Wesfarmers Limited · ASX:WES
Wesfarmers — H1 2009 Earnings Presentation
106 slides from Wesfarmers's earnings presentation, Feb 16, 2009
Slide 1: 2009 Half Year Results Information Pack
2009 Half Year Results Information Pack 16 February 2009
Slide 2: Table of Contents
Table of Contents 1 Group Performance 3 2 Capital Management 10 3 Home Improvement & Office Supplies 19 4 Coles 32 5 Target 42 6 Kmart 48 7 Resources 54 8 Insurance 70 9 Industrial & Safety 79 10 Chemicals & Fertilisers 86 11 Energy 93 12 Other Businesses 100 13 Outlook 104 2
Slide 3: Group Performance
Group Performance
Slide 4: Group Performance Summary
Group Performance Summary Half Year ended 31 December ($m) 2008 2007* % Operating revenue 26,363 9,808 168.8 EBITDA 2,236 1,266 76.6 EBIT 1,759 1,046 68.2 Net profit after tax 879 601 46.3 Operating cash flow 1,770 1,241 42.6 Earnings per share (excl. employee res. shares) 106.4 127.3 (16.4) Earning
Slide 5: Divisional EBIT
Divisional EBIT Half Year ended 31 December ($m) 2008 2007* % Home Improvement & Office Supplies 395 332 19.0 Coles 431 130 n.m. Target 215 118 n.m. Kmart 75 101 n.m. Resources 686 112 512.5 Insurance 67 64 4.7 Industrial & Safety 68 61 11.5 Chemicals & Fertilisers 4 48 (91.7) Energy 30 48 (37.5) Ot
Slide 6: Provisions and write-downs
Provisions and write-downs Period ended 31 December ($m) 2008 Comment Coles (65) Coles Property writedown DC Closure and Kmart (14) restructure costs Non-trading items (79) Self Insurance (48) Increase in provisions Investments (21) Mark-to-market of investments One-off trading items (69) Total Sign
Slide 7: Divisional ROC & Capital Employed
Divisional ROC & Capital Employed 2008 2007 Rolling 12 months to 31 December EBIT Cap Emp ROC ROC $m $m % % Home Improvement & Office Supplies 688 3,278 21.0 31.4^ Coles 775 15,144 5.1 n.m. Target 318 3,421 9.3 n.m. Kmart 88 1,055 8.3 n.m. Resources 997 1,048 95.1 30.3 Insurance 136 1,263 10.8 11.2
Slide 8: Return on Shareholders' Funds
Return on Shareholders’ Funds (rolling 12 months to 31 December) % 35 30 25 20 30.2 15 27.7 21.4 10 18.4 5 7.4 0 2004 2005 2006# 2007 2008 #Excludes sale of ARG 8
Slide 9: Cash Flow & Dividend (Half Year to Dec)
Cash Flow & Dividend (Half Year to 31 Dec) (per share) cents 280 240 200 160 120 80 40 0 2004 2005 2006 2007 2008 EPS^ Operating Cashflow* Dividend *WANOS includes employee reserved shares ^AIFRS excl. employee reserved shares. 2008 and 2007 adjusted for rights issues. 9
Slide 10: Capital Management
Capital Management
Slide 11: Equity Raising
Equity Raising • 3 for 7 entitlement offer plus $900m placement • Institutional Entitlement raised $2.0bn • Retail Entitlement closes 23 February 2009 • Strengthens balance sheet and provides increased flexibility • Extension and refinancing of maturing debt facilities – Proforma 31 Dec debt down fr
Slide 12: Equity Raising
Equity Raising Position 31 December 2008 Pro Forma 31 December 2008 Drawn Undrawn Drawn Undrawn Facility Due ($bn) ($bn) Due ($bn) ($bn) Working Capital and Bill Facilities* 2009-2010 1.8 0.6 2009-2010 0.4 1.9 Facility C (Revolver) Oct-09 0.5 0.5 Oct-09 - 0.5 Dec-09 0.7 0.1 Bilateral Facilities* Dec
Slide 13: Maturity Profile Analysis
Maturity Profile Analysis $bn 3 2 1 0 FY09 FY10 FY11 FY12 FY13 Facility B - Syndicated Facilities Bilateral Facilities Working Capital and Bill Facilities Bonds 13 Note: based on $2.9bn equity raised to date not including Retail Entitlement Offer closing 23 February 2009
