Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Day (May 2006)
122 slides from Wesfarmers's investor day presentation, May 10, 2006
Slide 1: Investor Briefing
Investor Briefing 10 May 2006 Westin Hotel, Sydney Investor Briefing Day - May 2006 1
Slide 2: Richard Goyder
Richard Goyder Managing Director, Wesfarmers Limited Investor Briefing Day - May 2006 2
Slide 3: Agenda
Agenda 9:15 Wesfarmers Industrial and Safety Terry Bowen 9:50 Chemicals and Fertilisers Keith Gordon 10:25 Morning Tea 10:45 Wesfarmers Insurance Bob Buckley 11:20 Energy David Robb 12:00 Lunch 12:55 Home Improvement John Gillam 1:40 Other Businesses and Capital Management Gene Tibrook Richard Goyde
Slide 4: Wesfarmers Industrial & Safety
Wesfarmers Industrial & Safety Terry Bowen Managing Director Investor Briefing Day - May 2006 4
Slide 5: Overview
Overview Investor Briefing Day - May 2006 5
Slide 6: Overview
Overview • New Business Unit structure and leadership team • Business environment • New strategies to reconnect with growth - Departure from previous plans • Improvements underway • Outlook Investor Briefing Day - May 2006 6
Slide 7: Distribution Network
Distribution Network NEW ZEALAND BUSINESSES No. NZ Safety 24 2 1 Protector Safety 22 20 12 Blackwoods Paykels (NZ) 21 4 3 Packaging House 10 26 11 1 1 6 5 23 10 1 3 1 15 11 22 AUSTRALIAN BUSINESSES No. 24 1 2 Blackwoods 98 10 21 Protector Alsafe 54 6 4 Motion 8 Mullings 9 Investor Briefing Day - May
Slide 8: Portfolio of Businesses
Portfolio of Businesses Australia New Zealand Investor Briefing Day - May 2006 8
Slide 9: New Organisation by Business Unit
New Organisation by Business Unit New Leadership Team in Place (April 2006) Managing Director Blackwoods Protector Alsafe Industrial Specialists New Zealand (plus Bakers, Atkins) Mullings Fasteners NZ Safety Motion Industries Protector Safety Supply Blackwoods Paykels Packaging House Group Support S
Slide 10: New Business Unit Structure to Generate a Number of Benefits
New Business Unit Structure to Generate a Number of Benefits • Improve focus on core generalist Blackwoods business • Position specialist businesses for growth - Dedicated management to develop each business • Implement shared support services in IT, HR, Accounting - Centres of excellence and low co
Slide 11: Business Environment
Business Environment Investor Briefing Day - May 2006 11
Slide 12: Business Environment
Business Environment • Strong competition in Safety - Commoditisation of some product categories • Mixed industry trends in Australia - Continued pressure in some traditional markets (e.g. Manufacturing) - Growth in mining, construction and infrastructure continuing • Economic slow down in New Zeala
Slide 13: Strategies
Strategies Investor Briefing Day - May 2006 13
Slide 14: Strategies to Reconnect with Growth
Strategies to Reconnect with Growth Simplify Grow Leverage businesses Selectively positions Performance • Growth: customers & markets, network • Further expansion • “Enabling” initiatives • Supply chain, • Business simplification distribution channels optimisation • Improvement programs • Further im
Slide 15: Improvements Underway
Improvements Underway • “Enabling” initiatives to clearly position business streams for growth - Business Unit structure implemented - Overhead cost reduction program underway (5% of employees) - Most management systems reviewed - Warehousing infrastructure upgrade continuing - OH&S programme introd
Slide 16: Outlook
Outlook Investor Briefing Day - May 2006 16
Slide 17: Outlook
Outlook • Very different YTD sales trends across Businesses • Continued mixed industry/geographic market conditions expected • FY06 results will be impacted by a number of significant items • New initiatives to deliver over time Investor Briefing Day - May 2006 17
Slide 18: FY06 results will be impacted by a number of significant items
