Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Presentation (October 2009)
157 slides from Wesfarmers's investor presentation, Oct 23, 2009
Slide 1: Presentation to be given at investor briefing, Sydney
For personal use only 23 October 2009 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 in Sydney on 23 October 2009. Yours faithfully, L J KE
Slide 2: Investor Briefing
For personal use only Investor Briefing g 23 October, 2009 InterContinental Hotel, Sydney
Slide 3: Richard Goyder, Managing Director
For personal use only Richard Goyder Managing Director, Wesfarmers Limited
Slide 4: Agenda
Agenda g For personal use only 8:30 Introduction 8:50 Coles 9:50 Home Improvement & Office Supplies 10:45 Morning Tea 11:15 Target 11:45 Kmart 12:15 Insurance 12:45 Lunch 1:30 Resources 2:00 Panel – Industrial Businesses In 3:00 Q&A 3:30 Close 3
Slide 5: Management Team
Management g Team For personal use only Managing Director & CEO Richard Goyder Finance Director Terry Bowen Divisional Managing Directors Food, Liquor and Fuel Retailing Coles Ian McLeod Big Box Retailing Home Improvement & Office Supplies John Gillam Department Store Retailing Target Launa Inman Km
Slide 6: Long-term, consistent strategies
Long-term, g , consistent strategies g For personal use only 5
Slide 7: The Wesfarmers Way
The Wesfarmers Way… y For personal use only Portfolio of High Performing Quality Assets Value creating business model Autonomy Stand alone businesses High calibre leadership teams with operational control Lean corporate office O t t di g P Outstanding People l A Accountability t bilit R Reporting ti
Slide 8: Providing satisfactory returns over time
Providing g satisfactoryy returns over time For personal use only Objective: Satisfactory Returns to Shareholders Outcome: Growth in value of future cash flows to equity Review processes: (Growth in EPS, Growth in ROE) • Corporate planning • Budgeting process • Incentive schemes Disciplines: Improve
Slide 9: Coles renewal
For personal use only Coles renewal… Ian McLeod 8
Slide 10: Agenda
Agenda g For personal use only 1. 1Q performance update 2. Renewal progress 3. Trading outlook 9
Slide 11: Solid 1Q performance
Solid 1Q Q performance* p For personal use only • Growth in food and liquor sales – Total food & liquor sales up 7.3% – Comparable food & liquor sales up 6 6.1% 1% New supermarket at Flemington (Vic) • Growth in fuel & convenience sales – Comparable shop sales up 6.5% – Comparable fuel volumes up 1
Slide 12: Food & liquor 1Q sales drivers
F&L 1Q Q sales drivers… For personal use only • Solid volume growth F&L Volume V l Growth G th 7% – Customer transactions up 6% 5% • Better fresh quality 4% – Double Double-digit digit volume growth 3% 2% • Improving service 1% 0% – Customer satisfaction up 1Q09 2Q09 3Q09 4Q09 1Q10 -1% • Stronger g
Slide 13: Planning for phase two
Planning g for phase p two… For personal use only Building a Solid Delivering Driving the Coles Foundation Consistently Well Difference Performance • Create a strong top team • Embed the new culture • Culture of continuous • Cultural change improvement p • Team member development • Availability & st
Slide 14: Building strength and depth of top team
Building g strength g & depth p of top team … For personal use only • New executive appointments – Tony Buffin – Finance Director (Group Aeroplan Inc & Boots, UK) – Simon McDowell – Marketing g Director ((Sony y Entertainment, US)) – Sharry Cramond – GM, Marketing Communications (Tesco, UK) – Charlo
Slide 15: Culture change and team member development
Culture change g & team member development… For personal use only A more engaged workforce Increased training & development • Better incentives for store management • Expanded ‘Retail Leaders’ program • Labour turnover down • More graduates for store positions • Absenteeism falling • Craft skills pr
Slide 16: Improving customer service
Improving p g customer service… For personal use only • Fixing the basics – Open entries & clutter free – Focus on shorter customer queues B f Before… – Roll-out of self check-out • Investing in better stores – Capital support guidelines – Unique q facilities management g agreement – Consolidated co
Slide 17: A more appealing fresh food offer
A more appealing pp g fresh food offer… For personal use only • Focus on Australian-made Australian made produce • Improving fresh through local sourcing • B tt quality Better lit through th h direct di t supply l • Market atmosphere in store – New fruit & vegetable presentation – Open meat preparat
Slide 18: Stronger value and customer trust
Stronger g value & customer trust… For personal use only • Stronger value focus Increase in targeted customer – Better quality fresh food satisfaction scores since May 2008 Rewarded For Being Regular – Giant Gift Card Give-Away Customer 15% – Feed the family for under $10 Has Great Fresh Food 13% en