Slide 14: Capital Management
Capital Management • Net Debt to Equity of 49% at 31 December 2008 (29% on a pro-forma basis*) • Cash Interest Cover Ratio of 5.2 times (rolling 12 month basis) • Well within all debt covenants (pre equity raising) • S&P rating BBB+ (stable), Moody’s Baa1 (stable) • Weighted average cost of debt inc
Slide 15: Hedging Profile
Hedging Profile • At 31 Dec 08, ~50% of debt hedged for 5 years at average 7.2% (excluding margins) • Rebalancing of hedge positions underway • Post rebalancing, expect debt to be ~50% hedged for 5 years at average 7.2% (excluding margins) • Expect to realise ~$150m of hedge losses as a result of re
Slide 16: Cashflow
Cashflow (Half Year to 31 Dec) • Focus on working capital management • Strong free cash flows 2,000 200% 1,600 160% 1,200 120% 800 80% 400 40% 0 0% 2004 2005 2006 2007 2008 NPATDA Operating Cash Flow Free Cash Flow Cash Realisation Ratio *adjusted for Stanwell and significant non-cash asset writedow
Slide 17: Cashflow from Operations
Cashflow from Operations 2,000 44 (55) 69 78 1,600 149 129 1,200 477 - 1,770 800 879 400 - - - - - - - - NPAT Depreciation Movement in Write-down of Other Provisions Dividends & Stanwell Cashflow from and Working non current Distributions Operations Amortisation Capital assets and from impairment As
Slide 18: Capital Expenditure
Capital Expenditure • Continued focus on prudent Half Year ended 31 December (A$m) 2008 2007 capital expenditure Home Improvement & Office Supplies 214 173 Coles 204 93 • Coles capital expenditure Target 51 - weighted towards 2H09 Kmart 41 - Resources 109 95 • Completion of Ammonia Insurance 6 6 Nit
Slide 19: Home Improvement & Office Supplies
Home Improvement & Office Supplies
Slide 20: Home Improvement & Office Supplies Performance Summary
Home Improvement & Office Supplies Performance Summary Half Year ended 31 December ($m) 2008 2007 % Revenue Home Improvement 3,009 2,795 7.7 Office Supplies 602 115* n.m. 3,611 2,910 n.m. EBIT Home Improvement 370 325 13.8 Office Supplies 25 7* n.m. 395 332 n.m. *Officeworks ownership period of 23 N
Slide 21: Home Improvement
Home Improvement ZUNNINGS aoe warehouse ae
Slide 22: Home Improvement Performance Summary
Home Improvement Performance Summary Half Year ended 31 December ($m) 2008 2007 % Revenue 3,009 2,795 7.7 EBIT 370 325 13.8 ROC (R12 %) 31.1 31.4 (0.3)pt Safety (R12 LTIFR) 13.3 14.5 Trading Revenue* 3,007 2,760 8.9 Net property contribution 7 12 (41.7) Trading EBIT* 363 318 14.0 Trading EBIT / Trad
Slide 23: Home Improvement Highlights
Home Improvement Highlights • 10.3% cash sales growth – Store-on-store growth of 7.7% • 1.6% lift in trade sales – Ongoing re-alignment of trade business from a customer perspective • Opened 6 warehouses, 2 smaller formats & 6 trade centres • Continued investment in the existing network • Ongoing st
Slide 24: Home Improvement Outlook
Home Improvement Outlook • Cash sales growth – Possible lower rate given volatile economic conditions • Trade sales sensitive to any further slowing in housing construction • Strong customer and business improvement focus. 24
Slide 25: Bunnings Network
Bunnings Network at 31 December 2008 171 Warehouse stores 59 Small format stores 2 19 Trade Centres 29 5 5 20 9 2 8 2 1 51 17 6 12 25 43 4 4 2 1 1 25
Slide 26: Office Supplies
Office Supplies
Slide 27: Office Supplies - Performance Summary
