Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Day (April 2009)
143 slides from Wesfarmers's investor day presentation, Apr 21, 2009
Slide 1: Presentation to be given at investor briefing, Sydney
For personal use only 21 April 2009 The Manager Company Announcements Office Australian Securities Exchange Dear Sir, PRESENTATION TO BE GIVEN AT AN INVESTOR BRIEFING, SYDNEY Following is a presentation that is to be given at an investor briefing in Sydney on 21 April 2009. Yours faithfully, L J KEN
Slide 2: Investor Briefing 21 April 2009
For personal use only Investor Briefing 21 April, 2009 Westin Hotel, Sydney
Slide 3: Richard Goyder, Managing Director
For personal use only Richard Goyder Managing Director, Wesfarmers Limited
Slide 4: Agenda
Agenda For personal use only 8:30 Introduction 8:45 Coles 10:45 Morning Tea 11:15 Target 11:45 Kmart 12:30 Insurance 1:00 Lunch 2:00 Resources 2:30 Capital Management 2:50 Q&A 3:30 Close 3
Slide 5: Management Team
Management Team For personal use only Managing Director & CEO Richard Goyder Finance Director Terry Bowen* Divisional Managing Directors Home Improvement & Office Supplies John Gillam Coles Ian McLeod Target Launa Inman Kmart Guy Russo ` Insurance Rob Scott Director Industrial Divisions Keith Gordon
Slide 6: Managing through current conditions
Managing through current conditions For personal use only • An uncertain global environment but strong businesses • 5-year forecasting incorporating deep downside scenario planning – Look for opportunities to innovate • Continue to focus on running businesses well – Return on capital => efficiencies
Slide 7: Coles renewal
For personal use only Coles renewal… Ian McLeod 6
Slide 8: Agenda
Agenda For personal use only 1. Performance update 2. Renewal progress 3. Trading outlook 7
Slide 9: Q3 sales on track
Q3 sales on track… For personal use only • Solid growth in food and liquor sales – Total food & liquor sales up 7.6% to $5.3 bn at end March (Easter adjusted up 8.3%) – Comparable food & liquor sales up 6.0% at end March (Easter adjusted up 6.6%) – Pre-Christmas momentum maintained – Easter steady w
Slide 10: Renewal drives positive customer response
Renewal drives positive customer response… For personal use only • Increasing customer numbers Comp. Sales 8.0% • Basket value growth 7.0% 6.0% • Positive volume growth 5.0% 4.0% • Change to promotion cycle 3.0% 2.0% 1.0% 0.0% Q1 Q2 Q3 9
Slide 11: Agenda
Agenda For personal use only 1. Performance update 2. Renewal progress 3. Trading outlook 10
Slide 12: The situation facing the new management team
The situation facing the new management team… For personal use only • Many complex issues to fix Fresh Value Range • Reversal of sustained under investment • Reversal of slow moving, high cost centralised culture Efficiency Service Culture • Multi-faceted recovery plan required • Recovery to take 5
Slide 13: Beginning the Circle for Success
Beginning the Circle for Success… For personal use only Fresh New Trading Waste & Operating Improvement Value Markdowns Model Strategy Culture change Store Renewal Productivity Improvement More Volume Capability 12
Slide 14: Phase of turnaround on track
Phase 1 of turnaround on track… 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 • Team member development • Availability &
Slide 15: Creating a strong top team & customer focused culture
Creating a strong top team & customer focused culture… For personal use only • Driving culture change through new leadership continues • Renewed store & customer focus – Move to customer centric structures & processes – Quarterly road-shows involving store managers – Absenteeism down 10% since Oct 0
Slide 16: Improving store standards
Improving store standards… For personal use only • Spring clean in all stores completed • Rising expectations on store standards • Consistent performance measures • Improved service focus • Customer facing service investment – 650 open entrances created – 130,000 trolleys replaced or ordered – 700 d
Slide 17: Improving on-shelf availability
Improving on-shelf availability… For personal use only • Out of stocks a third of last year Gaps on shelf • Improved stock flow from DCs to stores 500 450 400 • 35 supplier ‘implants’ now in place in 350 Coles 300 250 200 • Weekend availability focus 150 100 50 0 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 D
Slide 18: Compelling customer message