Slide 19: Private label rebranding
Private label rebranding g… For personal use only • New private label branding – You’ll Love Coles replaced by ‘Coles’ – Listened to Mum’s Panel feedback • Introducing Quality Seal and Promise on front of pack – 100% satisfied or 100% refunded • Repackaging whole range – Over 1,600 product lines by
Slide 20: Liquor renewal gaining traction with customers
Liquor q renewal ggaining g traction with customers… For personal use only • Clearer brand positioning & value focus – 1st Choice – price led destination big box format – Liquorland – continue with Everyday Value – Vintage Cellars –knowledge, quality & price • Accelerating our change program – Impro
Slide 21: Roll-out of store renewal formats
Roll-out of store renewal formats… For personal use only Successful renewal store concepts • Customer response very encouraging • Pilot program provides important insights • 20 plus renewal stores across the country • Strongest company sales densities • 50+ stores targeted in FY10 50 • Further roll-
Slide 22: Improving store and supply chain efficiency
Improving p g store & supply pp y chain efficiency… For personal use only 500 Gaps on shelves 450 • Easy store ordering 400 350 – 200 stores by end of FY10 300 250 200 • Less gaps on shelves 150 100 – Improved ordering focus 50 0 • Stronger replenishment focus Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-
Slide 23: Trading outlook
Trading g outlook… For personal use only • Consumer sentiment improving but customers remain value conscious • Consumers cautious about rising interest rates and higher petrol prices • Food and liquor inflation to remain low • Encouraging progress on renewal strategy to date • Confident we are creat
Slide 24: Questions
For personal use only Questions Quest o s
Slide 25: Appendices
For personal use only Appendices
Slide 26: Our national footprint
Our national footprint… p As at 30 September 2009 For personal use only Selling Area 7 8 11 Supermarkets (sqm) 1,606,244 Liquor (sqm) – ex hotels 177,184 151 231 79 82 94 6 117 67 62 30 6 43 252 252 5 211 161 195 162 763 Supermarkets 14 15 q 777 Liquor stores 96 Hotels 625 Convenience 25
Slide 27: Improving our franchise
Improving p g our franchise… For personal use only Open at Open at Opened Closed 30 June 2009 30 Sept 2009 Supermarkets Coles 705 4 3 706 Bi-Lo 58 - 1 57 Total Supermarkets p 763 4 4 763 Liquor 1st Choice 64 4 2 66 Vintage Cellars 80 - - 80 Liquorland 631 3 3 631 Hotels 95 1 - 96 Total Liquor 870 8
Slide 28: Home Improvement & Office Supplies
For personal use only Home Improvement p & Office Supplies John Gillam
Slide 29: Agenda
Agenda g For personal use only 1. Bunnings • Background & market trends • Strategic g agenda g • Trading update & outlook 2. Officeworks • Background • Strategic agenda • Trading g update p & outlook 3. Q&A 28
Slide 30: For personal use only
For personal use only
Slide 31: History
History For personal use only • 123 years • timber & building sector origins • consumer & DIY f focus from f 1980’s 1980’ • long term growth 30
Slide 32: Background: Strategic platform
Background: g Strategic platform For personal use only 31
Slide 33: Background: Long-term growth drivers
Background: g Long-term growth drivers For personal use only 1. A winning offer to customers 2. An engaged, focused & committed workforce 3 Business 3. B i b behaviour h i that h b builds ild trust 4 Sustainable satisfactory shareholder returns 4. Achieving growth in every store & by expansion 32
Slide 34: Aust. & NZ market trends
Aust. & NZ market trends For personal use only • Dynamic evolution across 3 decades – “hardware” to “home improvement & outdoor living” – attractive personal tax benefits driving DIY – competitor changes • 1980: two hardware markets … commercial or retail • 1990: big box formats enter • today: one m
Slide 35: Aust. & NZ market trends: Traditional hardware
Aust. & NZ market trends … evolution across 3 decades … For personal use only et Size Marke “Traditional” Hardware 1980 - 2010 34
Slide 36: Aust. & NZ market trends: Home improvement
Aust. & NZ market trends … evolution across 3 decades … For personal use only et Size Marke Home Improvement 1980 - 2010 35
Slide 37: Aust. & NZ market trends: market today
Aust. & NZ market trends … evolution across 3 decades … For personal use only Aust market today over $36b Bunnings u gs 14%% et Size Marke Home Improvement & Outdoor Living 1980 - 2010 36
Slide 38: Market size: 2001 v 2009