Office Supplies - Performance Summary Half Year ended 31 December ($m) 2008 2007* Revenue 602 115 EBIT 25 7 Trading Revenue 602 115 Trading EBIT 25 7 Trading EBIT/Trading revenue (%) 4.1 6.1 *Ownership period of 23 November to 31 December 27
Slide 28: Office Supplies Highlights
Office Supplies Highlights • Officeworks retail store sales growth 3.9% – Underpinned by strong transaction growth – Transitioning to EDLP – Pressures on margin • Range authority being re-established • Customer-facing channel conflict eliminated • Adverse sales trends for OW Business and HT • Small
Slide 29: Office Supplies Outlook
Office Supplies Outlook • Focused on gaining traction with reset strategic agenda • Difficult trading conditions for remainder of year – Pressure on sales and margin, particularly in small business sector – Moderate sales growth expected 29
Slide 30: Office Supplies Network
Office Supplies Network at 31 December 2008 Retail Stores 119 Officeworks 5 Harris Technology 22 1 1 Business 11 1 1 4 Fulfilment Centres 8 3 Service Centres 38 2 1 2 38 1 1 1 2 30
Slide 31: Store Network Movements
Store Network Movements Under Jun 2008 Opened Closed Dec 2008 construction Home Improvement Warehouse format 165 6 0 171 8 Smaller format 61 2 4 59 2 Bunnings Trade centres 14 6 1 19 3 Frame & Truss plants 8 0 0 8 0 Office Supplies Officeworks 115 4 - 119 3 Harris Technology 11 - 6 5 - 31
Slide 32: Coles
Coles CHOICE Vintace CEeLtars perstore Liquor Su coles express 44 Wesfarmers
Slide 33: Coles Performance Summary
Coles Performance Summary Half Year ended 31 December ($m) 2008 2007* Revenue 14,626 2,919 EBITDA 628 175 Depreciation & Amortisation (197) (45) EBIT 1 431 130 Food & Liquor Revenue 3 11,191 2,271 Total store sales growth % 3.9 3.4 Comp store sales growth % 2.6 2.0 Trading EBIT 1,3 382 118 Convenien
Slide 34: Coles Transformation
Coles Transformation • Intensive period of change led by new management team • Change programme will be transformational – Retail disciplines – Fresh offer – Service – Store format – Culture • Encouraging signs in early phase of recovery programme • Meaningful and sustainable change will take time 3
Slide 35: Coles Highlights
Coles Highlights • Food & Liquor Sales – Q2 comparative stores sales growth of 3.8% – Improving growth trend driven by rising customer numbers – Positive results from promotional programme overhaul – Strong Christmas trading, particularly in Fresh – Seasonal sell through well managed 35
Slide 36: Coles Highlights
Coles Highlights • Food – Improving Fresh with largest trading uplifts in Produce and Bakery – Markedly better on-shelf availability – Begun transforming store service standards – Store ‘spring clean’ programme completed – “Renewal” store pilots encouraging – Distribution network transformation near
Slide 37: Coles Highlights
Coles Highlights • Liquor – Liquor ‘renewal’ intensified – Strong Christmas trading period – Value significantly strengthened in all Brands – Improving ranges to meet local demand • Convenience – New store format and value on key staples driving results – Lower petrol prices in Q2 – Q2 comparative s
Slide 38: Food and liquor store network
Food and liquor store network at 31 December 2008 Selling Area Supermarkets (sqm) 1,591,279 7 8 11 Liquor (sqm) 273,181 154 232 77 81 90 5 116 67 63 31 6 43 252 248 5 208 161 765 Supermarkets 194 163 772 Liquor stores 93 Hotels 14 15 621 Convenience 38
Slide 39: Store network movements