Compelling customer message… For personal use only • Investment in weekly promotions – Stronger, larger catalogue – Thursday catalogue better timed for peak shopping period • Less tickets on the shelf – Clearer for customers – Improved shelf presence • Better market intelligence – E track regularly
Slide 19: Revamp of house brand drives double digit growth
Revamp of house brand drives double digit growth… For personal use only • Currently offering 3,900 SKUs across 99 categories • Higher sales with significantly fewer SKUs than two years ago • Currently experiencing double digit sales growth (more than branded product lines) • Full quality review cond
Slide 20: Developing an outstanding fresh offer
Developing an outstanding fresh offer… For personal use only • Focus on local produce in store • Coles now managing quality control in DCs • Improved delivery schedules to stores • Improved fresh produce training • Fresh participation beginning to grow • New store formats with open market style 19
Slide 21: Store renewal
Store renewal… For personal use only Rigorous pilot programme prior to rollout Trial formats Pilot stores Trial formats Expanded pilot Store renewal stores Trial formats Pilot stores A systematic programme designed to fundamentally re-engineer store formats and minimise ‘regret’ capital spend 20
Slide 22: Our renewal strategy
Our renewal strategy… For personal use only • Stringent financial disciplines on capex to be maintained • Optimise learning from pilot programme before full roll-out • Value engineer each component to minimise cost of roll-out • Roll-out to commence in FY10 and build to scale in FY11 • ‘Plug & play’
Slide 23: Our store transition (video)
Our store transition… For personal use only VIDEO CLIP 22
Slide 24: IT investment to provide better customer service
IT investment to provide better customer service… For personal use only • Major IT projects – Unit pricing – Replacement of old cash registers – Easy ordering rolled out to 100 + selected stores – New self check-out system rolled out to stores – 50 stores by September 09 – Easy warehouse ordering –
Slide 25: A better supply chain to support business growth
A better supply chain to support business growth…. For personal use only • DC transformation completed – Parkinson CDC Queensland now fully operational • Simplified national network over last three years to support growth – 9 new sites opened – 18 closures • Focus now on efficiency – Fresher for Cus
Slide 26: Our mechanised supply chain (video)
Our mechanised supply chain… For personal use only VIDEO CLIP 25
Slide 27: Liquor renewal
Liquor renewal… For personal use only • New management driving renewal • First quarter of renewal under new team • Retail “basics” reset: – Range refinement – Improved marketing – Procurement aggregation • Pricing architecture revision – 1,000 SKU price reduction • Operating model “renovation” – Non
Slide 28: A strong, differentiated liquor portfolio
A strong, differentiated liquor portfolio… For personal use only Large Format Convenience Specialist Destination Caters for Tailored customer offering + liquor purchase local purchase specialist advice • National network • Standalone sites with specialist • The best liquor range with the • Convenien
Slide 29: Building on our successful fuel & convenience offer
Building on our successful fuel & convenience offer… For personal use only • Increased focus on value – Extended fuel and shop discount offer • Driving sales through improved product offer – Competitive offers on basics such as bread and milk • Investing in existing stores – 236 sites undergoing sto
Slide 30: Coles Online growth encouraging
Coles Online growth encouraging… For personal use only • Profitable and scalable store pick model – Switch from warehouse pick – More than 20,000 SKUs available • Resilient & growing demand • Expanding to new regions – Currently opened in Vic, NSW & Qld – Opening in WA & SA before year end • Driving
Slide 31: Managing our working capital better
Managing our working capital better… For personal use only • Working capital initiatives – Drive to reduce aged inventory Coles – Grocery Overstocks – Improved purchase order quality 140 120 – Strict purchasing governance 100 – Improved international stock ordering and 80 $M 60 flow 40 20 – Greater
Slide 32: Coles & its customers in the Community
Coles & its customers in the Community… For personal use only • Coles raised nearly $10 million for those affected by the February bushfires • Coles ensured ongoing supply of fresh produce and groceries to customers affected by floods in North Queensland • Other Coles community initiatives include:
