Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Presentation (November 2006)
140 slides from Wesfarmers's investor presentation, Nov 14, 2006
Slide 1: Presentation at Investor Briefing, Sydney
7 Wesfarmers Limited ABN 28 008 984 049 LIK/pe 14 November 2006 The Manager Company Announcements Office Australian Stock Exchange Limited Level 4 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam PRESENTATION AT INVESTOR BRIEFING, SYDNEY — 14 NOVEMBER 2006 Following is a presentation that is to be gi
Slide 2: Ly Oo _
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Slide 4: Richard Goyder, Managing Director
EOS, Lo Richard Goyder Managing Director, Wesfarmers Limited Oe Wesfarmers
Slide 5: Agenda
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Slide 6: Wesfarmers
Oe Wesfarmers
Slide 7: Wesfarmers Timeline of Significant Events
key decisions in 22 years... Wesfarmers Timeline of Significant Events vies | AEs 1 vis April 2001 December 1987 October 1993 Resulted in capital boing fread up for aquisitions ASX Listing ‘pal market tho rotall hartware sector ens vector Acquitad interest as a "white s 196 knight” and_was the precu
Slide 8: Resulting in increasing returns
Resulting in increasing returns EPS Share (cents) Price(A$) 40,00 350 4 35,00 30.00 250 25,00 20.00 150 15.00 10.00 50 ; 5.00 : : 80 oe OT 0.00 -50 -5.00 86 «87 88 8990 91 92 «93 94°95 96 «(97 98 #499 00 01 #02 03 04° «05 06 EPS (AGAAP) EPS (A-IFRS) @@@mGirrah EPS @Z@Jiandmark EPS MMARG EPS = ~«--—W
Slide 9: Investment has consistently exceeded depreciation
Investment has consistently exceeded depreciation ASm 1,600 1,400 5 1,200 - 1,000 800 5 600 + 400 5 200 5 0+ T he T T 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 O7F Capital Expenditure wm Acquisitions omm Depreciation
Slide 10: Management Team
Management Team Managing Director & CEO Richard Goyder Finance Director Gene Tilbrook John Gillam Stewart Butel Bob Buckley Industrial & Safety Terry Bowen | _ Chemicals & Fertilisers Keith Gordon Energy Tim Bult
Slide 11: Group results
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Slide 12: Most divisions exceeded ROC performance target
Most divisions exceeded ROC performance target of 20% in 2006 Return on Capital 70 (%) 30 Satisfactory 25 5 Satisfactory 20 4 154 Improvement Required Minimum 10 4 5 J . / : Unsatisfactory 0 — 2002 2003 2004 2005 2006 © Energy r Home Improvement @ Insurance © Industrial & Safety @) Chemicals & Ferti
Slide 13: Industrial & Safety
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Slide 14: Portfolio of industrial and safety businesses
Portfolio of industrial and safety _ product supply and service businesses - Core business | Blackwoods Australian market leader in distribution of Maintenance, Repair and Operating supplies (MRO) ist Businesses A) NZ Safety rstector ) \. Safety Supply OL, Blackwoods 2 Paylels ai Packaging House Gt
Slide 15: Blackwoods - MRO market leader
Blackwoods - MRO Market leadefee! / in Australia (88 locations) General Industrial Fragmented, intense Products competition largely from specialists A$10b MRO market Major competitors Blackweods + Hagemeyer Top 3 industries * Coventry * Manufacturing * Crane * Mining *BOC * Construction * Heatley In
Slide 16: Australian Specialists - Complementary
Australian Specialists - Complerfiiiiitary (66 locations) Safety clothing & products All industries Fragmented, intense * BOC Safety specialist + Best range/ availability A$1.5b « Aust. Safety + Advice & Training * Independents + Customised solutions Fasteners Fragmented Fastener specialist Nullings
Slide 17: New Zealand Specialists
New Zealand Specialists All Industries NZ$0.5b Safety clothing & products Fragmented “BOC + Snell * Equip Safety #1 & #2 safety specialists * Complementary price, range and service positions General industrial products All Industries Hackweads © Paykels NZ$2.9b MRO market Fragmented *BGH « Independe
Slide 18: WIS has a very competitive platform
i) WIS has a very competitive 7 & platform a i) LE yD 7 7) _. ay 7 _ es | LL L Vy i y . Wy LL YD) iy) c v y yy . _ | y . - Vy Vy wis Competitor 1 Competitor 2 Competitor 1 Competitor 2 Australia | International @ EBIT/sales w Asset turn (excl. goodwill) Note: profits have not been adjusted for one-o