Store network movements Open at Open at Opened Closed 30 Jun 2008 31 Dec 2008 Supermarkets Coles 685 24 7 702 Bi-Lo 65 - 2 63 Total Supermarkets 750 24 9 765 Liquor 1st Choice 52 8 - 60 Vintage Cellars 85 - 3 82 Liquorland 630 12 12 630 Hotels 95 - 2 93 Total Liquor 862 20 17 865 Convenience 619 4 2
Slide 40: Coles – Strategy
Coles – Strategy 5 years – 3 phases of recovery Building a Solid Delivering Driving the Coles Foundation Consistently Well Difference Performance • Culture of continuous • Embed the new culture improvement • Create a strong top team • Team member development • Strong customer trust and • Cultural ch
Slide 41: Coles Outlook
Coles Outlook • Tougher economic conditions and lower consumer confidence • Growing customer focus on value • Strategic programmes being driven at pace • Store Renewal development expected in new financial year • Scale of change significant but confidence in its delivery over time 41
Slide 42: Target
Wesfarmers
Slide 43: Target Performance Summary
Target Performance Summary Half Year ended 31 December ($m) 2008 2007* Revenue 2,094 605 EBITDA 245 123 Depreciation & Amortisation (30) (5) EBIT 215 118 Total revenue growth (%) 8.0 6.4 Comp. store sales growth (%) 4.0 3.1 EBIT margin (%) 10.3 19.5 Store numbers 283 274 *Ownership period 23 Novembe
Slide 44: Target Highlights
Target Highlights • EBIT margin strength maintained at 10.3% – Overall margins maintained • Comp Store sales growth for the half 4.0% (Q2 growth 4.8%) – All departments increased sales over last year – Women’s Youth Apparel, Electrical and Toys all had excellent growth • Outstanding Christmas tradin
Slide 45: Target Store Network
Target Store Network at 31 December 2008 3 54 31 25 97 68 283 Target stores (incl 116 Target Country) 5 45
Slide 46: Store Network Movements
Store Network Movements Under June 2008 Opened Closed Dec 2008 construction Target 159 8 - 167 3 Target Country 118 3 5 116 3 • Target openings includes 2 stores converted from Target Country • Target Country openings include 2 replacement stores. • Target Country Broome closed in September 2008. It
Slide 47: Target Outlook
Target Outlook • Five new stores in next six months; 15 refurbishments • Well positioned for slow down in retail spending – Close attention to costs and inventory in difficult trading conditions • Well positioned to benefit from stimulus package • Margins on direct imports supported by hedging in th
Slide 48: Kmart
Tire Aut ae = Wesfarmers
Slide 49: Kmart Performance Summary
Kmart Performance Summary Half Year ended 31 December ($m) 2008 2007* Revenue 2,249 692 EBITDA 100 106 Depreciation & Amortisation (25) (5) EBIT^ 75 101 Total revenue growth (%) 0.8 4.6 Comp. store sales growth (%) 0.4 5.0 EBIT margin (%) 3.3 14.6 Store numbers (incl. Kmart Tyre & Auto) 446 450 *Own
Slide 50: Kmart Highlights
Kmart Highlights • Average trading performance – Christmas trading helped deliver 2Q09 comp growth of 1.0% – Apparel and toys were the strongest performers – In-store execution and offer requires improvement • Inventory levels significantly below last year – Reduce complexity in operations • Senior
Slide 51: Kmart Store Network
Kmart Store Network at 31 December 2008 183 Kmart stores 263 KTAS centres 2 3 36 52 20 32 13 20 50 73 12 42 77 5 6 3 51
Slide 52: Store Network Movements
Store Network Movements Under June 2008 Opened Closed Dec 2008 construction Kmart 182 1 - 183 2 Kmart Tyre & Auto 263 3 3 263 1 52
Slide 53: Kmart Outlook