Market size: 2001 v 2009 For personal use only • $24 billion market in 2001 – Common market view at time of BBC takeover • Continued growth in all categories – Rapid expansion of outdoor living • Market today exceeds $36 billion – homogenous; g ; major j p players y ‘verticallyy capable’ p – long te
Slide 39: Bunnings sales & EBIT growth
Bunnings g sales & EBIT g growth For personal use only Sales ($m) EBIT ($m) Acquisition of BBC 1st Warehouse 38
Slide 40: Store & trade centre network
Store & trade centre network at October 2009 For personal use only 2 179 Warehouse stores 57 Small format stores 23 Trade Centres 29 5 8 22 7 3 9 3 1 54 16 5 13 25 44 5 4 2 1 1 39
Slide 41: Bunnings Warehouse
MXED a -BUNNINGS » “warehouse
Slide 42: Strategic Agenda
Strategic g Agenda g For personal use only 1. Profitable sales growth 2 2. Better stock flow 3. Engaging and developing a stronger team 4. Improving productivity and execution 5. Sustainability Agenda driving growth & business fitness 41
Slide 43: Strategic Agenda: Profitable sales growth
Strategic g Agenda g 1. Profitable sales growth For personal use only A. Lifting customer service • Continued priority; largest improvement & growth opportunity • Work focused on 3 key areas – coverage, knowledge k l d & product d t availability il bilit B. Enhanced merchandising • New product range
Slide 44: Strategic Agenda: Network expansion
Strategic g Agenda g 1. Profitable sales growth For personal use only C. Network expansion & enhancement • O Ongoing go g rollout o ou o of new e sstores o es & trade ade ce centres es a) more ‘Bunnings Warehouse’ stores • long term plans: open 10 to 14 annually • shorter term: likely to exceed top-
Slide 45: Merchandising update
Strategic g Agenda g 1. Profitable sales growth For personal use only Merchandising Update – wider & deeper ranges 1. New / expanded p across p past 36 mths outdoor leisure, kitchens, flooring, play equipment, fencing, sustainability special orders sustainability, orders, steel steel, lighting light
Slide 46: For personal use only
= 2 o = ry 7) i E) 2 3 UO h fais Sin) attr au liite nari “8 ; —% * iJ \ae Ha 7 Order | | at The | | Special Ii pee BI Yao wha
Slide 47: For personal use only
For personal use only 46
Slide 48: Strategic Agenda: Stock flow and team
Strategic g Agenda g For personal use only 2. Better stock flow • Improving end-to-end supply chain – lift in-stock levels, higher productivity, reduced cost 3. Engaging & developing a strong team • M More effective ff ti safety, f t training t i i & other th development d l t programmes • Higher te
Slide 49: Strategic Agenda: Effectiveness and sustainability
Strategic g Agenda g For personal use only 4. Lifting effectiveness & efficiency • Reducing the cost of doing business – systems, business improvement and productivity projects 5. Sustainability focus • Ongoing commitments: less water, energy & wastage • Improving affordability of sustainability for
Slide 50: Strategic Agenda Summary
Strategic g Agenda g Summary For personal use only Current agenda harnesses 5 growth drivers • Service • Category expansion • St Store roll-out ll t & reinvestment i t t • Trade presence • Business ‘fitness’ to fuel the productivity loop 49
Slide 51: For personal use only
mal Ne | "hous: =“ Pe) f. Ss
Slide 52: Trading update July to September 2009
Trading g update p 1 July to 30 September 2009 For personal use only • Cash store-on-store growth 15% • cycled against weakest relative trading pcp • Improved trade market conditions • Ongoing network re-investment & expansion • 6 stores & 2 trade centres opened in July to October period • 8 stores
Slide 53: Home Improvement Outlook
Home Improvement p Outlook For personal use only • Cash sales growth to continue – tempered for impact of Aust Aust. Govt Govt. consumer stimulus in past year • Improving trade contribution as economy recovers – multiple Aust. Govt. stimulus programmes • Maintaining M i t i i iintense t ffocus: cust
Slide 54: Office Supplies
For personal use only pp Office Supplies 53
Slide 55: For personal use only
Cutting Trimming Paperclips Rubber Bands Staplers Envelopes
Slide 56: Background
Background g For personal use only 1994 2003 2004 First store opens in Richmond, Harris Technology becomes part of Officeworks Acquires Viking Victoria Officeworks portfolio 2005 2007 Today Retail Stores 124 Officeworks 5 Harris Technology 24 1 1 Business 11 1 1 4 Fulfilment Centres 8 3 Service Cent
Slide 57: Strategic Platform
Strategic g Platform For personal use only 56
Slide 58: Office Supplies Network
Office Supplies pp Network at 30 September 2009 For personal use only Retail Stores 124 Officeworks 5 Harris Technology 24 1 1 B i Business 11 1 1 4 Fulfilment Centres 8 3 Service Centres 41 2 1 2 38 1 1 1 2 57
Slide 59: Strategic Agenda
