Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Presentation (May 2003)
48 slides from Wesfarmers's investor presentation, May 2003
Slide 1: Investor Briefing
Investor Briefing Michael Chaney Richard Goyder Wesfarmers Limited May 2003
Slide 2: Background and Corporate Strategy
Background and Corporate Strategy
Slide 3: Capital Employed by Division
Capital Employed by Division Rolling 12 months to 31 March 2003 (A$ million) Industrial & Safety $797.0 Chemicals & Fertilisers Rural Services $499.2 $437.2 Gas $161.9 Coal $669.3 Hardware $1,945.0 3
Slide 4: Objective – Philosophy – Strategies
Objective – Philosophy – Strategies Objective Growth Philosophy To provide a Growth Strategies satisfactory return to shareholders 1. Improve Logical performance of Incrementalism existing businesses 2. Expand existing businesses 3. Portfolio Management 4
Slide 5: Divisional Performance Requirements
Divisional Performance Requirements ROC % >18 A B 10-18 C <10 1 2 3 4 5 Years 5
Slide 6: Integrated Shareholder-Focused Systems
Integrated Shareholder-Focused Systems • Objective setting • Performance measures • Performance targets • Management accounts • Cash management • Corporate planning • Project evaluation • Remuneration • Risk Management 6
Slide 7: Divisional ROC and Capital Employed
Divisional ROC and Capital Employed Before Amortisation of Goodwill Capital 2003 2002 31 March 2003 EBITA Employed ROC ROC (rolling 12 months) $m $m % % Hardware 356.0 1,945.0 18.3 16.4 Energy 263.9 831.2 31.8 26.3 Rural Operations 81.0 437.2 18.5 12.2 & Insurance Industrial & Safety 111.6 797.0 14.
Slide 8: Share Price vs Earnings Per Share
Share Price vs Earnings Per Share (pre goodwill amortisation and abnormals) Cents $ 175 35 150 30 125 25 100 20 75 15 50 10 25 5 0 0 2003 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 Analyst Range Share Price Earnings Per Share 8
Slide 9: Outlook & Priorities by Major Business Activity
Outlook & Priorities by Major Business Activity
Slide 10: Hardware
Hardware CY Wesfarmers
Slide 11: Bunnings Market Share – 2003 (estimated)
Bunnings Market Share – 2003 (estimated) Australia 11.0% Total 14.1% 16.5% (01/02 13.9%) 20.6% 10.8% 11.4% 14.7% •Internal estimate only •Market Size $22B+ approx 9.0% 11
Slide 12: Bunnings Business Overview – Store Network
Bunnings Business Overview Store Network 2 Totals 114 Warehouses 24 Traditional 12 100 Stores 17 9 WA Salvage 3 18 Stores 18 34 4 33 31 3 7 32 2 1 -As at 31 March 2003 - Figures excludes DCs, F&T, MLM and State Offices 12
Slide 13: Bunnings Margins & Sales – Australia
Bunnings Margins & Sales – Australia EBIT/Sales % Sales $M 11.0% 4,000 10.0% 9.0% 8.0% 3,000 7.0% 6.0% 10.2% 2,000 5.0% 9.4% 10.0% 9.8% 8.7% 4.0% 7.9% 6.5% 3.0% 1,000 2.0% 1.0% 0.0% 0 1997 1998 1999 2000 2001 2002 2003 YTD Trading EBIT/Sales Sales Bunnings Australia exc Property 13
Slide 14: Store Network Developments
Bunnings Store Network Developments • Store network - move toward warehouse mix • Traditional store network “conversions” • Continue warehouse openings • Dedicated trade outlets 14
Slide 15: Store Network Developments – Warehouse Store Openings
Bunnings Store Network Developments (cont) Warehouse Store Openings Under Construction - 8 Committed opening program 8-12 per year continued network restructure i.e. closings as appropriate Closures to date – 59 Warehouses 5 Traditional 54 15
Slide 16: Store Network Developments (cont)
Bunnings Store Network Developments (cont) 7000 series 9000 series No. of Bays 970 1136 (+17%) Significant additional range - Garden & Leisure 20% - Decorator 43% - Heavy bench tools - - Flooring 91% - Plumbing 27% - Promotional & Seasonal 20% 16
Slide 17: Store Network Developments – Warehouse Store Upgrades
Bunnings Store Network Developments (cont) Warehouse Store Upgrades • 7-14 per annum • Continuous improvement & learning • Merchandise range • Tool Shop/Paint/Garden/Services 17
Slide 18: Store Network Developments – Traditional Store Conversions
Bunnings Store Network Developments (cont) Traditional Store Conversions • 03/04 – 12 planned • 30-40% lift in sales • 8-12,500 additional sku’s 18
Slide 19: Bunnings Strategies
Bunnings Strategies • Consistency of offer (range, service, price) • Store network development • Reducing costs and better use of working capital • Attracting, developing, retaining the right people • Safety • Systems improvements 19
Slide 20: Bunnings Outlook & Priorities
Bunnings Outlook & Priorities • Slower growth in domestic building trade sector • DIY and renovation market growing • Focus on continuous improvement • Focus on development of store network • - openings & re-merchandising • Focus on costs and systems 20
Slide 21: Energy
CY Wesfarmers
Slide 22: Energy Activities
Energy Activities • Coal • Premier - 3.2mt pa domestic contract steaming coal • Bengalla - 40% owned - 6.0mt pa domestic/export steaming coal • Curragh - 6.0mt pa - export coking coal - domestic contract steaming coal • LPG extraction plant 350,000t pa • National LPG distribution business • 40% inte
Slide 23: Coal & Gas Developments