Kmart Outlook • Anticipate trading performance to remain soft in 2H09 • The renewal of Kmart – Fix the customer experience – Significantly reduce cost base – Rebuild customer trust – Make every site a success – Right people and accountability • Two new stores to open in 2H09 and complete 3 refits 53
Slide 54: Resources
Resources
Slide 55: Resources Performance summary
Resources Performance summary Half Year ended 31 December ($m) 2008 2007 % Revenue 1,427 530 169.2 EBITDA 791 179 341.9 Depreciation & Amortisation* (105) (67) 56.7 EBIT# 686 112 512.5 ROC (R12 %) 95.1 30.3 64.8pt Coal Production (‘000 tonnes) 7,938 6,963 14.0 Safety (R12 LTIFR)^ 5.0 4.4 *Includes S
Slide 56: Resources Highlights
Resources Highlights • Record half year production and sales levels – Curragh achieving consistent production – Reduced impact of rail and port constraints – Strong coal shipping in 1H09 • Record prices for metallurgical and steaming coal • Significant increase in earnings • Blackwater Creek Diversi
Slide 57: Coal – production volumes
Coal – production volumes Half Year ended Mine Beneficial Coal Type ('000 tonnes) Interest Dec-08 Dec-07 Premier, WA 100% Steaming 1,783 1,323 Curragh, QLD 100% Metallurgical 3,565 3,184 Steaming 1,511 1,348 Bengalla*, NSW 40% Steaming 1,079 1,108 Total 7,938 6,963 *Wesfarmers attributable productio
Slide 58: Business environment
Business environment • Challenging environment due to global economic crisis – Customers – Significant reduction in global steel production – Reducing metallurgical coal demand and prices – Suppliers: Major industry announcements of metallurgical coal output cuts – Uncertain metallurgical coal sales
Slide 59: Australian hard coking coal prices
Australian hard coking coal prices US$/Tonne (Nominal) FOB Australia (annual verse spot) 400 350 300 250 200 150 100 50 0 2003 2004 2005 2006 2007 2008 2009 Spot Price Annual Reference Price Source: Barlow Jonker, Tex Report, Macquarie Research 59
Slide 60: Australian steaming coal prices
Australian steaming coal prices US$/Tonne (Nominal) FOB Australia (annual verse spot) 200 160 120 80 40 0 2003 2004 2005 2006 2007 2008 2009 Spot Price JPU Reference Source: Barlow Jonker 60
Slide 61: Coal – sales volumes
Coal – sales volumes Beneficial Half Year ended Mine Coal Type Interest ('000 tonnes) Dec-08 Dec-07 Premier, WA 100% Steaming 1,802 1,330 Curragh, QLD 100% Metallurgical 3,485 3,134 Steaming 1,687 1,348 Bengalla*, NSW 40% Steaming 1,123 1,214 Total 8,097 7,026 *Wesfarmers attributable production 61
Slide 62: Curragh production costs
Curragh production costs • Significant cost increases industry-wide; signs pressure now easing • Curragh in lowest quartile of hard coking coal industry cost curve – per Dec 2008 independent review • Curragh costs fall into three key categories – Discretionary eg: incremental contractor truck & shov
Slide 63: Demurrage
Demurrage • Easing demurrage costs • Newcastle coal chain remains constrained $Am 14 12 $3.28/t 10 8 $2.49/t 6 $2.89/t 4 $1.48/t 2 0 H1 2008 H1 2009 Curragh Bengalla (40%) 63
Slide 64: Coal port congestion
Coal port congestion East coast Australia as at 30 January 2009 No. of ships at anchor 180 160 140 120 100 80 60 40 20 0 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Gladstone Newcastle Other Ports Source: McCloskey Fax 64
Slide 65: Curragh export metallurgical sales
Curragh export metallurgical sales Product mix 2008/09 Hard Semi Hard Semi Hard Hard 44% 24% 22% 45 - 47% PCI PCI 32% 31 - 33% First half 2008/09 actual 2008/09 estimate 3.5 million tonnes 6.5 - 6.9 million tonnes 65