Slide 33: What our team members think (video)
What our team members think… For personal use only VIDEO CLIP 32
Slide 34: What our customers think (video)
What our customers think… For personal use only VIDEO CLIP 33
Slide 35: Agenda
Agenda For personal use only 1. Performance update 2. Renewal progress 3. Trading outlook 34
Slide 36: Outlook
Outlook… For personal use only •Tough economic conditions continue to adversely affect consumer confidence – Customers looking to save money – Customers eating out less & eating at home more •Coles focus on providing customer value – Competitive fresh and house-brand offer – Better promotional progr
Slide 37: Questions
For personal use only Questions
Slide 38: Appendices
For personal use only Appendices
Slide 39: Improving our customer franchise
Improving our customer franchise… For personal use only Open at Open at Opened Closed 30 June 2008 31 March 2009 Supermarkets Coles 685 26 9 702 Bi-Lo 65 - 6 59 Total Supermarkets 750 26 15 761 Liquor 1st Choice 52 9 - 61 Vintage Cellars 85 1 5 81 Liquorland 630 12 16 626 Hotels 95 1 2 94 Total Liqu
Slide 40: Our customer franchise at March 2009
Our customer franchise at 31 March 2009 For personal use only Selling Area 7 8 11 Supermarkets (sqm) 1,591,066 Liquor (sqm) – ex hotels 171,292 153 228 78 81 92 5 116 67 63 30 6 43 249 248 5 208 161 194 162 761 Supermarkets 14 15 768 Liquor stores 94 Hotels 621 Convenience 39
Slide 41: A great platform to capture future growth in liquor
A great platform to capture future growth in liquor… For personal use only • Coles Liquor now operates an extensive national network Northern Territory Queensland x7 x1 x 29 x 181 •Network and store investment Western x 18 Australia x 78 x3 – 8 new 1st Choice New South Wales superstores (1HFY09) x 7
Slide 42: An efficient national supply chain
An efficient national supply chain… For personal use only Heathwood Forest Lake Eastern Creek Kewdale Edinburgh Park Smeaton Grange Canningvale Goulburn 10 major distribution centres Altona Liquor Regional distribution centre National distribution centre Launceston Composite RDC’s National chilled c
Slide 43: Target
For personal use only Target Launa Inman 42
Slide 44: Trading Update months to March
Trading Update 3 months to March For personal use only • Sales up 6.1% (1 Jan to 31 March) • Underlying same store sales up 2.9% (14 weeks to April 13) – Period incorporates Easter trading and comparative promotional events • Trading for three months to end March volatile and inconsistent – Partly o
Slide 45: Managing the Business: Current Challenges
Managing the Business Current Challenges For personal use only • Customer behaviour – Customers downgrading and demanding value – Importance of entry price points • Rising product costs; FX and inflation – Broaden sourcing base – Offset by supplier negotiations • Volatile trading – Expenses tightly
Slide 46: Target Store Network
Target Store Network end March 2009 For personal use only 2 1 31 23 15 10 19 12 52 45 45 23 168 Target stores 4 1 115 Target Country stores 45
Slide 47: Store Network Movements
Store Network Movements For personal use only Under Dec 2008 Opened Closed Mar 2009 construction Target 167 1 - 168 5 Target Country 116 - 1 115 3 • Includes 1 Target Country conversion to Target • Investment in existing stores – FY09 – 39 stores; 21 completed to date – upgrades range from full refi
Slide 48: Latest Store Design
Latest Store Design Store Entry Treatment and signage For personal use only 47
Slide 49: Latest Store Design – Sunbury
Latest Store Design – Sunbury Window Treatment For personal use only 48
Slide 50: Latest Store Design - Sunbury Entry
Latest Store Design - Sunbury Entry and Orientation Zone For personal use only 49
Slide 51: Latest Store Design - Sunbury Boulevard
Latest Store Design - Sunbury Major arterial boulevard For personal use only 50
Slide 52: Latest Store Design - Sunbury Focal Walls
Latest Store Design - Sunbury Focal Walls For personal use only 51
Slide 53: Latest Store Design – Department Beacons
Latest Store Design – Sunbury Department Beacons For personal use only 52
Slide 54: Latest Store Design – Fitting Rooms
Latest Store Design – Sunbury Fitting Rooms For personal use only 53
Slide 55: Latest Store Design - Checkouts
Latest Store Design First in, first served checkouts For personal use only 54