FY06 results will be impacted by a number of significant items vs. last year Item $m • Redundancies 2.4 • Obsolete stock provision review 2.0 - 4.4 • Doubtful debt provision review 1.7 • Employee share plan accounting impact 3.2 • New Zealand exchange rate movement 1.0 Total 10.3 – 12.7 Investor Bri
Slide 19: Questions
Questions Investor Briefing Day - May 2006 19
Slide 20: Chemicals and Fertilisers
Chemicals and Fertilisers Keith Gordon Managing Director Investor Briefing Day - May 2006 20
Slide 21: Overview
Overview Investor Briefing Day - May 2006 21
Slide 22: Chemicals and Fertilisers
Chemicals and Fertilisers • Manufacturer of mining & processing chemicals - ammonia, ammonium nitrate, sodium cyanide, chlorine • Manufacturer and importer of fertilisers - phosphate, nitrogen, potassium and compounds • Manufacturing operations at: - Kwinana and Esperance (WA), Moura (Qld) • 580 emp
Slide 23: EBITA and EBITA/Capital 5 Year Trend
EBITA and EBITA/Capital 5 Year Trend EBITA EBITA/Capital $m % 100 20 90 18 80 16 70 14 60 12 50 10 40 8 30 6 20 4 10 2 0 0 2001 2002 2003 2004 2005 2006 First HY EBITA Full Year EBITA EBITA/Capital (R12) Investor Briefing Day - May 2006 23
Slide 24: Safety
Safety Injuries R12 LTIFR 100 10 9 80 8 7 60 6 5 40 4 3 20 2 1 0 0 2002 2003 2004 2005 YTD 2006 Lost Time Injuries Workplace Injuries R12 LTIFR Investor Briefing Day - May 2006 24
Slide 25: Business Environment
Business Environment Investor Briefing Day - May 2006 25
Slide 26: Chemicals
Chemicals • Ammonia - Gas curtailments - Force majeure event in April 2006 - 5,000 tonne import in January 2006 - 15 day shut scheduled for October 2006 • Sodium Cyanide - Improved trading conditions in export market - Boddington development approved Investor Briefing Day - May 2006 26
Slide 27: Chemicals
Chemicals • Ammonium Nitrate - Kwinana plant performing well - Wet weather in Pilbara and Queensland - Kwinana expansion on track - QN2 expansion shelved • Industrial chemicals - Chlor alkali plant – extended down time Investor Briefing Day - May 2006 27
Slide 28: Fertiliser
Fertiliser • Farmers terms of trade - High input prices - High exchange rates - Soft commodity prices • Reasonable summer rainfall • Seasonal break critical to achieve average volumes • Closure of Albany superphosphate manufacturing facility Investor Briefing Day - May 2006 28
Slide 29: Strategies
Strategies Investor Briefing Day - May 2006 29
Slide 30: Ammonium Nitrate
Ammonium Nitrate Maintain and grow CSBP’s position in AN • Increased demand for AN - WA iron ore industry - QLD/NSW coal industries - Liquid fertilisers • Duplication of AN capacity at Kwinana to 470,000 tpa - Commissioning anticipated second half calendar 2007 • Duplication of QNP shelved Investor
Slide 31: Kwinana Expansion
Kwinana Expansion • Long lead items on track • Technology agreements signed • Site EBA agreed and registered • NA / AN construction contract signed • Contractors on site • Prill plant detailed design nearing completion • Procurement plan in line with plan • AN storage design and licensing ongoing In
Slide 32: Kwinana AN Construction Site
Kwinana AN Construction Site Investor Briefing Day - May 2006 32
Slide 33: Liquid Fertilisers
Liquid Fertilisers Develop and capture growth in liquid fertilisers • Continue with strategy - Increase penetration of existing products - Develop new products - Infrastructure and logistics - Storage capacity at Kwinana and “on-farm” - Transport capacity - Benefits of locally manufactured product I
Slide 34: Other Strategies
Other Strategies • Identify and evaluate growth opportunities • Develop improved capabilities • Optimal cost and capital structure • Maintain “Licence to Operate” Investor Briefing Day - May 2006 34
Slide 35: Development of Capabilities
Development of Capabilities • Greater investment in training - Leadership - Operational • Upgrade of competency management system - Operating procedures - Training manuals • Business process improvement programme • EBA negotiation Investor Briefing Day - May 2006 35