Strategic g Agenda g For personal use only 1. Improve the customer offer 2 Improve customer service 2. 3. Team development & engagement 4. Make things simple & reduce costs 5 Drive sales & profitability 5. 58
Slide 60: For personal use only
For personal use only
Slide 61: Strategic Agenda: Improve the customer offer
Strategic g Agenda g 1. Improve the customer offer For personal use only • Improving the shopping experience • New & improved products / services • ‘How To’ classes & supplier demonstrations • Eco friendly products & services • Special orders service rollout • New website 60
Slide 62: Strategic Agenda: Improve customer service
Strategic g Agenda g 2. Improve customer service For personal use only • New point of sale system • Driving stronger customer focus • Provide team with tools & training • New labour scheduling system • Operation Blueprint savings invested in customer service – Self-funding via efficiency gains 61
Slide 63: Strategic Agenda: Team development
Strategic g Agenda g 3. Team development & engagement For personal use only • Strong focus on team members • Significant lift in ‘cultural cultural engagement’ engagement • Investment in team member training • Reward & recognition • Developing attracting & retaining the best Developing, 62
Slide 64: Strategic Agenda: Simple and reduce costs
Strategic g Agenda g 4. Make things simple & reduce costs For personal use only • Stock management improvements • Supply chain productivity & CODB gains • Reduction in store support cost base • Processes & procedures simplified, complexity removed 63
Slide 65: Strategic Agenda: Drive sales & profitability
Strategic Agenda 5. Drive sales & profitability For personal use only • Open 8 to 10 new Officeworks stores p.a. – new store pipeline progressing well • Upgrade 8 to 10 existing stores p.a. – pleasing results to date • Further F th website b it enhancements h t • Attracting g new business customers
Slide 66: For personal use only
For personal use only
Slide 67: Trading Update July to Sept 2009
Trading g Update p 1 July to 30 Sept 2009 For personal use only • Officeworks retail stores sales growth 12% – Underpinned by strong transaction growth – Positive response to EDLP • OW Business gaining momentum • Ongoing network investment & expansion 66
Slide 68: Outlook
Outlook For personal use only • Moderate sales growth in retail stores – Small business sector sentiment remains volatile – Pressures on margin and costs • Focus on executing strategic agenda – Drive sales – Improved customer offer & service – Network expansion & upgrade – Reduce CODB & complexity 6
Slide 69: Questions
For personal use only Questions Quest o s
Slide 70: Target
For personal use only Target a get Launa Inman 69
Slide 71: Trading Update
Trading Update 3 months to September^ For personal use only • Sales up 4.3% • Comparable store sales up 1.8% (adjusted up 2.4%*) – July and September flat – August strong • Fragile consumer sentiment – Retail sales from Government stimulus no longer evident – Customers looking for exceptional value
Slide 72: Managing the Business
Managing g g the Business For personal use only • Customer behaviour – Evidence of customers ‘bargain hunting’ – I Importance t off entry t price i points i t and d volumes l att these th prices • Capturing reductions from suppliers in product costs – Negotiations g to benefit from FX improvement p
Slide 73: Target strategies
Target g strategies g For personal use only Strategic initiatives Comments Focus on fundamentals 3 Meeting customer needs on range, price and service 3 Evolution of “100% Happy” Brand reinforcement Ongoing Unique philosophy and positioning Ongoing Leveraging an emotional connection Ongoing Bringing
Slide 74: Strategies: Store Network Development
Strategies g Store Network Development – FY10 For personal use only • Planned new stores – 6 new Target stores – 1 Target Country (replacement) • Expansions – 2 Target stores • Investment in existing stores – Around 20 stores – Upgrades range from full refits to a light touch – Projected P j t d tto
Slide 75: Differentiation still the key: Pop Up Retail
Differentiation still the keyy For personal use only • Creating new ways to excite the customer – Pop Up Retail 74
Slide 76: Differentiation still the key: new to Target
Differentiation still the keyy For personal use only • Bringing what’s new in the world to Target – Appointment of General Manager, Creative – Build internal Design and Innovation Group – Direct Sourcing g System y 75
Slide 77: Supply Chain
Supply pp y Chain For personal use only • Improved efficiencies – Better service to stores – Increased speed to market • Supply Chain cost savings of $10m to date • Benefits realised = financial and non-financial – Principles focused on making it easier for our stores 76