Slide 19: But business performance has been constrained
But business performance has ea been constrained * Declining core manufacturing market « Unsatisfactory Blackwoods Paykels performance — Integration difficulties * More recently, difficult New Zealand business conditions — Slowing economy — Falling exchange rate «04 18
Slide 20: Focus on capturing potential in faster growing sectors
Focus on capturing potential in Se faster growing sectors Continued decline of manufacturing in the Australian economy (% GDP) Manufacturing Sector Output as a Percentage of Gross Domestic Product 18.0% 47.0% La, 16.0% \ t 15.0% aA 14.0% Ny 13.0% NA Mining 4S i Forecast Construction 4 0% i Services
Slide 21: Business turnaround program
Business turnaround program fo (Oct 05-Oct 06 Improve management New management introduced and stable Improve IT performance = -¥_|T platform stabilised Improve service levels Vv IWIP DIFOT increased from 82.5% to 90% Cost base down by NZ$ 2.6m (11%), FTEs from 260 to _ 230, Warehousing rationalised
Slide 22: Reinforcing strong positions in New Zealand
Despite tough business conditiofiill! reinforcing strong positions in New Zealand * Seeking new growth opportunities — range extension and new sector development * Reinforcing competitiveness — cost control — capital management, particularly inventory * Maintaining strong expertise and service level
Slide 23: Strategy Update: Focus to date on strengthening the platform
Strategy Update: Focus to date | ee on strengthening the platform Performance 4 re * Further expansion __ + Growth sectors focus: sales, network, products __ + Service excellence to key : . Business simplification customers | + Improvement programs » Further lift cost/capital | competitiveness Time
Slide 24: Re-base the business: Enabling initiatives completed
Re-base the business: Enabling initiatives completed _ Division Restructured into national business units _ Shared services strengthened (HR, Accounting, IT) Delivered efficiency savings: >150 non-sales employees Blackwoods Restructured sales and contract teams Reposition Range rationalisation, clos
Slide 25: Re-base the business: Business simplification
Re-base the business: Business simplification well underway ~ 500 + 400 + 300 | SKUs (,000) 200 net reduction of 183,000 product lines «04 24
Slide 26: Re-base the business: Improvement programs
Re-base the business: a Improvement programs begin to impact Division $65m/18% reduction in working capital (inventory, debt) New sales incentive schemes in place Redesign the New Safety and people programmes in place sales & logistics model Blackwoods & Enhanced sales & contracts skills / processes
Slide 27: Leverage stronger platform to focus on growth
Leverage stronger platform to | oe increasingly focus on growth Performance a -.. + Further expansion * Growth sectors focus: sales, network, products. * “Enabling” initiatives : Service excellence to key . . rr customers | + Business simplification + Further lift costicapital_ + Improvement program
Slide 28: Growth Strategies underway
Growth Strategies underway ae Additional sales force / product specialists for growth sectors « 34 of target 50 additional positions filled over past 6 months Network development in growth locations (across networks) Further penetrate higher growth sectors « Continued improvements in supply chain Pr
Slide 29: Growth Strategies underway
Growth Strategies underway oon 7 Services and incentives to grow spend across entire portfolio Continue to improve service to increase + Attract, train and retain the best people in the industry share of spend + Pricing programmes + Expand competitive advantage in e-business channels Leverage econom
Slide 30: Outlook
* Weak market conditions in New Zealand and manufacturing generally Outlook balanced by stronger results elsewhere — continued strong demand from resource customers — business improvement initiatives delivering benefits * Leverage stronger foundations — completion of business improvement initiatives
Slide 31: Questions
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Slide 32: Chemicals & Fertilisers
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Slide 33: Major supplier of ammonia and nitrate to resources sector
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Slide 34: LD u .