Slide 36: Sodium Cyanide Inventory
Sodium Cyanide Inventory Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Investor Briefing Day - May 2006 36
Slide 37: Licence to operate
Licence to operate • Development of sustainability concept at CSBP • Continue management of legacy issues - Bayswater - Ongoing remediation program • Regulatory compliance - Operational focus - Support resources in place Investor Briefing Day - May 2006 37
Slide 38: Outlook
Outlook Investor Briefing Day - May 2006 38
Slide 39: Outlook
Outlook Long Term • Build capabilities for sustainable performance • Focus on controllable costs and capital • Major chemical plants sold out • Deliver Kwinana AN expansion Short Term • Seasonal break important • Sodium cyanide performance improvement • Review options for AN in Queensland Investor B
Slide 40: Questions
Questions Investor Briefing Day - May 2006 40
Slide 41: Wesfarmers Insurance Division
Wesfarmers Insurance Division Bob Buckley Managing Director Investor Briefing Day - May 2006 41
Slide 42: Insurance
Insurance Investor Briefing Day - May 2006 42
Slide 43: Agenda
Agenda • Overview • Business Environment • Strategies • Outlook • Question and Answer Investor Briefing Day - May 2006 43
Slide 44: Overview
Overview Investor Briefing Day - May 2006 44
Slide 45: Overview
Overview • Sound COR from all business units • Higher level of reported claims - Victoria/South Australia bushfires ($2.0m net cost) - Cyclone Larry ($4.5m net cost) - A number of individual large losses • Achieving profitable revenue growth is difficult • Commercial portfolios experiencing continue
Slide 46: 2006 Achievements
2006 Achievements • Reinsurance change Year Ended 30 June (%) HY 2006 FY 2005 FY 2004 Reinsurance Expense (%GEP) including AMO 27.4 32.4 37.5 excluding AMO 24.4 28.2 32.1 Investor Briefing Day - May 2006 46
Slide 47: 2006 Achievements
2006 Achievements • Revenue Growth - Acquisition of Parks Insurance by LGA - Enhancement of Lumley Marine Division - WFI alliance with Tasmanian Farmers & Graziers Association - LGNZ system implemented in Westpac branches - Investment in sales capability Investor Briefing Day - May 2006 47
Slide 48: 2006 Achievements
2006 Achievements • Human resources initiatives - Leadership development - Succession planning - Targeted recruitment Investor Briefing Day - May 2006 48
Slide 49: Business Environment
Business Environment Investor Briefing Day - May 2006 49
Slide 50: APRA Statistics
APRA Statistics APRA Statistics (Rolling Insurance Cycle $m APRA Statistics (Rolling 12)12) • The peak of the 29,000 94% 28,800 92% insurance cycle was in 28,600 90% June 2004 with the highest premium 28,400 88% revenue and lowest 28,200 86% COR • The insurance cycle 28,000 84% 27,800 82% has impact
Slide 51: JPMorgan General Insurance Survey
JPMorgan General Insurance Survey • 2005 industry profitability at record levels • Commercial premium rates falling • Personal lines premium rates holding • Industry GWP growth forecast 1% (nominal) • Modest rate reductions expected next year • COR expected to deteriorate in 2006 Investor Briefing D
Slide 52: Broker & Underwriter Survey
Broker & Underwriter Survey Top 10 issues confronting brokers Top 10 issues confronting underwriters 1. Compliance 1. Regulation/cost of compliance 2. Competition/number of players 2. Increased competition 3. Underwriting discipline 3. Push to wind back tort reform 4. Staff training 4. Climate chang
Slide 53: Strategies
Strategies Investor Briefing Day - May 2006 53
Slide 54: Strategies
Strategies • Achieve GWP growth - Pursue growth though EDI - Bolt-on acquisitions - Maintain underwriting discipline • Enhance margins - Continued focus on profitable niche business - Seek new profitable segments Investor Briefing Day - May 2006 54
Slide 55: Strategies