Slide 66: Curragh export sales
Curragh export sales Destination 11% • World leading steel mills 6% 51% • Strong direct customer relationships 10% • Long history of performance 22% Japan Other North Asia South Asia Europe South America 66
Slide 67: Hedging profile
Hedging profile as at 31 December 2008 Curragh – Open Contracts Bengalla – Open Contracts Current US$ 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 2009* 264 0.82 2009* 55 0.80 2010 315 0.78 2010 97 0.79 20
Slide 68: Coal delivery system
Coal delivery system • Gladstone – Short-term rail capacity significantly improved – Ongoing rail duplication projects – Adequate port capacity in place – Wiggins Island Coal Terminal feasibility study continues into CY2009 • Newcastle – Port constraints continue into 2009 – Decreasing vessel queues
Slide 69: Resources Outlook
Resources Outlook • Global steel production uncertain • 2009/10 price negotiation underway • Signs mining input cost pressures are easing • Forecast Curragh metallurgical sales of 6.5 – 6.9mt in 2008/09 • Timing of expansion projects subject to market conditions • Significant increase in Stanwell re
Slide 70: Insurance
Insurance 70
Slide 71: Insurance Performance Summary
Insurance Performance Summary Half Year ended 31 December ($m) 2008 2007 % Gross Written Premium Underwritten 679 618 9.9 EBITA Underwriting 44 38 15.8 EBITA Broking* 27 28 (3.6) EBITA Other 4 5 (20.0) EBITA Insurance Division 75 71 5.6 EBIT Insurance Division 67 64 4.7 Net Earned Loss Ratio (%) 68.
Slide 72: Insurance Highlights
Insurance Highlights • Turnaround of Lumley New Zealand • Rate increases achieved in motor portfolios • Higher than expected crop claims in WFI (worst since 1992) • Underwriting losses in Lumley Australia marine and retail agencies • Consolidation of Australian underwriting licenses on track – One-o
Slide 73: Geographical Presence
Geographical Presence 3 1 1 6 3 13 4 21 1 2 1 1 4 13 8 18 11 6 17 6 2 Lumley General Australia 13 6 Lumley General New Zealand 10 3 4 Wesfarmers Federation Insurance 85 1 2 OAMPS 33 Crombie Lockwood 17 73
Slide 74: Underwriting Performance Summary
Underwriting Performance Summary Half Year ended 31 December ($m) 2008 2007 % Gross Written Premium 679 618 9.9 Net Earned Premium 513 464 10.6 Net Claims (353) (313) (12.8) Net Commission and Expenses (157) (142) (10.6) Underwriting Result 3 9 (66.7) Insurance Margin 31 27 14.8 EBITA 44 38 15.8 EBI
Slide 75: Broking Performance Summary
Broking Performance Summary Half Year ended 31 December ($m) 2008 2007 % Commission and Fee Income 92 85 8.2 Other Income* 12 18 (33.3) Total Income 104 103 1.0 Expenses (77) (75) (2.7) EBITA 27 28 (3.6) Amortisation of Identifiable Intangible Assets (6) (5) (20.0) EBIT 21 23 (8.7) EBITA Margin (%)
Slide 76: Underwriting KPIs
Underwriting KPIs Half Year ended 31 December (%) 2008 2007 %pt Gross Earned Loss Ratio 68.0 69.6 1.6 Net Earned Loss Ratio 68.9 67.4 (1.5) Reinsurance Expenses (% GEP) 21.9 23.6 1.7 Exchange Commission (% RI excl XOL) 24.1 24.9 0.8 Commission Expense (% GWP) 13.9 13.5 (0.4) Total Earned Expenses (%
Slide 77: Gross Written Premium (underwriting)
Gross Written Premium (underwriting) (for the six month period to 31 December 2008) Total $679m Personal Liability $135 $128 Marine $25 Engineering $35 Commercial AMO $21 $138 Crop $28 Commercial Motor $169 77
Slide 78: Insurance Outlook
