003/2004 Propane 2004/2005 Propane 2005/2006 Investor Briefing – November 2005 90
Slide 91: Tonnes per TJ
Tonnes per TJ 1- J 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 ul 8- J u 14 l -J u 21 l -J u 27 l -J LPG Content u 2- l Au g 8- Au 15 g Investor Briefing – November 2005 -A u 21 g -A u 27 g -A ug 2- Se p 9- Se 15 p -S e 21 p -S e 27 p -S ep 4- Oc Feed Gas Tonnes per TJ from 1 July 2005 10 t -O c 16
Slide 92: Coal Production
Coal Production Beneficial 3 Months to Mine Coal Type Interest Sep-04 Sep-05 % ('000 tonnes) Premier 100 Steam 882 915 Curragh 100 Coking 1,169 1,531 Steam 657 679 Bengalla 40 Steam 695 483 Investor Briefing – November 2005 92
Slide 93: Coal Handling & Preparation Plant
Coal Handling & Preparation Plant • 4,320 sq m area • 27m high • 2 parallel modules • 24 screens • 43 pumps • 444 electric motors • 26km piping • 1,600tph nominal • 12.5mtpa Investor Briefing – November 2005 93
Slide 94: Coal Handling & Preparation Plant
Coal Handling & Preparation Plant Flow Chart Tailings Tailings CHPP Plant Fine coal Rejects Feed circuit Primary Coking coal Raw Coal Raw Coal Coking coal Product Distribution Desliming Primary Dense Product 58 t Distribution Screens DMC 2 Modules Modules Medium 2 4 Loops Cyclones Secondary Dense St
Slide 95: Coal Handling & Preparation Plant
Coal Handling & Preparation Plant Vibrating “Banana” Screen Investor Briefing – November 2005 95
Slide 96: Coal Handling & Preparation Plant
Coal Handling & Preparation Plant Banana Screen - Failed Cross Tube Investor Briefing – November 2005 96
Slide 97: Curragh North
Curragh North Oxidised Coal in 1st Panels of Central Pit Partially Oxidised Oxidised Fresh Coal Coal Coal Feeds LW HW I1 I2 I4 Investor Briefing – November 2005 97
Slide 98: Curragh North
Curragh North Initial Road Transport Investor Briefing – November 2005 98
Slide 99: Coal Handling & Preparation Plant
Coal Handling & Preparation Plant Processing Flow Chart (normal) 11t Tailings Fine coal Tailings CHPP Plant Rejects Feed circuit 100t Type ‘B’ 25t 14t Primary Coking coal Raw Coal 100t 75t 44t Coking coal Product Raw Coal Distribution Desliming Primary Dense Product 58 t Distribution 2 Modules Scree
Slide 100: Strategies
Strategies Investor Briefing – November 2005 100
Slide 101: Energy Strategy Summary
Energy Strategy Summary Premier - renew contracts, new markets, unit costs Curragh - deliver and optimise Curragh North Bengalla - new mine plan, improve sales mix KHG - improve efficiency, develop new markets WLPG - implement new LPG supply arrangements ALWA - deliver new projects Investor Briefing
Slide 102: Premier Sales Development
Premier Sales Development • RFP successful • Char patent granted • Demonstration plant 2H 2006 • 40,000 tonnes per annum Investor Briefing – November 2005 102
Slide 103: Curragh North Progress
Curragh North Progress • Ahead of schedule • Infrastructure largely complete • Major mobile equipment on site • 2 mt coal mined • Conveyor operational 4Q 2006 Investor Briefing – November 2005 103
Slide 104: Curragh North Capex
Curragh North Capex at 31 October • Committed $330m • Spent $200m • Coal handling and conveyor project on track - Escalation risk share plus contingency • Forecast at completion ≤ $360m Investor Briefing – November 2005 104
Slide 105: Curragh Expansion Potential
Curragh Expansion Potential Preconditions • CHPP performance and reliability • PCI sales development • Creek Diversion • UDS technology for draglines • CHPP upgrade • Rail and port capacity headroom 9 - 7.5 mtpa from July 06 - 8.5 mtpa from July 07 Investor Briefing – November 2005 105
Slide 106: Curragh Export Volume
Curragh Export Volume Potential Growth Export Sales Volumes Mt 8 7 HCC 60% 6 SHCC 20% 5 4 PCI 20% 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 Investor Briefing – November 2005 106
Slide 107: Bengalla
Bengalla • Amend development consent • Expand from 8.7 to 10.7 mtpa ROM maximum • Increase export sales • Consistent with port and rail capacity Investor Briefing – November 2005 107