Slide 56: Differentiation still the key
Differentiation still the key For personal use only • Emphasis on great value, without compromising on style and quality • Designers for Target still in the mix • Continue to bring the latest trends to Australia faster than ever 55
Slide 57: Supply Chain
Supply Chain For personal use only • Fully integrated supply chain that is flexible and responsive • Improved service – Speed to shop floor from origin close to optimum – Focused on reducing time from design to receipt in China – Three supply chain delivery principles developed – Replenishment – Fas
Slide 58: Supply Chain Savings/Productivity
Supply Chain Savings/Productivity For personal use only • Improved efficiencies – Increased use of flowing stock to the regions – Use of the network e.g. Regionalisation – Increased use of supplier capability upstream e.g. source tagging and store ready delivery – Sustainable approach – Use of viabl
Slide 59: Target Outlook
Target Outlook For personal use only • Customers looking for value and spending cautiously – Entry and mid-price points well stocked – Ongoing negotiations with suppliers in difficult economic conditions – Broaden sourcing base to mitigate cost increases from China – Controlled stock levels – Managi
Slide 60: Questions
For personal use only Questions 59
Slide 61: Kmart
For personal use only Kmart Guy Russo 60
Slide 62: Agenda
Agenda For personal use only • Trading Update 3Q09 • Key Issues • Our Strategy • Outlook 61 61
Slide 63: Trading Update – 3Q09
Trading Update – 3Q09 For personal use only • Poor trading performance – Sales were poor in January and February – March sales supported by the Government’s multiple stimuli packages – Comparative store sales for 14 weeks to 13 April (incl. Easter) in line with last year (+0.1%) – Inventory under co
Slide 64: Key issues
For personal use only Key issues 63
Slide 65: Key Issues
Key Issues For personal use only • Customer • Product • Price • Promotion • Place • People 64
Slide 66: Our strategy
For personal use only Our strategy 65
Slide 67: Discount department store strategy statement
For personal use only A discount department store focussed on serving customers quality products at low prices, in an easy to shop environment. 66
Slide 68: Customer strategy framework
For personal use only Customer Outstanding Customer People Experience Product Best People, Ranges Great Customers Company Want Profit Place Price Every Site a Great Value Success Everyday Promotion Clear Communication 67
Slide 69: Customer
Customer For personal use only Outstanding Customer Experience Now 1 – 3 years Customer Service 9 Improving basic store standards • Develop team capability Love the customer 9 Extended store trading hours • Improve workforce utilisation 9 Management team on selling floor In-Store Presentation • Redu
Slide 70: Product
Product For personal use only Ranges Customers Want Now 1 – 3 years Purpose What Kmart 9 Inventory 12% below last year • Become more famous for key Stands For Range • Ranges being rationalised departments On Trend Ranges • Range to sales and space • Customer driven ranges Space • Improve product flo
Slide 71: Price
Price For personal use only Great Value Everyday Now 1 – 3 years Trusted Prices Prices Customers Can Rely On • Eliminate extreme high/low • Reduce frequency of category Simple Pricing • All products priced to sell promotions Easy to Understand Pricing • Competitive everyday pricing • Reduce depth of
Slide 72: Promotion
Promotion For personal use only Clear Communication Now 1 – 3 years Customer It’s All About The Customer • Decisions based on the customer • Build brand positioning Generate Sales Volume • Great events • Refine loyalty offer More Customers Buy More Items • More focus on in-store events • Simplify ev
Slide 73: Place
Place For personal use only Every Site a Success Now 1 – 3 years Existing Sites Improve Network Profitability 9 1 distribution centre closed • Layouts based on how customers New Sites 9 More than 50 off sites closed shop Deliver the Best New Locations • Fixing loss making stores • Profitable new sto
Slide 74: People
People For personal use only Best People, Great Company Now 1 – 3 years Structure Right Structure, Right People 9 New management team in place • Build customer focussed culture Culture High Performance, 9 New incentive plans • Develop store leadership skills Customer Focused Culture 9 Right structur
Slide 75: Outlook
For personal use only Outlook 74
