Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Day (April 2009)
142 slides from Wesfarmers's investor day presentation, Apr 21, 2009
Slide 1: Investor Briefing
Investor Briefing 21 April, 2009 Westin Hotel, Sydney
Slide 2: Richard Goyder
Richard Goyder Managing Director, Wesfarmers Limited
Slide 3: Agenda
Agenda 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 4: Management Team
Management Team 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 Resources Stewart But
Slide 5: Managing through current conditions
Managing through current conditions • 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 and ongoing capital r
Slide 6: Coles renewal...
Coles renewal... lan McLeod Wesfarmers
Slide 7: Agenda
Agenda 1. Performance update 2. Renewal progress 3. Trading outlook 7
Slide 8: Q3 sales on track…
Q3 sales on track… • 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 with well managed seaso
Slide 9: Renewal drives positive customer response…
Renewal drives positive customer response… • 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 10: Agenda
Agenda 1. Performance update 2. Renewal progress 3. Trading outlook 10
Slide 11: The situation facing the new management team…
The situation facing the new management team… • 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 years, with several St
Slide 12: Beginning the Circle for Success…
Beginning the Circle for Success… Fresh New Trading Waste & Operating Improvement Value Markdowns Model Strategy Culture change Store Renewal Productivity Improvement More Volume Capability 12
Slide 13: Phase 1 of turnaround on track…
Phase 1 of turnaround on track… 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 & store • Strong custome
Slide 14: Creating a strong top team & customer focused culture…
Creating a strong top team & customer focused culture… • 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 08 • Launched Coles ‘Re
Slide 15: Improving store standards…
Improving store standards… • 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 deli scales replaced –
Slide 16: Improving on-shelf availability…
Improving on-shelf availability… • 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 Dec-08 Mar-09 16
Slide 17: Compelling customer message…
Compelling customer message… • 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 listening to 1 million
Slide 18: Revamp of house brand drives double digit growth…
Revamp of house brand drives double digit growth… • 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 conducted in last six mont
Slide 19: Developing an outstanding fresh offer…
Developing an outstanding fresh offer… • 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 20: Store renewal…
Store renewal… 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 21: Our renewal strategy…
Our renewal strategy… • 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’ approach based on cus
Slide 22: Our store transition…
Our store transition… VIDEO CLIP 22
Slide 23: IT investment to provide better customer service…
IT investment to provide better customer service… • 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 – Liquor IT platform sim
Slide 24: A better supply chain to support business growth….
A better supply chain to support business growth…. • 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 Customers "Somerton NDC i
Slide 25: Our mechanised supply chain…
Our mechanised supply chain… VIDEO CLIP 25
Slide 26: Liquor renewal…
Liquor renewal… • 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-store cost rationalis
Slide 27: A strong, differentiated liquor portfolio…
A strong, differentiated liquor portfolio… 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 • Convenience format offering tar
Slide 28: Building on our successful fuel & convenience offer…
Building on our successful fuel & convenience offer… • 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 store and forecourt impro
Slide 29: Coles Online growth encouraging…
Coles Online growth encouraging… • 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 service improvement f
Slide 30: Managing our working capital better…
Managing our working capital better… • 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 focus on terms of trad
Slide 31: Coles & its customers in the Community…
Coles & its customers in the Community… • 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: – Cancer Council Daffo
Slide 32: What our team members think…
What our team members think… VIDEO CLIP 32
Slide 33: What our customers think…
What our customers think… VIDEO CLIP 33
Slide 34: Agenda
Agenda 1. Performance update 2. Renewal progress 3. Trading outlook 34
Slide 35: Outlook…
Outlook… •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 programme ie $10 family mea
Slide 36: Questions
Questions
Slide 37: Appendices
Appendices
Slide 38: Improving our customer franchise…
Improving our customer franchise… 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 Liquor 862 22 22 862 Conve
Slide 39: Our customer franchise
Our customer franchise at 31 March 2009 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 40: A great platform to capture future growth in liquor…
A great platform to capture future growth in liquor… • 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 77 South Australia x 12
Slide 41: An efficient national supply chain…
An efficient national supply chain… 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 centre 41
Slide 42: Target
Target Launa Inman Wesfarmers
Slide 43: Trading Update
Trading Update 3 months to March • 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 offset by Government st
Slide 44: Managing the Business
Managing the Business Current Challenges • 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 managed – Flexible wor
Slide 45: Target Store Network
Target Store Network end March 2009 2 1 31 23 15 10 19 12 52 45 45 23 168 Target stores 4 1 115 Target Country stores 45
Slide 46: Store Network Movements
Store Network Movements 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 refits to a light touch 46
Slide 47: Latest Store Design
Latest Store Design Store Entry Treatment and signage 47
Slide 48: Latest Store Design – Sunbury
Latest Store Design – Sunbury Window Treatment 48
Slide 49: Latest Store Design - Sunbury
Latest Store Design - Sunbury Entry and Orientation Zone 49
Slide 50: Latest Store Design - Sunbury
Latest Store Design - Sunbury Major arterial boulevard 50
Slide 51: Latest Store Design - Sunbury
Latest Store Design - Sunbury Focal Walls 51
Slide 52: Latest Store Design – Sunbury
Latest Store Design – Sunbury Department Beacons 52
Slide 53: Latest Store Design – Sunbury
Latest Store Design – Sunbury Fitting Rooms 53
Slide 54: Latest Store Design
Latest Store Design First in, first served checkouts 54
Slide 55: Differentiation still the key
Differentiation still the key • 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 56: Supply Chain
Supply Chain • 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 – Fast moving fashion – Eve
Slide 57: Supply Chain
Supply Chain Savings/Productivity • 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 viable transport options e.