Slide 108: Kleenheat
Kleenheat • vTrack • 2nd 3 tpd LNG plant at Kwinana • Potential 160 tpd plant Investor Briefing – November 2005 108
Slide 109: enGen – Remote Power
enGen – Remote Power • Midwest project delivered • Remote Towns bid successful • Opportunity pipeline strong Investor Briefing – November 2005 109
Slide 110: Questions
Questions Investor Briefing – November 2005 110
Slide 111: Corporate Sustainability
Corporate Sustainability Keith Kessell Executive General Manager, Corporate Affairs Investor Briefing – November 2005 111
Slide 112: Corporate Sustainability
Corporate Sustainability • “…an approach in which financial success sits comfortably with a resolve to set high standards in a range of other areas. These include the decent treatment of employees, customers and suppliers, acting honestly and ethically in all dealings, doing what we can to minimise
Slide 113: Corporate Sustainability
Corporate Sustainability • Combines concepts of Sustainable Development, Triple Bottom Line, Corporate Social Responsibility • Endorse BCA position on CSR – “..the greatest social contribution made by corporations is through the goods and services they provide, the wealth they create and the employm
Slide 114: Corporate Sustainability
Corporate Sustainability • Increases attractiveness as business partner, employer and influences attitude of regulators • Reporting voluntarily on non financial performance since 1998 • Social Responsibility Report covers eight wholly- owned businesses • Picks up some GRI criteria • Prime impacts in
Slide 115: Questions
Questions Investor Briefing – November 2005 115
Slide 116: Bunnings
Bunnings John Gillam Managing Director Investor Briefing – November 2005 116
Slide 117: Investor Briefing – November 2005
Investor Briefing – November 2005 117
Slide 118: Agenda
Agenda 1. Background 2. Trading update 3. Strategies 4. Outlook Investor Briefing – November 2005 118
Slide 119: Background
Background Background WIDEST RANGE LOWEST PRICES BEST SERVICE Investor Briefing – November 2005 119
Slide 120: Store Network
Store Network 2004/05 CONTRIBUTION TO GROUP EBITA 2 26 6 37% 19 7 17 4 3 1 41 25 9 28 Warehouse stores 135 34 6 Small format stores 78 WA Salvage stores 17 2 1 HouseWorks store 1 Excludes Distribution Centres and trade operational sites Investor Briefing – November 2005 120
Slide 121: Hardware Financial Performance
Hardware Financial Performance Segment Result 2003/04 2004/05 Revenue ($m) 3,845.7 4,067.5 EBITA ($m) 384.8 417.9 Amortisation ($m) 50.1 52.3 EBIT ($m) 334.7 365.6 EBITA/Sales Ratio 10.0% 10.3% LTIFR 14.5 11.4 Investor Briefing – November 2005 121
Slide 122: Trading Update
Trading Update July–Oct 2005 Investor Briefing – November 2005 122
Slide 123: Trading Update
Trading Update • Lower cash sales growth in past 4 months - July to Oct cash store on store growth 1.1% - Housing price, household debt and fuel impacts - Strong competition for discretionary spend - NZ, Qld and NSW performing best - gaining market share • Trade sales flat over July to Oct period -
Slide 124: Strategies
Strategies Investor Briefing – November 2005 124
Slide 125: Strategies
Strategies 1. Focus on retail drivers 2. Store network development 3. Trade business 4. Team members 5. Business systems 6. Business improvement Investor Briefing – November 2005 125
Slide 126: Focus on core retail drivers
Strategies 1. Focus on core retail drivers • Range − innovation driving WIDEST RANGE • Price − strong cost focus delivering LOWEST PRICES − productivity loop • Service − best people delivering BEST SERVICE Investor Briefing – November 2005 126
Slide 127: Focus on core retail drivers
Strategies 1. Focus on core retail drivers • Range − expanding market size with new ranges − expanding existing ranges − total revamp of special orders • Service − lifting customer service − improving customer services Investor Briefing – November 2005 127