Slide 78: Sustainability
Sustainabilityy Environmental Initiatives For personal use only • B ilding ssustainability Building stainabilit into o ourr b business siness fabric – Signatory to National Packaging Covenant – Participant in Government’s Energy Efficiency Opportunity program • Taking a leadership role role, but sti
Slide 79: Target Outlook
Target g Outlook For personal use only • Outlook remains cautious – Managing inventory – Cost control – Cycling Dec. Government stimulus package • Customers continuing to seek out value - Entry and mid-price points well stocked - Broaden sourcing base to help reduce costs • Remain nimble to competit
Slide 80: Questions
For personal use only Q Questions
Slide 81: Appendix
For personal use only pp Appendix
Slide 82: Target Store Network
Target g Store Network end September 2009 For personal use only 2 1 32 24 16 10 19 12 52 45 45 23 170 Target stores 116 Target Country stores 4 1 81
Slide 83: Kmart
For personal use only Kmart Guy Russo 82
Slide 84: Agenda
Agenda g For personal use only • Trading Update 1Q10 • Strategy Update • Outlook 83 83
Slide 85: Trading Update 1Q10
Trading g Update p – 1Q10* For personal use only • S Successfully f ll exiting iti unprofitable fit bl sales l – Comparative store sales decline of 2.3% for 1Q10 – Profitability improving • Inventory below last year and remains well controlled • Pleasing performance from Kmart Tyre & Auto * 13 weeks
Slide 86: Strategy Update
For personal use only Strategy Update 85
Slide 87: A discount department store
For personal use only A discount department store focussed on serving customers quality products at low prices, in an easy to shop environment
Slide 88: Health check - where are we at?
Health check - where are we at? For personal use only Customer Outstanding Customer People Experience Product Best People, Ranges Great Customers Company Want P fit Profit Place Price Every Site a Great Value Success Everyday Promotion Clear Communication 87 87
Slide 89: Customer
Customer For personal use only • Faster friendlier customer service Faster, • Significant increase in customer engagement – Compliments p on the rise • Extended trading hours for enhanced convenience i 88 88
Slide 90: Product
Product For personal use only • Unnecessary products removed – Over 20% SKU reduction in an average store • Stopped discounting products at below cost • Ongoing execution of supply chain rationalisation – 62 offsites/storage facilities closed – Announced net closure/exit of 5 distribution centres •
Slide 91: Price
Price For personal use only • Making good progress on removing excessive category discounting • Simplified pricing communicated – Round prices – Price points on racks • Focussed F d on iimproving i price i perception 90 90
Slide 92: Promotion
Promotion For personal use only • Major investment in customer research • Si l clearer Simple, l messages • Clearer, uncluttered catalogues • Promoting items rather than ‘% off’ 91 91
Slide 93: Old
For personal use only Old 92 92
Slide 94: New
For personal use only New 93 93
Slide 95: Place
Place For personal use only • Actively looking for new sites – Additional resources added • Making it easier for our customers – Clear race tracks • Network refresh – ~60 over next 2 years 94 94
Slide 96: People
People p For personal use only • Building a customer focussed culture – develop capabilities focusing on customer • Store Managers in store on weekends • People accountable for focussing on customers and results 95 95
Slide 97: Summary
Summaryy For personal use only • R Renewal l progressing i wellll and d att pace – Removing unnecessary and unprofitable sales is working – Right prices results in significant growth in volume – Customers are responding p g well to in-store changes g • Confident we are creating solid foundations for
Slide 98: Outlook
For personal use only Outlook 97
Slide 99: Kmart Outlook
Kmart Outlook For personal use only • Continue to cycle category exits and promotional changes • Cycling Government stimulus packages • Ongoing profitability improvements • Changes g over the next six months will be even more significant g • Internal focus will begin to shift from renewal to growth
Slide 100: Questions
For personal use only Q Questions 99
Slide 101: Appendix
For personal use only Appendix 100
Slide 102: Kmart Store Network
Kmart Store Network at 30 September 2009 For personal use only 185 Kmart stores 252 KTAS centres 2 3 36 52 21 28 13 19 50 71 12 43 73 5 6 3 101
Slide 103: Insurance
For personal use only Insurance su a ce Rob Scott 102
Slide 104: Insurance financial results FY09
For personal use only Broking Underwriting Australia New Zealand Income GWP $218m $1,358m EBITA Margin COR 27 9% 27.9% 103 2% 103.2% Financial results are for FY 09 103