Slide 76: Kmart Outlook
Kmart Outlook For personal use only • We have a lot to do • 3 – 5 year journey • Anticipate trading performance to remain soft – Market conditions will remain challenging – Immediate focus on getting the basics right • Renewal and Growth of Kmart is underway 75 75
Slide 77: Questions
For personal use only Questions 76
Slide 78: Rob Scott, Insurance
For personal use only Rob Scott Insurance 77
Slide 79: Insurance broking and underwriting overview
For personal use only Broking Underwriting UK Australia Australia New Zealand Revenue – CY09 GWP – CY09 $214 m $1,389 m Market Position1 Market Position1 Number 3 Number 5 1 by Revenue (Broking) and GWP (Underwriting) for corporate groups Australia and New Zealand 78
Slide 80: Insurance cover for rural, business and private requirements
For personal use only Insurance cover for rural, business and private requirements BUSINESS FARM 85 locations across rural and HOME & CAR regional Australia STRATA 79
Slide 81: Wholesale distribution of tailored insurance solutions
For personal use only Wholesale distribution of tailored insurance solutions to individuals, businesses, large corporates and government FLEET MOTOR MARINE PROPERTY & LIABILITY ENGINEERING 23 locations in Australia & CONSTRUCTION New Zealand BUILDERS WARRANTY 80
Slide 82: Advice and solutions for clients
For personal use only Advice and solutions to allow clients to financially survive any insurable event BUSINESS INSURANCE PERSONAL LINES FINANCIAL SERVICES LIFE DISABILITY & HEALTH SCHEMES CLAIMS MANAGEMENT PREMIUM FINANCING 17 locations across New Zealand 81
Slide 83: Specialist product advice and tailored services
For personal use only Specialist product advice and tailored services to businesses by accessing local and global insurance markets BUSINESS INSURANCE PERSONAL LINES SUPERANNUATION LIFE & INCOME PROTECTION SCHEMES FINANCIAL MANAGEMENT ENVIRONMENTALCONSULTING 33 locations in Australia & the UK 82
Slide 84: Trading Update - Underwriting
Trading Update - Underwriting For personal use only Business Unit Details Market rates hardening across most classes WFI Improved sales conversion rates Above average claims - crop and Victorian fires Management restructure, new senior appointments Lumley Australia Portfolio reviews – exit legacy ag
Slide 85: Trading Update - Broking
Trading Update - Broking For personal use only Business Unit Details Revenue and earnings ahead of last year Crombie Lockwood Commercial clients facing challenging conditions Business well positioned for tougher environment Revenue growth improving Process and efficiency improvements continue OAMPS
Slide 86: Higher than average natural catastrophes
Higher than average natural catastrophes For personal use only Australian natural catastrophe claims cost by halves 1,800 1999 Sydney hailstorm 1,600 Newcastle and Hunter 1,400 storms Victorian Insurance Costs ($m) bushfires 1,200 1,000 800 Estimate 600 15 year average large claim cost $160m 400 Can
Slide 87: Market Conditions
Market Conditions For personal use only • Weather related claims affecting loss ratios • Lower interest rates affecting investment returns • Rate increases gaining momentum; predominately in short-tail classes • Liability claims trends worsening • Economic slowdown and credit tightening constraining
Slide 88: Underwriting Strategies
Underwriting Strategies For personal use only Update on Key Strategies Single licenced entity Complete • Single licence effective 31 March 2009 for Australian • Shared services function now operational (Finance, Admin, businesses Risk & Compliance, IT, HR) • Move to combined reinsurance programme 1
Slide 89: Broking Strategies
Broking Strategies For personal use only Update on Key Strategies Leverage combined On-track • Senior Crombie Lockwood appointments in OAMPS capabilities • Sales performance systems • Project Empower – streamline support functions and empower branches • Aligning arrangements with underwriters Buildi
Slide 90: Insurance Outlook
Insurance Outlook For personal use only • Lower earnings in FY09 from underwriting due to: – Higher incidence of claims, particularly crop and bushfires – Lower interest rates reducing investment earnings – Poor performance from LGA legacy agency businesses (now in run off) • Lumley New Zealand deli
Slide 91: Questions
For personal use only Questions 90
Slide 92: Resources, Stewart Butel
For personal use only Resources Stewart Butel
Slide 93: Wesfarmers Resources