Insurance Outlook • Rate increases being achieved in most classes • Lower investment returns resulting from lower interest rates • Retained losses from Victorian bushfires estimated at $13 million • Conditions support underwriting margin improvement • Strengthening of management across Lumley Aust &
Slide 79: Industrial & Safety
Industrial & Safety Wesfarmers
Slide 80: Industrial & Safety Performance Summary
Industrial & Safety Performance Summary Half Year ended 31 December ($m) 2008 2007 % Revenue 687 642 7.0 EBITDA 75 66 13.6 Depreciation & Amortisation of PPE (7) (5) (40.0) EBIT 68 61 11.5 EBIT margin (%) 9.9 9.5 0.4pt ROC (R12 %) 17.1 16.9 0.2pt Safety (R12 LTIFR) 4.4 5.2 80
Slide 81: Industrial & Safety Highlights
Industrial & Safety Highlights • Operating revenue up 7% to $687m – Strong growth in Blackwoods, Protector Alsafe and Bullivants – New Zealand achieved sales growth in NZ dollars despite challenging economic conditions • Earnings increased by 11.5% to $68m – Strong improvements from Blackwoods, Prot
Slide 82: Industrial & Safety Business Portfolio
Industrial & Safety Business Portfolio Australia New Zealand “All your Safety Industrial workplace needs” Specialist Specialists 82
Slide 83: Industrial & Safety - Distribution Network
Industrial & Safety - Distribution Network 242 locations (166 Australia, 76 New Zealand) Australia No. 2 72 MRO, “All your workplace needs” 1 1 17 6 Electrical 15 6 12 7 9 5 9 4 43 Safety 1 1 55 21 Materials handling, lifting, rigging 5 2 17 1 6 3 Fasteners 16 5 1 8 Engineering 11 5 New Zealand No.
Slide 84: Business Activity Highlights
Business Activity Highlights • Continued focus on safety resulting in reduction in lost days and severity of injuries • Customer service and delivery performance initiatives delivering benefits – Continued improvements in delivery performance and supply chain efficiency – Branch and Distribution Cen
Slide 85: Industrial & Safety Outlook
Industrial & Safety Outlook • Market conditions are expected to be more challenging in the second half – Large customers scaling back production and project plans in Australia – Difficult conditions in New Zealand expected to continue • Pressure on margins expected due to input cost inflation, excha
Slide 86: Chemicals & Fertilisers
Chemicals & Fertilise Wesfarmers
Slide 87: Chemicals & Fertilisers Performance Summary
Chemicals & Fertilisers Performance Summary Half Year ended 31 December ($m) 2009 2008 % Revenue Chemicals 291 218 33.5 Fertilisers 167 173 (0.3) 458 391 17.1 EBITDA 34 69 (50.7) Depreciation & Amortisation of PPE (30) (21) (42.9) EBIT 4 48 (91.7) Sales Volume (‘000t): Chemicals 334.4 281.4 18.8 Fer
Slide 88: Chemicals & Fertilisers Highlights
Chemicals & Fertilisers Highlights • Varanus Island gas incident: – no gas supply to Kwinana ammonia plant during July, August and September – contracted gas supply curtailed by >50 percent since November, spot gas purchases – estimated lost EBIT for the 6 months ~ $50 million – all customer require
Slide 89: Chemicals & Fertilisers Outlook
Chemicals & Fertilisers Outlook • Demand for mining chemicals remains strong, although growth softening • Demand for PVC softening • Advised of return to full contracted gas supply by 1 June 2009 • Commission $15 million sodium cyanide expansion in H2 FY09 • Volatile commodity prices • Seasonal brea
Slide 90: Fertiliser Sales
Fertiliser Sales kt 1,200 1,000 800 739 670 813 589 600 612 400 200 381 370 387 249 289 226 0 2004 2005 2006 2007 2008 2009 1st Half 2nd Half 90
Slide 91: Global Fertiliser Pricing