Slide 105: Market Conditions
Market Conditions For personal use only Benign weather conditions through Q1 FY2010 Modest rate increases in some classes Rate hardening more prevalent in NZ than Australia Business confidence and spending p g still fragile g Positive signs emerging in Australia NZ remains flat 104
Slide 106: Key Strategies - Underwriting
Keyy Strategies g - Underwriting g For personal use only Fundamental Profitable growth through leadership in chosen Objective segments Keyy Strategies g Stronger partnerships Disciplined underwriting and pricing Managing claims effectively Growth in chosen segments Building g a culture of
Slide 107: Trading Update
For personal use only BUSINESS Trading Update FARM HOME & CAR Premium growth across all classes STRATA Benign B i weather th conditions diti in i Q1 WFI re-branding well received by market Changes in market players Elders/QBE acquisition Exit from rural market: SUN, ACE and Zurich Good
Slide 108: Trading Update
For personal use only Trading Update Australia New management team in place Strong business retention Re Re-branding branding well received in broker market Exit from Builders warranty insurance Launch L h off my.place l on-line li b broker k system t New Zealand New distribution par
Slide 109: Personal Lines Initiatives
Personal Lines Initiatives For personal use only 108
Slide 110: Key Strategies - Broking
Keyy Strategies g - Broking g For personal use only Fundamental To understand our clients clients, earn their trust and provide Objective solutions to enable them to financially survive any insurable event Key Strategies Support our brokers in being client focused Improve efficiency and producti
Slide 111: Trading Update
For personal use only Trading Update BUSINESS INSURANCE PERSONAL LINES Positive start to year FINANCIAL SERVICES LIFE DISABILITY & HEALTH Distribution arrangement through ANZ Business SCHEMES Banking CLAIMS MANAGEMENT SME Express trial in progress PREMIUM FINANCING Growth in ancillary lines
Slide 112: Trading Update
For personal use only BUSINESS INSURANCE Trading Update PERSONAL LINES SUPERANNUATION Yet to see material benefits from rate hardening LIFE & INCOME PROTECTION New premium funding arrangement (Monument) SCHEMES FINANCIAL MANAGEMENT Improvements to business support capabilities ENVIRONMENTAL CO
Slide 113: Developing our team
Developing p g our team For personal use only .....step step into the Wesfarmers Insurance Leadership Development (W.I.L.D.) is a suite of leadership programs g with ith customised t i d content t t tto meett th the d development l t needs d off our iinsurance leaders today & build leaders for tomor
Slide 114: Outlook 2010
Outlook 2010 For personal use only Positive momentum in Lumley turnaround Premium rate increases being achieved in NZ Recent benign weather a positive but future uncertain Higher interest rates will improve investment returns Continue investment in people and management systems Bolt-on a
Slide 115: Questions
For personal use only Q Questions 114
Slide 116: Resources
For personal use only Resources Stewart Butel
Slide 117: Wesfarmers Resources
Wesfarmers Resources For personal use only Export metallurgical and domestic steaming g coal QLD Domestic steaming coal WA Export and domestic NSW steaming coal (40% ownership) 116
Slide 118: Business environment
Business environment For personal use only • Strong signs of emergence from global economic crisis – Customers – Significant increase in global steel production – Increased metallurgical coal demand and spot prices – Traditional T diti lAAustralian t li exportt market k tddemand d returns t – Suppli
Slide 119: Seaborne metallurgical coal market
Seaborne metallurgical g coal market For personal use only CONSTRAINED SUPPLY REBOUNDING DEMAND Australia rail & port China imports continue constraints re-emerging g g (August YTD 32mtpa rate) (Hay Point ship loader down / 70 vessels DBCT) Higher rates of steel production US high cost mines closed
Slide 120: Resources strategies
Resources strategies g For personal use only Strategic initiatives Comments • Long-term contracts ongoing Maximise export sales and • Price relativity maintained optimise sales mix • Maximise higher value products • Improve operational performance • Cost reduction programs in place Cost reduction pr
Slide 121: Coal production volumes
Coal – p production volumes For personal use only YTD ended Mine Beneficial Coal Type (('000 000 tonnes) Interest Sep-09 Sep-08 Curragh QLD Curragh, 100% Metallurgical 1 711 1,711 1 809 1,809 Steaming 618 774 Premier, WA 100% Steaming 802 938 B Bengalla, ll NSW 40% St Steaming i 587 519 Total* 3,718
Slide 122: Curragh focus on cost control