Slide 128: Special Orders launched in Victoria
Strategies Special Orders launched in Victoria in Oct 2005 Investor Briefing – November 2005 128
Slide 129: Store network development
Strategies 2. Store network development • Continue 10 to 14 new warehouse store openings • Format and development adaptability • Relocate low performing sites • Store upgrades, refits and offer consistency Investor Briefing – November 2005 129
Slide 130: Store network development
Strategies 2. Store network development • 2005/06 warehouse openings in target range − 4 opened YTD, 7 under construction • Store upgrades, refits and offer consistency − accelerated programme on track − complete 11 in 1st half, plans on track − sales disruption and one-off costs Investor Briefing –
Slide 131: Trade business
Strategies 3. Trade business • Improved strategies implemented − building stronger senior team • Establishing trade distribution centres − servicing delivered-to-site business − allows stores to better serve pick-up business • Targeting profitable market share growth Investor Briefing – November 200
Slide 132: Trade business
Strategies 3. Trade business • Positive early signs from trade DC strategy - four trade distribution centres in operation - further sites planned to open in 2005/06 - improved service ratings (DIFOT) - improved store performance Investor Briefing – November 2005 132
Slide 133: Team members
Strategies 4. Team members • Enhanced development programmes • Support to lift team member performance − focus on customer service • Continuing strong safety program − pleasing improvement trend Investor Briefing – November 2005 133
Slide 134: Business systems
Strategies 5. Business systems • $55m systems upgrade project underway • Phase 1 on track - new inventory management system - new distribution centre system - on-line mid 2006 Investor Briefing – November 2005 134
Slide 135: Business improvement
Strategies 6. Business improvement • Warehouse Administration Review (W.A.R.) project - redeploying hours to customer service • Supply chain - improvements across import program - enhanced import distribution centre capabilities - centralised return centre implemented • Positive business disciplines
Slide 136: Outlook
Outlook Investor Briefing – November 2005 136
Slide 137: Outlook
Outlook • Strong commitment to key retail strategic platforms - Range, price and service • Continued store network development activity • Driving costs down through business improvements • Tight trading climate Investor Briefing – November 2005 137
Slide 138: Questions
Questions Investor Briefing – November 2005 138
Slide 139: International Financial Reporting Standards
International Financial Reporting Standards David Moroney General Manager, Group Business Services Investor Briefing – November 2005 139
Slide 140: Presentation outline
Presentation outline • Overview • Background • Proforma AIFRS June 2005 Results • Post June 2005 Transition Adjustments • Future Accounting Impacts Investor Briefing – November 2005 140
Slide 141: Overview
Overview • Mandatory adoption of AIFRS from 1 July 2005 • Impact on Wesfarmers is minimal compared to many Australian corporates • AIFRS has indirectly lead to changes in share plan structure and coal inventory accounting AIFRS will not change Wesfarmers’ focus of providing satisfactory returns to s
Slide 142: Background
Background • May 2005 outstanding issues have been finalised – share plan, Stanwell rebates and audit sign-off • Anticipated impacts on the 2004 and 2005 financial years are disclosed in the 2005 annual report • Final adjustments subject to issue of first set of AIFRS accounts in August 2006 for yea
Slide 143: Proforma profit and loss
Proforma profit and loss Year to 30 June 2005 Increase/ AGAAP AIFRS (decrease) $ million $ million $ million Revenues 8,190 8,159 (31) Expenses (6,970) (6,942) 28 Share of associates' profits 40 50 10 EBITDA 1,260 1,267 7 Depreciation and amortisation (277) (189) 88 EBIT 983 1,078 95 Borrowing costs