Global Fertiliser Pricing USD/t 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Urea (FOB Middle East) DAP (FOB US Gulf) 91
Slide 92: Global Ammonia & PVC Pricing
Global Ammonia & PVC Pricing USD/t 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Am m onia (FOB Middle East) PVC (Harrim an Mid-point) 92
Slide 93: Energy
Energy Wesfarmers
Slide 94: Energy Performance Summary
Energy Performance Summary Half Year ended 31 December ($m) 2008 2007 % Revenue 322 281 14.6 EBITDA 52 66 (21.2) Depreciation & Amortisation (22) (18) (22.2) EBIT 30 48 (37.5) ROC (R12 %) 9.1 12.0 (2.9pts) WLPG production (kt) 84.4 82.3 2.6 Safety (R12 LTIFR) 5.9 3.0 94
Slide 95: Energy Highlights
Energy Highlights • Western Australian LNG project operational – LNG plant commissioned – Ramp up of sales to heavy duty vehicle customers – Power stations increasing LNG consumption • Growth in industrial gas sales • Varanus Island – Maintained supply of LPG – ~$15m EBIT impact in 1H09 – Gas supply
Slide 96: Energy Key Issues
Energy Key Issues • Varanus Island gas disruption – Emergency LPG import at premium price – ~$15m EBIT impact across several business units – Insurance claim in preparation • Lower world energy prices from Q2 – Lower sales margins for WLPG – $9m inventory write-downs in 1H09 96
Slide 97: World LPG prices – Saudi CP
World LPG prices – Saudi CP Average CP USD/tonne Jul 08 - Dec 08 Propane USD 698 1,000 900 800 700 600 500 400 300 Average CP 200 Jul 07 - Dec 07 100 USD 658 0 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Sharp reduction in LPG price affects WLPG’s profits 97
Slide 98: WLPG Production and Price
WLPG Production and Price USD/tonne kt Propane 20 1,000 18 900 16 800 14 700 12 600 10 500 8 400 6 300 4 200 2 100 - 0 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Production Saudi CP 98
Slide 99: Energy Outlook
Energy Outlook • LPG earnings dependant on international LPG prices and content • Economic slow down to impact: – Industrial gases sales growth – Resource project demand • Volume growth in LNG sales 99
Slide 100: Other Businesses
Other Businesses 100
Slide 101: Other Business Performance Summary
Other Business Performance Summary Holding Half Year ended 31 December (A$m) 2008 2007 % Associates: Gresham Private Equity - Fund 1 51 (2) 3 Gresham Private Equity - Fund 2 67 2 23 Gresham Private Equity - Fund 3 75 (1) n.a. Gresham Partners 50 1 5 Wespine 50 4 3 Bunnings Warehouse Property Trust 2
Slide 102: Breakdown of reported result
Breakdown of reported result Half Year ended 31 December ($m) 2008 2007 Divisional EBIT (excl Other) 1,971 1,014 Profit from associates (5) 38 Write-downs and provisions^ (148) (8) Other EBIT 15 42 Less: Corporate overheads (74) (40) Group EBIT 1,759 1,046 Finance costs - expense net of capitalisati
Slide 103: Gresham Private Equity
Gresham Private Equity Fund 1 • Riviera only remaining investment • Wesfarmers’ current investment $34m Fund 2 • Wesfarmers’ current commitment $183m; capital invested $165m • Divestment of Australian Pacific Paper Products • Investments include: – Barminco, Witchery, Noel Leeming, Silk Logistics Gr
Slide 104: Outlook
Outlook
Slide 105: Outlook
Outlook • Challenging global economic environment • Expect turnaround in Coles to gather pace over next 12 months • Lower export coal prices from April 2009 • Lower borrowing costs from reduced debt levels 105
Slide 106: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au 106