Curragh g focus on cost control For personal use only • Aggressive cost reduction program in place • Strategies targeted include – Mining and processing practices, equipment utilisation and productivities – Procurement optimisation on key input costs – Optimisation of contractor usage and roles – Tr
Slide 123: Curragh expansion study
Curragh g expansion p studyy For personal use only • Feasibility st Feasibilit study d to e expand pand e exports ports to 8.0mtpa to 8.5mtpa completed • Curragh expansion study includes – New 1,200tph CHPP – Additional overburden removal capacity – Rail and p port capacity p y in p place – Market d
Slide 124: Blackwater Creek diversion
Blackwater Creek diversion For personal use only • Access to additional metallurgical coal • Capital estimate $130 million • Civil works completed September 2009 • Rehabilitation and project completion estimated mid CY2010 • Ahead of budget and timeline 123
Slide 125: Resources outlook
Resources outlook For personal use only • Strong signs of global steel production recovery • JFY2010 price negotiations to commence around January 2010 • Forecast Curragh g metallurgical g sales of 6.2 – 6.7mt in FY10 – Estimated sales mix (Hard 47 - 50%; Semi-Hard 20%; PCI 30 - 33%) • Significantly
Slide 126: Questions
For personal use only Q Questions 125
Slide 127: Appendices
For personal use only pp Appendices 126
Slide 128: Australian coal market prices
Australian coal market prices p For personal use only Steaming coal Hard coking coal US$/Tonne (Nominal) FOB Australia (annual verse spot) US$/Tonne (Nominal) FOB Australia (annual verse spot) 200 400 350 160 300 120 250 200 80 150 100 40 50 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2003 2004 2005
Slide 129: Hedging profile as at September 2009
Hedging g g profile p as at 30 September p 2009 For personal use only Curragh – Open Contracts Bengalla – Open Contracts Current US$ Average Current US$ Average Year end Year end sold forward A$ / US$ sold forward A$ / US$ 30 Jun 30 Jun (US$m) hedge rate (US$m) hedge rate 2010* 281 0.80 2010* 66 0.7
Slide 130: Coal delivery systems
Coal deliveryy systems y For personal use only • Gladstone – Short-term rail capacity constrained due to increased coal demand – Ongoing rail duplication projects – Adequate port capacity in place – Wiggins Island Coal Terminal feasibility study continues • Newcastle – Port o coconstraints s a s co
Slide 131: Coal port congestion
Coal p port congestion g East Coast Australia as at 9 October 2009 For personal use only No. of ships p at anchor 180 160 140 120 100 80 60 40 20 0 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Gl d t Gladstone N Newcastle tl Oth Ports Other P t Source: McCloskey Fax 1
Slide 132: Industrial Businesses
For personal use only Industrial Businesses 131
Slide 133: Chemicals & Fertilisers
For personal use only Chemicals & Fertilisers 132
Slide 134: Chemicals & Fertilisers Overview
Chemicals & Fertilisers Overview For personal use only B i Business G Geography h S t Sector K C Key Customers t Ammonia WA Nickel BHP, Minara Orica, Dyno Ammonium Nitrate WA Iron Ore Nobel, Rio Tinto BMA, AngloCoal, BMA AngloCoal (50%) Ammonium Nitrate Qld Coal Rio Tinto Newmont, (75%) Sodium Cyani
Slide 135: Operational Update
Operational p Update p For personal use only • Ammonia, ammonium nitrate plants ran at maximum production in Q1 FY10. – Record production from all plants, with significant AN exports. – No p planned ammonia p plant shutdowns in FY10. – 49 day planned maintenance shutdown of 50 per cent AN capacity i
Slide 136: Strategy Update
Strategy gy Update p For personal use only Strategic Initiatives Comment Growth WIP Improve ammonia plant production performance 9 Sodium cyanide expansion (+8,000 tpa) WIP Identify additional AN capacity opportunities Optimise cost and capital 9 Refinance QNP – cash to sponsors WIP Inventory manage
Slide 137: Chemicals & Fertilisers Outlook
Chemicals & Fertilisers Outlook For personal use only CHEMICALS • Strong demand for ammonia and AN from Nickel and Iron Ore producers. • High gold price has increased sodium cyanide demand. • Water infrastructure spend in eastern Australia should lift PVC demand. FERTILISER • Global fertiliser price
Slide 138: Industrial & Safety
For personal use only Industrial dust al & Safety Sa ety
Slide 139: Trading update
Trading g update p For personal use only • Solid FY09 result given challenging market conditions – Impact partially mitigated by expense and capital management focus – Strong performance from Bullivants and resources & infrastructure segments – Most competitors more severely impacted • Slowdown stil
Slide 140: Strategic agenda