Strategies • Increase organisational effectiveness - Review existing processes - WFI and LGNZ to deploy Koukia system • Complete the Koukia base product - Discussions with implementation partners - Deploy in WFI and LGNZ Investor Briefing Day - May 2006 55
Slide 56: Outlook
Outlook Investor Briefing Day - May 2006 56
Slide 57: Outlook
Outlook • Continued pricing pressure in most lines • Claims are reverting to long term averages • Expected full year result satisfactory but below last year Investor Briefing Day - May 2006 57
Slide 58: Questions
Questions Investor Briefing Day - May 2006 58
Slide 59: Wesfarmers Energy
Wesfarmers Energy David Robb Managing Director Investor Briefing Day - May 2006 59
Slide 60: Wesfarmers Energy
Wesfarmers Energy Gas and Power Kleenheat Unigas Wesfarmers LPG Air Liquide enGen Coal Investor Briefing Day - May 2006 60
Slide 61: Coal operation FY 2004/05 statistics
FY 2004/05 Production Volume mt 3.3 Sales Volume mt 3.3 Customers 2 Investor Briefing Day - May 2006 61
Slide 62: Coal operation FY 2004/05 statistics
FY 2004/05 Production Volume mt 7.0 Sales Volume Export mt 4.6 Domestic mt 2.5 Customers 14 Investor Briefing Day - May 2006 62
Slide 63: Coal operation FY 2004/05 statistics
FY 2004/05* Production Volume mt 5.4 Sales Volume Export mt 4.5 Domestic mt 1.2 Customers 9 *Figures are in 100% terms (Wesfarmers equity interest 40%) Investor Briefing Day - May 2006 63
Slide 64: LPG distribution FY 2004/05 statistics
FY 2004/05 Sales Volume kt 219 Sites Depots 39 Branches 15 Commission agents 30 Dealers 619 Customers '000 229 Investor Briefing Day - May 2006 64
Slide 65: LPG production FY 2004/05 statistics
W E S FA R M E R S L P G P A.C .N . 00 9 214 83 1 FY 2004/05 Production Volume kt 310 Sales Volume Export kt 199 Domestic kt 110 Customers 2 Investor Briefing Day - May 2006 65
Slide 66: Industrial gases FY 2004/05 statistics
FY 2004/05 Air Separation Plants Kwinana Capacity TPD Oxygen 285 Hismelt Capacity TPD Oxygen 880 Carbon Dioxide Plants WMC Capacity TPD 12 CSBP Capacity TPD 120 Cylinder Filling Operations 2 Branches 4 Agents 77 Customers '000 5 Investor Briefing Day - May 2006 66
Slide 67: Power generation FY 2004/05 statistics
FY 2004/05 MW installed MW 94 GWh generated per annum GWh 415 Power stations 14 Customers 7 Investor Briefing Day - May 2006 67
Slide 68: Profitable Growth Over Time
Wesfarmers Energy Objective P G T Profitable Growth Over Time Investor Briefing Day - May 2006 68
Slide 69: Energy - Profitable Growth
Energy - Profitable Growth Financial Performance EBIT* EBIT/Capital $m % 350 45 40 300 35 250 30 200 25 150 20 15 100 10 50 5 0 0 1999 2000 2001 2002 2003 2004 2005 1999 2000 2001 2002 2003 2004 2005 * Excludes Girrah $80.5m in 2003 Investor Briefing Day - May 2006 69
Slide 70: Milestones - Coal
Milestones - Coal First coal from Record Won Curragh Curragh North Curragh Purchase North tender March 2005 Exports of Curragh Dec 2002 Curragh Mar 2006 Mine Record North mining Jun 2000 Sale of Girrah lease issued export coal Aug 2004 prices Dec 2002 2005/06 1 July 1 July 1 July 1 July 1 July 1 Jul
Slide 71: Milestones - Gas and Power
Milestones - Gas and Power enGen enGen acquisition 65% acquisition 100% Sep 2001 Feb 2004 WLPG WLPG Upgrade EnGen Construction Fractionation completed of Train 2 Trays Midwest Project Dec 2000 Nov 2001 Dec 2003 1 July 1 July 1 July 1 July 1 July 1 July Today 2000 2001 2002 2003 2004 2005 Record CP’s
Slide 72: Curragh Export Sales Growth
Curragh Export Sales Growth tonnes (m) 7 Wesfarmers Ownership 6 5 4 3 2 1 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 F Investor Briefing Day - May 2006 72
Slide 73: Business Environment
Business Environment Investor Briefing Day - May 2006 73
Slide 74: Resources Growth Challenge
Resources Growth Challenge • Availability and cost of key inputs • Global shortage of earthmover tyres • Availability and cost of skilled labour • Industry-wide capital over-runs and delays Investor Briefing Day - May 2006 74