Slide 144: Proforma balance sheet
Proforma balance sheet As at 30 June 2005 Increase/ AGAAP AIFRS (decrease) $ million $ million $ million Total assets * 7,314 7,229 (85) Total liabilities * 4,233 4,408 175 Shareholders' Equity * 3,081 2,821 (260) Net Debt 1,720 1,720 Nil Net Debt/Equity 55.8% 61.0% 5.2% * Excludes hedge values and
Slide 145: Post June 2005 Transition Adjustments
Post June 2005 Transition Adjustments • Some standards are not backdated to the comparative period – financial instruments and insurance contracts transition at 1 July 2005 • Two impacts for financial instruments: - Mark-to-market hedging via equity reserve - Mark-to-market “portfolio” investments (
Slide 146: Future Accounting Impacts
Future Accounting Impacts • Introduction of AIFRS has had an impact on four significant areas: - Mark-to-market of investments - Share plan arrangements - Coal inventory accounting - Stanwell rebate accounting Investor Briefing – November 2005 146
Slide 147: Mark-to-Market of Investments
Mark-to-Market of Investments • Investments and financial instruments will be marked- to-market as follows: - Hedge derivatives – via equity - Investments held by associates: - Properties in BWPT – via P&L - Investments in GPEF 1 – via equity - Investments in GPEF 2 – via P&L - Investments in Gresha
Slide 148: Share Plan Arrangements
Share Plan Arrangements • Previous plan now treated as an “in-substance” option plan under AIFRS – loan assets were derecognised and offset against contributed equity on transition to AIFRS • No expense was recognised under the old plan on transition to AIFRS as all shares were fully vested at 31 De
Slide 149: Share Plan Arrangements (cont.)
Share Plan Arrangements (cont.) • New plan established October 2005 • Based on a share gift scheme with shares acquired on market this year • Utilises the tax-exempt/tax-deferred concessions in tax legislation for share schemes • All employees up to CEO participate in plan at different levels depend
Slide 150: Share Plan Arrangements (cont.)
Share Plan Arrangements (cont.) • Cost of 2005 issue of $20 million (post-tax) to be fully expensed in 2005/06 as a remuneration charge – no deferral despite a three-year holding lock • These amounts compare to a post-tax accounting expense for share plans in the 2004/05 financial year (pre-AIFRS) o
Slide 151: Coal Inventory Accounting
Coal Inventory Accounting • Inconsistent valuation methodologies in place amongst Curragh, Premier and Bengalla • UCR treatment created volatility, especially at Curragh • Standardised policy in line with other major coal producers implemented 1 July 2005 • No separate UCR recognition – all costs ab
Slide 152: Stanwell Export Price Rebate
Stanwell Export Price Rebate • In early 2003 the right to mine Curragh North was acquired from Stanwell • Consideration included an export price rebate • Export price rebate is based on: - Export coal sales from Curragh and Curragh North - Price of semi-soft coking coal above a trigger level - Rolli
Slide 153: Stanwell Rebate Accounting
Stanwell Rebate Accounting • Following satisfaction of conditions precedent in March 2005: - Liabilities recognised of $151m, predominately export price rebates on current contracts - Corresponding asset acquired (being the “right to mine” the Curragh North deposit) of $151m • Amount recognised for
Slide 154: Stanwell Rebate Accounting (cont.)
Stanwell Rebate Accounting (cont.) • Asset is written off as coal is delivered under current contracts – estimated cost for FY2006 is $80m • Liabilities are reduced as domestic steaming coal is delivered and export rebate payments are made to Stanwell • Total amortisation and discounting charge appr
Slide 155: Questions
Questions Investor Briefing – November 2005 155
Slide 156: Questions
Questions Richard Goyder Managing Director, Wesfarmers Limited Gene Tilbrook Finance Director, Wesfarmers Limited Investor Briefing – November 2005 156