Strategic g agenda g For personal use only Invest for the future Strengthen Push Manage downturn leadership position boundaries ance Performa • Further expansion • Profitable growth • Business model 1. Increasing sales to existing i ti g customers t • Consolidate positions 2. SME penetration 3. High
Slide 141: Strategies: Increasing sales to existing customers
Strategies g For personal use only 1. Increasing sales to existing customers • Sales to top 15 customers up 7% over 12 months • Security of supply - DIFOT > 94% • Leveraging specialist offering • Improving sales effectiveness • Product range extensions • Expanding range of value-added services • Sub
Slide 142: Strategies: SME penetration and growth sectors
Strategies For personal use only 2. Increasing SME penetration • Strong customer service focus • Network upgrade program • Improved marketing and merchandising • Developing more efficient channels 3. Investing g in higher g growth g sectors • Construction and infrastructure • Oil & gas g • Selected
Slide 143: Strategies: Margin and competitiveness
Strategies g For personal use only 4. Managing margin • Facing lagging FX impact on inventory • Leveraging improved pricing capability • Strengthening relationships with key suppliers • Continuing Co u g to o invest es in d direct ec sou sourcing c g capab capability y 5. Improving competitiveness •
Slide 144: Industrial & Safety outlook
Industrial & Safetyy outlook For personal use only • Strengthening growth platform – Increasing share of customers’ spend and exposure to growth industries – Improved competitiveness – Healthy acquisition pipeline • Challenging g g market conditions and margin g p pressure expected p until 2H10 – Su
Slide 145: Appendices
For personal use only pp Appendices
Slide 146: Industrial & Safety Business Portfolio
Industrial & Safetyy Business Portfolio For personal use only Australia New Zealand “All your Safety Industrial workplace Specialist Specialists needs” (1) (1) Manufacturing and services 145
Slide 147: Industrial & Safety Distribution Network locations
Industrial & Safetyy - Distribution Network 239 locations (162 Australia, 77 New Zealand) For personal use only Australia No No. 2 70 MRO, “All your workplace needs” 1 1 17 5 Electrical 14 5 12 7 9 5 9 3 Safety 42 2 1 54 22 Materials handling, lifting, rigging 4 2 17 1 6 4 Fasteners 16 4 1 7 Enginee
Slide 148: Mid term outlook
Mid term outlook Significant customer investment pipeline For personal use only 5 Selected ANZ projects Oil & gas Infrastructure & Construction Utilities (inc. telecommunication) Resources Source: ABARE, NZIER, Industry Capability Network (NZ), State governments’ resources and primary industries web
Slide 149: Energy
For personal use only e gy Energy 148
Slide 150: Energy Overview
Overview For personal use only Business Geography Products Key customers Gas production & NSW, Vic, Qld, distribution SA Metal solutions, manufacturing, Oxygen, nitrogen, acetylene, utilities, water, healthcare, food, argon, carbon dioxide, etc hospitality, pharmaceuticals, Gas production & research
Slide 151: Key Strategies Update on Strategies
For personal use only Key Strategies Update on Strategies • Following capacity investments in 2009, continuing targeted marketing and Focus business on increasing sales effort with expanded product portfolio market share • Renewed focus on effectiveness of sales force • Improving DIFOT, cylinder sca
Slide 152: Key Strategies Update on Strategies
For personal use only Key Strategies Update on Strategies Develop WA heavy duty vehicle • Broadening heavy duty vehicle customer base and progressing with refueller market to sell remaining rollout production capacity Raise awareness on east coast and • Identified target fleets, aggregating customer
Slide 153: Key Strategies Update on Strategies
For personal use only Key Strategies Update on Strategies • Diversifying and optimising supply sources Improve East Coast Supply Chain • Improve distribution marketing efficiencies Grow market share • Improve marketing efficiencies Trading Report • Q1 traditional volumes slightly down on prior year
Slide 154: Key Strategy Update on Strategy
For personal use only Key Strategy Update on Strategy • Negotiating most suitable gas supply for ongoing operation Maximise LPG production • Evaluating minor investment in plant to improve operating efficiency Trading Report • Q1 production above expectations due to higher than budgeted LPG content
Slide 155: Questions
For personal use only Quest o s Questions 154
Slide 156: Q&A
For personal use only Q&A Richard Goyder y Managing Director, Wesfarmers Limited Terry Bowen Finance Director, Wesfarmers Limited
Slide 157: For all the latest news visit
For personal use only For all the latest news visit www.wesfarmers.com.au 156