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Slide 35: Key supplier of fertilisers to rural sector
Key supplier of fertilisers to ru a y - y “ay iy y 7 Ly . yy q Le ae oe y UM y, os Yigg yy y ay yy Ve i en roduc A c Se : yy Ce yy ae “ae ) ~~ i a _ : oS nui i, i Wy Ue (on | ay 2 | iy - ) Le 7 oF ~ Ve ey | nee ae a one Le CC ellve i C7777 yy yy on yy ) ii 7 a ee CC 2 oe Y D 5 i: ye _ 7 gg Le Y iy a
Slide 36: Chemicals
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Slide 37: Contribution from Kwinana AN up significantly
Contribution from Kwinana AN up significantly on prior year Growing demand from Pilbara Record production >250,000t — all directed to explosives market Full year effect of short term contract renewal Ammonia production affected by gas curtailments; 5,000t import in January 2006; 13,000t import in Au
Slide 38: Sodium cyanide - Improved financial performance
Sodium cyanide - Improved financia performance and further growth prospects « Contribution increased by 65% over prior year « Record production of solid product « Reduced working capital in export business * Tight global market for solid sodium cyanide * Increasing customer focus on safety and compl
Slide 39: Fertilisers
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Slide 40: Fertiliser business tied to seasonal conditions
Fertiliser business tied to seaso conditions and rural outlook « Focus is on improving quality of business: — Market share maintained throughout seasonal fluctuations — Pursuing liquids growth strategy — Expenses under constant review — Fixed v variable expenses a focus * 2005/06 sales affected by d
Slide 41: Liquid fertilisers remained positive
Liquid fertilisers remained positive despite a lower market overall « Sales of liquid fertiliser in 2005/06 were slightly higher than in 2004/05 * Percentage of total sales continued to increase * CSBP is investing in liquids infrastructure in regional areas Tonnes sold * Amanufacturing position fol
Slide 42: The drought and poor harvest may impact 2006/07 sales
The drought and poor harvest may impact 2006/07 sales * High levels of closing stock on farm will influence 2006/07 volumes * Cash flow position of farmers will result in purchases for 2007 being delayed as long as possible We can respond through: * Maintaining our market-focused customer offer * En
Slide 43: Chemicals strategy and progress
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Slide 44: Fertilisers strategy and progress
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Slide 45: Chemicals & Fertilisers
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Slide 46: Outlook
Outlook * Chemicals — Continued strong demand from resource sector — Full year benefits from sodium cyanide business improvements — AN expansion project progressing * Fertilisers — Potentially high levels of closing stocks may influence 2006/07 volumes due to poor start to season — Continue focus on
Slide 47: Questions
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Slide 48: Insurance
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Slide 49: WID Strategic Rationale
WID Strategic Rationale a 1. Lumley _ Intermediary _ Risk Assessment, Relationship Underwriting & Pricing General Insurance > wri — Client __ Risk Assessment, ee ; Relationship / Underwriting & Ownership Pricing Financial : Insurer : : Client ae eS for 3. AMP — _— . . Services OAMPS Relationship /__
Slide 50: Industry Distribution Channels
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Slide 51: Industry in cyclical downturn
Industry in cyclical downturn $n Insurance cycle 29,000 Peak Ol surance oycle in June 2004 84%: with the highest premium revenus 28,000 7 28,600 N 50% 82% and lowest COR 28,400 7 ut 88% 28,200 N \ 86% iN VA ~ in “J 28,000 we : 84% "i “Sh i "i 27,800 al a2 27,600 f 1 1 f f f f Lage, Sep-O3 Dec-03 Mar
Slide 52: WID compares favourably to industry profitability
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Slide 53: New growth opportunities
New growth opportunities * Organic growth through business initiatives « Extend into related growth opportunities — Maintain focus on specialty skills and capabilities « Investigate acquisition opportunities that satisfy investment hurdles — OAMPS — Underwriting agencies — General insurance competit
Slide 54: OAMPS Acquisition
OAMPS Acquisition * Proceeding with compulsory acquisition * Provides broader engagement with the insurance sector * Provides new growth opportunities for the Division « Retain and build on specialist insurance skills « Merge OAMPS underwriting systems, processes and staff with Lumley « Provides int
Slide 55: Opportunities / Challenges 2006/07 Strategic Initiatives
Opportunities / Challenges 2006/07 Strategic Initiatives Pursuing profitable growth Target new segments for profitable growth Commercial rates stabilising in Australia Continue building technical and expert capabilities Sales force efforts targeted at growth sectors Focus on profitable sectors and m
Slide 56: Outlook
Outlook « Further consolidation in the general insurance sector in Australia — SUN/PMN — Continued aggregation of brokers * All business units experiencing high level of competition — Investment in sales capability — Maintain disciplined underwriting * Claims patterns returning to historic leveis —
Slide 57: Questions