Slide 58: Target Outlook
Target Outlook • 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 – Managing expenses • Increase
Slide 59: Questions
Questions Wesfarmers
Slide 60: Kmart
Kmart Guy Russo Wesfarmers
Slide 61: Agenda
Agenda • Trading Update 3Q09 • Key Issues • Our Strategy • Outlook 61 61
Slide 62: Trading Update – 3Q09
Trading Update – 3Q09 • 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 control • New store open
Slide 63: Key issues
Key issues j. << Wesfarmers
Slide 64: Key Issues
Key Issues • Customer • Product • Price • Promotion • Place • People 64
Slide 65: Our strategy
Our strategy j. << Wesfarmers
Slide 66: A discount department store focussed on serving customers
A discount department store focussed on serving customers quality products at low prices, in an easy to shop environment. 66
Slide 67: Strategy framework: Customer, Product, Price, Promotion, Place, People
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 68: Customer
Customer 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 • Reduced queuing Clean, tid
Slide 69: Product
Product 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 flow • Improve fashionabi
Slide 70: Price
Price 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 discounts Value • Sim
Slide 71: Promotion
Promotion 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 event processes In Store
Slide 72: Place
Place 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 stores Space & Design • M
Slide 73: People
People 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 structures • Develop store tea
Slide 74: Outlook
Outlook j. << Wesfarmers
Slide 75: Kmart Outlook
Kmart Outlook • 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 76: Questions
Questions Wesfarmers
Slide 77: Insurance
Insurance Rob Scott 77
Slide 78: Broking and Underwriting
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 79: Insurance cover for rural, business and private requirements
Insurance cover for rural, business and private requirements BUSINESS FARM 85 locations across rural and HOME & CAR regional Australia STRATA 79
Slide 80: Wholesale distribution of tailored insurance solutions
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 81: Advice and solutions to allow clients to financially survive
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 82: Specialist product advice and tailored services to businesses
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 83: Trading Update - Underwriting
Trading Update - Underwriting 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 agency arrangements Incr
Slide 84: Trading Update - Broking
Trading Update - Broking 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 Australia Organisation
Slide 85: Insurance Costs ($m)
Higher than average natural catastrophes 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 Canberra bushfires 200 -
Slide 86: Market Conditions
Market Conditions • 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 client growth 86
Slide 87: Underwriting Strategies
Underwriting Strategies 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 July LGNZ margin On-tr
Slide 88: Broking Strategies
Broking Strategies 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 Building the best team On-tr
Slide 89: Insurance Outlook
Insurance Outlook • 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 delivering on turnaround •
Slide 90: Questions
Questions 90
Slide 91: Resources
Resources Stewart Butel
Slide 92: Wesfarmers Resources
Wesfarmers Resources Export metallurgical and domestic steaming coal QLD Domestic steaming coal WA Export and domestic NSW steaming coal (40% ownership) 92
Slide 93: Business environment
Business environment • 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 metallurgical coal output cuts
Slide 94: Australian coal market prices
Australian coal market prices Steaming coal Hard coking coal US$/Tonne (Nominal) FOB Australia (annual verse spot) US$/Tonne (Nominal) FOB Australia (annual verse spot) 200 400 350 160 300 120 250 200 80 150 100 40 50 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2003 2004 2005 2006 2007 2008 2009 201
Slide 95: Resources strategies
Resources strategies Strategic initiatives Comments 3 Long-term contracts ongoing Maximise export sales and 3 Price relativity maintained optimise sales mix 3 Maximise higher value products 3 Improve operational performance 3 Cost reduction programmes in place Cost reduction programmes WIP People, p
Slide 96: Coal production – year on year growth
Coal production – year on year growth YTD ended Mine ('000 tonnes) Beneficial Interest Coal Type Mar 2009 Mar 2008 Curragh, QLD 100% Metallurgical 5,016 4,822 Steaming 2,217 1,966 Premier, WA 100% Steaming 2,663 2,213 Bengalla*, NSW 40% Steaming 1,529 1,529 Total 11,425 10,530 * Wesfarmers attributa
Slide 97: Curragh FY09 projected metallurgical sales
Curragh FY09 projected metallurgical sales Sales mix and volume • FY09 sales volume estimate – Lower end of 6.5 to 6.9 million tonne range Hard Semi Hard 47% 25% • Additional 325kt PCI diverted to export steaming PCI 28% 97
Slide 98: Curragh FY10 projected metallurgical sales
Curragh FY10 projected metallurgical sales Sales mix and volume • Strong shipping in year ended March 09 Hard Semi Hard • Limited carryover tonnage into June 09 QTR 45 - 48% 22% • Strong customer support • FY10 sales volume estimate PCI 30 - 33% – 6.0 to 6.5 million tonnes 98