Wesfarmers Resources For personal use only Export metallurgical and domestic steaming coal QLD Domestic steaming coal WA Export and domestic NSW steaming coal (40% ownership) 92
Slide 94: Business environment
Business environment For personal use only • Impact of global economic crisis – Customers – Significant reduction in global steel production – Reduced metallurgical coal demand and prices – Major metallurgical coal price negotiations concluding – Suppliers – Major industry announcements of metallurg
Slide 95: Australian coal market prices
Australian coal market prices For personal use only Steaming coal Hard coking coal US$/Tonne (Nominal) FOB Australia (annual verse spot) US$/Tonne (Nominal) FOB Australia (annual verse spot) 200 400 350 160 300 120 250 200 80 150 100 40 50 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2003 2004 2005 2
Slide 96: Resources strategies
Resources strategies For personal use only Strategic initiatives Comments 3 Long-term contracts ongoing Maximise export sales and 3 Price relativity maintained optimise sales mix 3 Maximise higher value products 3 Improve operational performance 3 Cost reduction programmes in place Cost reduction pr
Slide 97: Coal production – year on year growth
Coal production – year on year growth For personal use only YTD ended Mine ('000 tonnes) Beneficial Interest Coal Type Mar 2009 Mar 2008 Curragh, QLD 100% Metallurgical 5,016 4,822 Steaming 2,217 1,966 Premier, WA 100% Steaming 2,663 2,213 Bengalla*, NSW 40% Steaming 1,529 1,529 Total 11,425 10,530
Slide 98: Curragh FY09 projected metallurgical sales
Curragh FY09 projected metallurgical sales Sales mix and volume For personal use only • FY09 sales volume estimate – Lower end of 6.5 to 6.9 million tonne range Hard Semi Hard 47% 25% • Additional 325kt PCI diverted to export steaming PCI 28% 97
Slide 99: Curragh FY10 projected metallurgical sales
Curragh FY10 projected metallurgical sales Sales mix and volume For personal use only • Strong shipping in year ended March 09 Hard Semi Hard • Limited carryover tonnage into June 09 QTR 45 - 48% 22% • Strong customer support • FY10 sales volume estimate PCI 30 - 33% – 6.0 to 6.5 million tonnes 98
Slide 100: Metallurgical coal price market outcome
Metallurgical coal price market outcome For personal use only US$ / Tonne FOB 285 - 300 245 - 255 240 - 245 115 - 129 Estimate 85 - 90 JFY 2008 JFY 2009 Hard Semi-Hard PCI 99 Source: Barlow Jonker, Tex Report, Macquarie Research
Slide 101: Australian HCC producers FOB cash costs
Australian HCC producers FOB cash costs For personal use only • Significant cost increases experienced industry wide in calendar year 2008 • Cost increases due to labour, export royalties and mining & processing costs • Curragh in lowest quartile of hard coking coal industry cost curve per 2008 inde
Slide 102: Curragh focus on cost control
Curragh focus on cost control For personal use only • Strategies targeted on cost reduction include: – Focus on mining and processing practices, equipment utilisation and productivities – Procurement optimisation on key input costs – Energy efficiency initiatives – Optimisation of contractor usage a
Slide 103: Hedging profile as at March 2009
Hedging profile as at 31 March 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 2009* 78 0.76 2009* 27 0.79 2010 315 0.
Slide 104: Dragline back in service ahead of schedule
Dragline 302 back in service ahead of schedule For personal use only • Boom accident - Dec 2008 • Estimated cost of repair - $20m • Insurance claim in progress • Return to service – end April 2009 103
Slide 105: Increase available reserves - Blackwater Creek diversion
Increase available reserves - Blackwater Creek diversion For personal use only • Allows access to additional hard coking coal • Optimise sales mix • Capital estimate $130 million including civil works and rehabilitation • Investment approval October 2008 • Construction Underway • First mining Decemb
Slide 106: Resources outlook
Resources outlook For personal use only • Global slowdown in steel production impacting coal market • 2009/10 price negotiations with major customers concluded • Curragh metallurgical sales for FY09 at lower end of forecast of 6.5 – 6.9mt – Estimated sales mix (Hard 47%; Semi-Hard 25%; PCI 28%) – St
Slide 107: Questions
For personal use only Questions 106
Slide 108: Appendices
For personal use only Appendices 107
Slide 109: Coal delivery systems