Slide 75: Curragh's Complexity Challenge
Curragh’s Complexity Challenge Pre Curragh Post Curragh Activity Metric North North Area Disturbed by Mining ha 3,860 5,945 Deposit Strike Length km 13 30 Total Overburden Removal mbcm 97.3 131.7 Tonnes Mined mt 8.7 12.1 CHPP Capacity t/hr 1,200 1,600 Resource Complexity – raw coal types no. 3 6 Ave
Slide 76: Curragh's Rising Costs
Curragh’s Rising Costs Mar 06 vs Mar 05 Unit Rate Increase by Major Category % Increase 30 25 20 15 10 5 0 Contractor T&S Maintenance Explosives Fuel Labour Materials Investor Briefing Day - May 2006 76
Slide 77: Curragh's Rising Costs
Curragh’s Rising Costs YTD Mar 06 vs YTD Mar 05 • Total cash production costs +40% • Total production volume +34% • Metallurgical coal production +41% • Cost curve position maintained CY2005 vs CY2004 • CY2006 peak, CY2007 improvement likely Investor Briefing Day - May 2006 77
Slide 78: Curragh North Box Cut
Curragh North Box Cut Boxcut (inclusive of 1st strip) 2nd Strip Wedge Surface Successive Strips Lowwall 3rd Strip Coal Seam Highwall Investor Briefing Day - May 2006 78
Slide 79: Stanwell Rebate Accounting
Stanwell Rebate Accounting • Accounted for as a part of acquisition CN • Asset and liability offset • Rebate profit impact for 05/06 = $93m (est) • Rebate payment to Stanwell for 05/06 = $89m (est) • Potentially higher payment in 06/07 Investor Briefing Day - May 2006 79
Slide 80: Thermal Coal Prices
Thermal Coal Prices Nominal US$/t 70 60 50 40 30 20 10 0 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 JPU Reference Price Spot Price Source: Barlow Jonker Investor Briefing Day - May 2006 80
Slide 81: Saudi Aramco Contract Price (CP)
Saudi Aramco Contract Price (CP) Nominal US$/t 600 500 400 300 200 100 0 Jul-90 Jul-92 Jul-94 Jul-96 Jul-98 Jul-00 Jul-02 Jul-04 Jul-06 Propane Butane 10yr Propane 5yr Propane 1yr Propane Investor Briefing Day - May 2006 81
Slide 82: WLPG Feed Gas
WLPG Feed Gas LPG Content and Flow Rate Content Flow Rate t/TJ TJ/d 2.5 500 480 2.0 460 1.5 440 1.0 420 400 0.5 380 0.0 360 2001 2002 2003 2004 2005 YTD Mar Financial Year 2006 Average Content Average Flow Rate Investor Briefing Day - May 2006 82
Slide 83: Production
Production Kt WLPG Mt Coal 400 14 Mt 12 300 10 8 200 6 4 100 2 0 0 2000 2001 2002 2003 2004 2005 9M 2000 2001 2002 2003 2004 2005 9M 2006 2006 Investor Briefing Day - May 2006 83
Slide 84: Coal Production
Coal Production Mine Beneficial Coal Type 9 months Interest Mar-05 Mar-06 (‘000 tonnes) Premier, WA 100% Steaming 2,550 2,842 Curragh, QLD 100% Metallurgical 3,198 4,509 Steaming 1,695 2,052 Bengalla, NSW 40% Steaming 1,656 1,739 Total 9,099 11,142 Investor Briefing Day - May 2006 84
Slide 85: Strategies and Outlook
Strategies and Outlook Investor Briefing Day - May 2006 85
Slide 86: Energy BU Strategy Summaries
Energy BU Strategy Summaries • Premier - reduce costs, improve productivity, grow sales • Curragh - finish CN, improve CHPP, grow sales • Bengalla - Consent modification, expand to 10.7mtpa • Kleenheat - implement lower cost business model, develop LNG • WLPG - secure long term feed gas LPG’s, build
Slide 87: Indicative Coal Price Settlement Range
Indicative Coal Price Settlement Range Australia Coals to Japan 125 115 Hard Coking 105 100 US$/t FOB 83 Semi-Hard 75 67 PCI Source: Citigroup April 2006 63 50 2005 2006 Investor Briefing Day - May 2006 87
Slide 88: Curragh Export Sales
Curragh Export Sales Contract Duration 2006/07 “Term” 3 - 5 Year Contracts 92% “Annual” 1 Year Contracts 8% Investor Briefing Day - May 2006 88
Slide 89: Curragh Export Sales
Curragh Export Sales Sales Mix Estimate Hard Coking Hard Coking 59% Semi Hard 50% 20% Semi Hard 23% PCI PCI 30% 18% 2005/06 Estimate 2006/07 Estimate Investor Briefing Day - May 2006 89
Slide 90: Gladstone Coal Delivery System