Slide 99: Metallurgical coal price market outcome
Metallurgical coal price market outcome US$ / 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 100: Australian HCC producers FOB cash costs
Australian HCC producers FOB cash costs • 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 independent review Austral
Slide 101: Curragh focus on cost control
Curragh focus on cost control • 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 and roles • Costs drive
Slide 102: Hedging profile as at 31 March 2009
Hedging profile as at 31 March 2009 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 0.78 2010 97 0.79 2011 2
Slide 103: Dragline 302 back in service ahead of schedule
Dragline 302 back in service ahead of schedule • Boom accident - Dec 2008 • Estimated cost of repair - $20m • Insurance claim in progress • Return to service – end April 2009 103
Slide 104: Increase available reserves - Blackwater Creek diversion
Increase available reserves - Blackwater Creek diversion • 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 December 2010 104
Slide 105: Resources outlook
Resources outlook • 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%) – Stanwell rebate estimate
Slide 106: Questions
Questions 106
Slide 107: Appendices
Appendices 107
Slide 108: Coal delivery systems
Coal delivery systems • 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 vessel queues and demurr
Slide 109: Coal port congestion
Coal port congestion East Coast Australia as at 27 March 2009 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 110: Home Improvement & Office Supplies
Home Improvement & Office Supplies
Slide 111: Bunnings Trading Update
Bunnings Trading Update 1January to 13 April* • 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 efficiency • Challenging trad
Slide 112: Bunnings Outlook
Bunnings Outlook • 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 current economic environmen
Slide 113: Officeworks Trading Update
Officeworks Trading Update 1 January to 13 April* • 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 progress on strategic agenda
Slide 114: Officeworks Outlook
Officeworks Outlook • 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 115: Bunnings Network
Bunnings Network at April 2009 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 116: Office Supplies Network
Office Supplies Network at April 2009 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 117: Store Network Movements
Store Network Movements 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 118: Industrial Businesses
Industrial Businesses 118
Slide 119: Industrial & Safety
Industrial & Safety Wesfarmers
Slide 120: Industrial & Safety Distribution Network: 240 branch locations
Industrial & Safety Distribution Network: 240 branch locations 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 3 1 1 1 20 MRO, hose,
Slide 121: Industrial & Safety Highlights
Industrial & Safety Highlights • 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 • Strengthening competitiven
Slide 122: Growth strategies
Growth strategies 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 investment in sales force (CRM,
Slide 123: Industrial & Safety Outlook
Industrial & Safety Outlook • 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 to manage through curre
Slide 124: Energy
Energy Wesfarmers
Slide 125: Energy Overview
Energy Overview 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, research, WA, NT educatio
Slide 126: Operational Update
Operational Update • 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 08 • Volatile interna
Slide 127: Strategies
Strategies 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 power generation project
Slide 128: Energy Outlook
Energy Outlook • 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 utilisation – upgrade of Po
Slide 129: Chemicals & Fertilisers
Chemicals & Fertiliser Wesfarmers
Slide 130: Chemicals & Fertilisers Overview
Chemicals & Fertilisers Overview 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, AngloGold PVC Resin / Vic/A
Slide 131: Strategy Update
Strategy Update 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 management Sustainability
Slide 132: Operational Update
Operational Update • 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. • 30,000 tonne pa expansion
Slide 133: Chemicals & Fertilisers Outlook
Chemicals & Fertilisers Outlook 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 in FY10 will benefit
Slide 134: Capital Management
Capital Management Terry Bowen 134
Slide 135: Equity proceeds
Equity proceeds • 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 ($1.9bn) • Remainder
Slide 136: Current maturity profile
Current maturity profile $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 137: Hedging profile
Hedging profile • 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 FY11) • Weighted average
Slide 138: Capital management
Capital management • 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 – strive to deliver stab
Slide 139: Significant items
Significant items • 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 assets • Ongoing testing
Slide 140: Questions
Questions 140
Slide 141: Q&A
Q&A Richard Goyder Managing Director, Wesfarmers Limited Terry Bowen Finance Director, Wesfarmers Limited
Slide 142: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au 142