Coal delivery systems For personal use only • Gladstone – Short-term rail capacity significantly improved – Ongoing rail duplication projects – Adequate port capacity in place – Wiggins Island Coal Terminal feasibility study continues • Newcastle – Port constraints continue into 2009 – Decreasing ve
Slide 110: Coal port congestion
Coal port congestion East Coast Australia as at 27 March 2009 For personal use only No. of ships 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 Gladstone Newcastle Other Ports 109 Source: McCloskey Fax 109
Slide 111: Home Improvement & Office Supplies
For personal use only Home Improvement & Office Supplies
Slide 112: Bunnings Trading Update
Bunnings Trading Update 1January to 13 April* For personal use only • Cash store-on-store sales growth of 11.1% − good performance across existing store network − growth across all merchandising categories − ongoing focus on creating customer value and improving operational effectiveness and efficie
Slide 113: Bunnings Outlook
Bunnings Outlook For personal use only • Continued cash sales growth – sensitive to an extended downturn • Challenging trade market conditions • Likely for 13 store and 10 trade centre openings for FY09 • Ongoing focus on operating the business for long term success, while managing through the curre
Slide 114: Officeworks Trading Update
Officeworks Trading Update 1 January to 13 April* For personal use only • Retail sales growth of 5.7% − strong transaction growth − pressure on margin • Difficult market conditions − adverse sales trends in OW Business and HT − small business sector exposed to economic adversity • Substantial progre
Slide 115: Officeworks Outlook
Officeworks Outlook For personal use only • Continued focus on gaining traction with strategic agenda • Difficult trading conditions for remainder of year – pressure on sales and margin, particularly in small business sector – moderate sales growth expected 114
Slide 116: Bunnings Network at April 2009
Bunnings Network at April 2009 For personal use only 2 172 Warehouse stores 58 Small format stores 20 Trade Centres 29 5 6 21 8 2 8 2 1 51 17 6 12 25 43 4 4 2 1 1 115
Slide 117: Office Supplies Network at April 2009
Office Supplies Network at April 2009 For personal use only Retail Stores 120 Officeworks 5 Harris Technology Business 22 1 1 4 Fulfilment Centres 11 1 1 8 3 Service Centres 39 2 1 2 38 1 1 1 2 116
Slide 118: Store Network Movements
Store Network Movements For personal use only Under Dec 2008 Opened Closed Apr 2008 construction Home Improvement Warehouse format 171 1 172 12 Smaller format 59 1 58 2 Bunnings Trade centres 19 1 20 3 Office Supplies Officeworks 119 1 - 120 3 Harris Technology 5 - - 5 - 117
Slide 119: Industrial Businesses
For personal use only Industrial Businesses 118
Slide 120: Industrial & Safety
For personal use only Industrial & Safety
Slide 121: Industrial & Safety Distribution Network
Industrial & Safety Distribution Network: 240 branch locations For personal use only Australia No. 2 71 MRO, “All your workplace needs” 1 1 16 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 15 4 1 8 Engineering 11 5 New Zealand No. 7 2
Slide 122: Industrial & Safety Highlights
Industrial & Safety Highlights For personal use only • Mining and industrial market conditions deteriorated over the past quarter • Downturn impact on volumes and margins partially offset by a number of initiatives – Global sourcing, supplier negotiations, pricing, cost and capital management • Stre
Slide 123: Growth strategies
Growth strategies For personal use only Strategic Progress Achievements Initiatives Increase sales to 9 • Maintained strong DIFOT performance and security of supply to customers existing customers (ongoing) • Strengthening range of leading and home brands at competitive prices • Completing investmen
Slide 124: Industrial & Safety Outlook
Industrial & Safety Outlook For personal use only • Difficult market conditions expected to continue – Reduced demand from mining and manufacturing sectors – Government infrastructure projects may provide some market growth – Margin pressure expected to continue • Strong foundations and strategies t
Slide 125: Energy
For personal use only Energy 124
Slide 126: Energy Overview
Energy Overview For personal use only Business Geography Products Key customers Gas production NSW, Vic, Metals, manufacturing, & distribution Qld, SA Oxygen, nitrogen, utilities, water, healthcare, acetylene, argon, metals, food & hospitality, Gas production carbon dioxide, etc pharmaceuticals, res