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Slide 58: Coal
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Slide 59: Wesfarmers Coal
Wesfarmers Coal eo 58
Slide 60: Wesfarmers Coal - locations
Wesfarmers Coal - locations CONTRIBUTION TO GROUP EBIT Coal Premier Coal Curragh Bengalla (40%) Z «00 59
Slide 61: Financial Performance
Financial Performance Year Ended 30 June ($m) Revenue EBIT * R12 Capital employed ROC (%) * 577.8 251.2 737.5 522.7 78.3 48.1 * Based on preliminary allocation of overheads eo 60
Slide 62: Coal - sales
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Slide 63: wie Ls
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Slide 64: Continued industry growth challenge
Continued industry growth challenge « Availability./ cost of key inputs «--Global shortage of earthmover tyres * Availabilty / cost of skiled labour . Industry-wide capital over-runs and delays * Infrastructure constraints *. Water availability eo 63
Slide 65: Curragh production costs
Curragh production costs year ending Sep 06 vs year ending Sep 05 « Continued pressure on costs *« Some scale benefits Total cash production cost * 20% Total production volume 19% Cash production cost per produc! tonne * 1% * excludes Stanwell rebate eo 64
Slide 66: Improving Curragh's CHPP performance
Improving Curragh’s CHPP performance Average hours per day downtime (excludes shutdowns) 4.05 3.51 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 eo 65
Slide 67: Scale and pace of change at Curragh
Scale and pace of change at Curragh 2003/04 vs 2005/06 Man-hours #82% Million hours 8.9 Million tonnes Million tonnes Export ales #30% - 6.0 - Million tonnes eo 66
Slide 68: ee _ _ es
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Slide 69: Strategies
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Slide 70: Curragh North development
Curragh North development « Mine development completed - Dec 2005 « Conveyor commissioning - Dec 2006 * Project on budget at $360 million 69
Slide 71: Premier Char Plant development
Premier Char Plant development! « R&D demonstration plant * 50,000 tonnes per year * Commissioning Dec 2006 * On time and on budget * Focus on market development eo 70
Slide 72: Bengalla expansion
Bengalla expansion * Amending development consent « Potential expansion from 8.7 to 10.7 mtpa ROM * Increase export sales * Consistent with port and rail capacity *« Decision to expand Q1 2007 74
Slide 73: Coal strategies
Coal strategies Strong export customer demand Maximise Bengalla and Curragh production Cost pressures Continue best practice production cost per product tonne Infrastructure constraints Closely monitor and capture opportunities to export as soon as capacity becomes available Increase coal production
Slide 74: oaes
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Slide 75: Gladstone Coal Delivery System (GCDS) - Performance update
Gladstone Coal Delivery System) (GCDS) - Performance update « Rail and port system constraints as predicted — Performance at around 93% of contract (July to October) . Capital works completion dates unchanged — Port third dump station (November 2006) —, Rail track duplication (July 2007) *- Expect r
Slide 76: Metallurgical Coal Sales
Metallurgical Coal Sales « 2006/07 metallurgical sales estimate unchanged d” contracts:
Slide 77: Coal Quality
Ash % (arb) Queensland Hard Coking Coal Coal Quality * QLD hard coking coal - ash vs volatile matter (VM) "1 Lower ash | 10 ,------Moprieh Pek Riverside a and lower VM | g naey Collinsville g +..Serman Crk" ___ Goor spe ---_pOaky Crk 8-8 a oe [ ; Higher carbon | Po eee Nth gurton ee content | r Kest
Slide 78: Queensland Hard Coking Coal
Queensland Hard Coking Coal Curragh Advantages * Lowest ash / low VM coking coal — Niche product quality with high coke yield * Lowest “Al2Os in coal” content — Important to balance increasing Al,O, in iron ores * High cold coke strength (Micum Index) = Appreciated: by customers * Only low-VM coking
Slide 79: Coal Outlook
Coal Outlook « Rail and port system constraints continue in 2006/07 * Curragh metallurgical sales — range 6.2 mt to 6.5 mt in 2006/07 * Curragh North Development Completion * Input cost and availability pressure to continue * Water availability becoming critical in eastern Australia eo 78
Slide 80: Questions
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Slide 81: Wesfarmers Energy
Slide 82: Financial Performance
Slide 83: Energy - locations
Slide 84: Alternative fuel opportunities
Slide 85: LPG
Slide 86: LPG - production
Slide 87: LPG content at WLPG
Slide 88: Record high world LPG prices
Slide 89: LPG - sales and distribution
Slide 90: LNG
Slide 91: LNG - $138 million vertically integrated project
Slide 92: LNG - production
Slide 93: LNG - sales and distribution
Slide 94: Power generation
Slide 95: Power generation - locations
Slide 96: Power generation
Slide 97: Industrial gases
Slide 98: Industrial gases
Slide 99: Energy's growth platform
Slide 100: Outlook
Slide 101: Questions
Slide 102: Home Improvement
Slide 103: Bunnings Warehouse
Slide 104: Agenda
Slide 105: Background
Slide 106: Store Network at November 2006
Slide 107: Store Network Movements
Slide 108: Trading Results
Slide 109: 2006 Performance Highlights
Slide 110: Q1 Trading Update
Slide 111: Strategies
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