Gladstone Coal Delivery System Export Capacity Upgrade Delays Original Revised Completion Completion Date Date (as at May 2006) QR (Rail) September 2006 July 2007 Blackwater to Bluff Duplication CQPA (Gladstone Port) July 2006 November 2006 3rd Train Dump Station • Curragh’s expected GCDS capacity i
Slide 91: Energy Outlook
Energy Outlook Coal • Improving operational performance • CN development on time, on budget • Conveyor commissioning early 4Q CY06 • Input cost and availability pressures to continue • Infrastructure bottlenecks impacting sales Gas and Power • High energy prices • Margin management critical • New pr
Slide 92: Questions
Questions Investor Briefing Day - May 2006 92
Slide 93: Home Improvement
Home Improvement John Gillam Managing Director Investor Briefing Day - May 2006 93
Slide 94: Home Improvement
Home Improvement Investor Briefing Day - May 2006 94
Slide 95: Agenda
Agenda • Background • Trading Results • Strategies • Outlook Investor Briefing Day - May 2006 95
Slide 96: Background
Background WIDEST RANGE LOWEST PRICES BEST SERVICE Investor Briefing Day - May 2006 96
Slide 97: Store Network – April 2006
Store Network – April 2006 2 Warehouse stores 138 Small format stores 70 WA Salvage stores 15 26 6 HouseWorks stores 2 19 7 15 4 3 2 43 22 11 26 33 6 2 1 Excludes Distribution Centres and trade operational sites Investor Briefing Day - May 2006 97
Slide 98: Store Network Movements
Store Network Movements Open at Open at Under Opened Closed June 2005 April 2006 development Bunnings Stores Warehouse format 131 8 1 138 9 Smaller format 81 2 13* 70 0 WA Salvage Stores 18 0 3 15 0 HouseWorks Stores 0 2 0 2 0 Bunnings trade operations Distribution Centres 4 1 0 5 2 Trade focused st
Slide 99: Trading Results
Trading Results Half Year Ended 31 December ($m) 2005 2004 % Revenue 2,215.6 2,134.3 3.8 EBIT 220.9 225.4 (2.0) Share Plan & Store Refit Expense 23.3 4.3 Comparative EBIT 244.2 229.7 6.3 ROC (%) 22.8 22.5^ 1.3 Safety (R12 LTIFR) 10.5 13.4 (21.6) Trading Revenue* ($m) 2,198.6 2,120.7 3.7 Comparative
Slide 100: Trading Update – YTD April 2006
Trading Update – YTD April 2006 • Retail sales growth improving − strong competition for discretionary spend − gaining market share Cash store on store growth data Aust. NZ (in NZ$) 2005/06 YTD 4.4% 8.4% Jan-April 2006 7.9% 3.1% • Trade sales just ahead of pcp − continued tight Australian housing ma
Slide 101: Strategies
Strategies 1. Focus on retail drivers 2. Store network development 3. Trade business 4. Team members 5. Business systems 6. Business improvement Investor Briefing Day - May 2006 101
Slide 102: Strategies
Strategies 1. Focus on core retail drivers • Range − innovation driving WIDEST RANGE − expanding market size • Price − strong cost focus delivering LOWEST PRICES − productivity loop • Service − best people delivering BEST SERVICE Investor Briefing Day - May 2006 102
Slide 103: Strategies
Strategies 1. Focus on core retail drivers • Range − new ranges expanding market size − widening existing ranges to grow share − revamped special orders • Service − lifting customer service − improving customer services Investor Briefing Day - May 2006 103
Slide 104: Strategies
Strategies 2. Store network development • 10 to 14 new warehouse store openings per year • Adapting store formats − primary focus on warehouse format • Store upgrades and refits programme − intensive work lifting offer consistency Investor Briefing Day - May 2006 104
Slide 105: Strategies
Strategies 2. Store network development • 2005/06 warehouse openings in target range − 8 opened to end April, 9 under construction • Accelerated store upgrades and refits programme − completed 14 in 1st half (12 warehouses, 2 small formats) − on track to complete 12-14 in 2nd half − commenced re-bra
Slide 106: Strategies
Strategies 2. Store network development • Lifting and widening offer quality • Format improvements − better customer experience − store environment “lifted” − warehouse look and feel retained • Space utilisation prize Investor Briefing Day - May 2006 106