Slide 127: Operational Update
Operational Update For personal use only • Varanus Island gas supply restored to 85%; adequate to meet current LNG demand • LNG plant fully operational • Industrial gas demand affected by market conditions, particularly in manufacturing sector Hiteshkumar Raval at the LNG plant in Kwinana, WA August
Slide 128: Strategies
Strategies For personal use only Strategies Segment Status Industrial gas growth in: • eastern states sales; & Refocus • oil and gas sector Ongoing Improve – Existing Maximise LPG production Exploring options Businesses LPG distribution: Ongoing • customer focus; & • controllable costs Pursue new po
Slide 129: Energy Outlook
Energy Outlook For personal use only • LNG project – ongoing development of WA HDV customer base and increased total LNG sales – Sunrise Dam LNG powered generation to run at full capacity • Industrial, medical and specialty gases – subdued demand – improved efficiency in logistics and cylinder utili
Slide 130: Chemicals & Fertilisers
For personal use only Chemicals & Fertilisers 129
Slide 131: Chemicals & Fertilisers Overview
Chemicals & Fertilisers Overview For personal use only Business Geography Sector Key Customers Ammonia WA Nickel BHP, Minara Orica, Dyno Ammonium Nitrate WA Iron Ore Nobel, Rio Tinto BMA, AngloCoal, (50%) Ammonium Nitrate Qld Coal Rio Tinto Newmont, (75%) Sodium Cyanide WA/Global Gold Barrick, Anglo
Slide 132: Strategy Update
Strategy Update For personal use only Strategic initiatives Comment Growth 3 • Kwinana duplication (+235,000 tpa) 3 • Upgrade of QNP (+30,000 tpa) WIP • Sodium cyanide expansion (+8,000 tpa) WIP • Improve ammonia plant production performance Optimise cost and capital WIP • Inventory and expense mana
Slide 133: Operational Update
Operational Update For personal use only • Ammonium nitrate solution name plate capacity has increased from 235,000 tonnes to 470,000 tonnes. • 8,000 tonne pa expansion of sodium cyanide solution plant underway to meet Boddington Gold Project demand; expansion commissioning expected mid 2009. • 30,0
Slide 134: Chemicals & Fertilisers Outlook
Chemicals & Fertilisers Outlook For personal use only CHEMICALS • Ammonia production and sales in FY09 curtailed due to gas disruption for an anticipated 11 months. • AN production and sales in FY09 will benefit from a full year’s operation of expanded capacity. • Sodium cyanide production and sales
Slide 135: Capital Management, Terry Bowen
For personal use only Capital Management Terry Bowen 134
Slide 136: Equity proceeds for entitlement offer plus placement raised $4.6bn
Equity proceeds For personal use only • 3 for 7 entitlement offer plus placement raised $4.6bn • By end of April, $3.5bn used to repay some maturing facilities, pay down revolving facilities • $0.2bn of Facility B (syndicated debt) to repay in Oct 10; remainder extended to Dec 11 ($1.9bn) and Dec 12
Slide 137: Current maturity profile
Current maturity profile For personal use only $bn 4 3 2 1 0 FY09 FY10 FY11 FY12 FY13 -1 Facility B - Syndicated Facilities Bilateral Facilities Working Capital and Bill Facilities Bonds 136
Slide 138: Hedging profile
Hedging profile For personal use only • Recent repayments resulted in debt levels below hedge levels; hedge book reduced by $2.5bn – as a result, expect to realise ~$135m of “Ineffective Hedge” losses, majority in 2H09 – cash impact will be spread over the next 4 years (weighted towards FY10 and FY1
Slide 139: Capital management
Capital management For personal use only • Equity raising eliminates medium-term refinancing risk • Rating strengthened; S&P rating BBB+ (stable), Moody’s Baa1 (stable) • Revised dividend policy – reflects uncertain economic environment – acknowledge importance of franking credits to shareholders –
Slide 140: Significant items
Significant items For personal use only • 1H09 included $148m in write-downs and increases in provisions • 2H09 significant items expected to include: – Interest rate “Ineffective Hedge” losses – Foreign exchange “close out” hedge losses (included in Resources EBIT) • Ongoing impairment review of as
Slide 141: Questions
For personal use only Questions 140
Slide 142: Q&A
For personal use only Q&A Richard Goyder Managing Director, Wesfarmers Limited Terry Bowen Finance Director, Wesfarmers Limited
Slide 143: For all the latest news visit www.wesfarmers.com.au
For personal use only For all the latest news visit www.wesfarmers.com.au 142