Energy Coal & Gas Developments • Curragh North (Pisces) secured • Girrah divested • LPG contract renewal post 2005 • WA electricity reform 23
Slide 24: Curragh Developments
Energy Curragh Developments 24
Slide 25: Curragh Production
mtpa 0 2 4 6 8 10 12 2003 2004 Energy 2005 2006 2007 2008 2009 2010 2011 2012 2013 Curragh Production 2014 2015 Curragh plus Curragh North ROM tonnes 2016 2017 2018 2019 2020 2021 2022 Curragh stand-alone 2023 2024 2025 2026 25
Slide 26: Key Factors Impacting Outlook
Energy Key Factors Impacting Outlook • Gas • Contract Price (Middle East uncertainties) • Weather impact on demand • Export shipment timing • Coal • Coal price outcomes • Rail / port performance • Export shipment timing • Premier restructuring 26
Slide 27: Wesfarmers Landmark
Wesfarmers Landmark CY Wesfarmers
Slide 28: Wesfarmers Landmark: a snapshot
Wesfarmers Landmark: a snapshot 100,000 customers Services Merchandise Fertiliser Sales Livestock Agency Wool Agency Real Estate Finance Insurance 1,890 employees 430 outlets 28
Slide 29: Strategic Direction
Wesfarmers Landmark Strategic Direction • Three phases for developing Landmark following acquisition of IAMA: Phase 1: Phase 2: Phase 3: Integration and Consolidating Generating creation of the merger sustainable common and fine-tuning growth systems the organisation • Phase 1 was completed in 2001
Slide 30: Generate Sustainable Growth - Phase 3
Wesfarmers Landmark Generate Sustainable Growth - Phase 3 Wesfarmers Landmark growth: • Appropriate cost base • Ongoing management of capital employed • Streamlined structure • Merchandise recovery • East coast fertiliser expansion • Drive livestock & wool growth • National finance & insurance 30
Slide 31: Landmark Outlook
Wesfarmers Landmark Outlook • Autumn break necessary to restore activity • Livestock numbers well down – herd and flock rebuilding to take place • Cattle prices will increase when drought breaks • Wool prices falling • Continued growth in finance and insurance business • Real estate expected to rema
Slide 32: Wesfarmers Federation Insurance
Wesfarmers Federation Insurance 32
Slide 33: Overview of WFI’s Business
Overview of WFI’s Business • Founded in 1919 • Acquired Federation Insurance in 1991 • Rural and small business focus • 13th largest insurer in Australia • 80 branches • 100,000 customers 33
Slide 34: Wesfarmers Federation Insurance Outlook
Wesfarmers Federation Insurance Outlook • Expect to achieve 2002/2003 budget • Premiums continuing slight upward trend • Strong consistent profit performance 34
Slide 35: Chemicals & Fertilisers
Chemicals & Fertilisers CY Wesfarmers
Slide 36: CSBP Activities
CSBP Activities • Manufacture and marketing of chemicals for industry, mining and mineral processing in Western Australia • Manufacture and marketing of broadacre and horticultural fertilisers in Western Australia • Soil and plant testing and agronomy advisory services 36
Slide 37: Chemicals Outlook
Chemicals Outlook • Firm demand for ammonia • Solid demand for AN for explosives and fertilisers • Improving sodium cyanide conditions • WA Water Corporation chlorine contract renewed • Evaluating growth opportunities 37
Slide 38: Fertilisers Outlook
Fertilisers Outlook • Generally favourable commodity pricing outlook • Expected strong plantings • Ongoing product range development to meet farmer requirements • Further cost base improvements • No interstate sales expected in the short term • Seeking new markets for proprietary fertilisers 38
Slide 39: Industrial & Safety
Industrial & Safety CY Wesfarmers
Slide 40: Distribution Network
Industrial & Safety Distribution Network TRADING STYLES: Blackwoods 73 Bakers 7 Motion 10 Metals 1 Mullings 10 Atkins 19 Protector Alsafe 48 NZ Safety 24 Blackwoods (NZ) 7 Protector (NZ) 22 Pkg House 10 TOTAL 231 BR
Slide 41: 2003 Outlook & Initiatives
Industrial & Safety 2003 Outlook & Initiatives • Positive outlook for mining and transport sectors • IT infrastructure implementation: • Financials / HR / Data Warehouse / Portal • Trading style – shop front rollout • Facilities rationalisation: • Protector & Alsafe branches and warehouses 41
Slide 42: Australian Railroad Group
Australian Railroad Group 42
Slide 43: ARG: Management change, drought impact, de-railments
ARG • Management change • Drought impact • De-railments 43
Slide 44: Wesfarmers Key Success Factors
Wesfarmers Key Success Factors 1. Financial Focus 2. Strict Disciplines 3. Building Growth-Enabling Competencies 4. Culture 44
Slide 45: Net Cashflow from Operations after Tax
Net Cashflow from Operations after Tax $m 700 600 500 400 300 200 100 0 1988 1999 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Net Cashflow after Tax 45
Slide 46: Wesfarmers Capital Expenditure & Depreciation
Wesfarmers Capital Expenditure & Depreciation $2bn+ $m 700 600 500 400 300 200 100 0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 F Capex Acquisitions Depreciation 46
Slide 47: Wesfarmers Corporate Objective
Wesfarmers Corporate Objective “to provide a satisfactory return to shareholders” 47
Slide 48: www.wesfarmers.com.au
www.wesfarmers.com.au A. LP ‘ves nb 7%