Slide 107: Strategies
Strategies 3. Trade business • Clarity of approach gaining traction • Trade distribution centres − servicing delivered-to-site “builder” business • Store network servicing pick-up “tradie” business • Targeting profitable market share growth • Solid progress in tight market conditions Investor Briefi
Slide 108: Strategies
Strategies 3. Trade business • Acquisition of Hudsons frame & truss business − improve ability to service major builder customers − March 2006 completion − rapid integration with existing F&T operations − forecast annual sales $60m − rationalisation costs $2m taken up this year − modest trading cont
Slide 109: Strategies
Strategies 4. Team members • Enhanced development programs • Supporting improved team member performance − focus on customer service • Continuing strong safety program − steady improvement trend Investor Briefing Day - May 2006 109
Slide 110: Strategies
Strategies 5. Business systems • $55m systems upgrade project progressing to plan • Phase 1 work in line with time and cost expectations • scaleable infrastructure successfully installed • user acceptance testing commences in May for new inventory mgt and distribution centre systems • on-line August
Slide 111: Strategies
Strategies 6. Business improvement • Effectiveness of in-store processes lifting − redeploying hours to customer service • Supply chain performance enhancements • Positive business disciplines − shrinkage and stock management improvements • Lowering our cost of doing business − supporting lower pric
Slide 112: Outlook
Outlook • Strong focus on core retail drivers − widest range, lowest prices and best service • Continued network development − busy agenda with new stores, upgrades and refits • Actively reducing the cost of doing business • Improved retail trading conditions in Australia − volatility concerns remai
Slide 113: Questions
Questions Investor Briefing Day - May 2006 113
Slide 114: Gene Tilbrook Finance Director
Gene Tilbrook Finance Director Investor Briefing Day - May 2006 114
Slide 115: ARG - Operations
ARG - Operations • Tonnages for minerals increasing • Grain tonnage rates recovered after floods • Regulatory focus is on transition • Capital programme on plan Investor Briefing Day - May 2006 115
Slide 116: ARG – Sale
ARG – Sale • Settlement planned for 1 June • Subject to accreditations, transfers of rights and other licensing issues • Pre-tax profit to WES expected to be $235m Investor Briefing Day - May 2006 116
Slide 117: Gresham Private Equity – Fund 1
Gresham Private Equity – Fund 1 Fund 1 • Current Wesfarmers investment around $30m • Five of eight investments divested • Cash on cash gross IRR 40% CURRENT INVESTMENT PORTFOLIO Norcros Riviera Raywood Investor Briefing Day - May 2006 117
Slide 118: Gresham Private Equity – Fund 2
Gresham Private Equity – Fund 2 Fund 2 • Current Wesfarmers investment $41m • Commitment up to $150m (of $324m) • Good opportunity flow but competitive market CURRENT INVESTMENT PORTFOLIO Noel Australian Pacific Pacific Print Leeming Paper Products Group Investor Briefing Day - May 2006 118
Slide 119: Capital Management
Capital Management • Net Debt:Equity around 65-85% (pre ARG completion) • Net Debt (not netting Insurance investments) averaging around $2 billion • 2005/06 Interest Expense includes about $13m finance charges (mainly Stanwell) • Cash cover remains strong Investor Briefing Day - May 2006 119
Slide 120: Questions
Questions Investor Briefing Day - May 2006 120
Slide 121: Q&A
Q&A Richard Goyder Managing Director, Wesfarmers Limited Gene Tilbrook Finance Director, Wesfarmers Limited Investor Briefing Day - May 2006 121
Slide 122: For all the latest news visit www.wesfarmers.com.au
For all the latest news visit www.wesfarmers.com.au Investor Briefing Day - May 2006 122