briefing day presentation - wesfarmers · 2016-07-13 · investor briefing 7 may 2004...
TRANSCRIPT
![Page 1: Briefing Day Presentation - Wesfarmers · 2016-07-13 · Investor Briefing 7 May 2004 InterContinental Hotel, Sydney. May 2004 Investor Relations David Robb May 2004. ... Energy 2003/04](https://reader030.vdocument.in/reader030/viewer/2022041112/5f1b5c17f788e165636ba1d3/html5/thumbnails/1.jpg)
Investor Briefing7 May 2004InterContinental Hotel, Sydney
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May 2004 Investor Relations
David Robb
May 2004
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3May 2004
Wesfarmers Energy
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4May 2004
Wesfarmers Energy Objective
P G T
Profitable Growth Over Time
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5May 2004
Production
0
2
4
6
8
10
12
14
Mt
Coal
0
100
200
300
400Kt
WLPG
1999 2000 2001 2002 2003 9Mths2004
1999 2000 2001 2002 2003 9 Mths2004
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6May 2004
Saleable Coal Production
Mine Beneficial Interest
Coal Type
% ('000 tonnes)
Premier 100 Steam 2,540 2,478
Curragh 100 Coking 2,949 3,412
Steam 1,539 1,808
Bengalla 40 Steam 1,332 1,682
9 MonthsMar-03 Mar-04
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7May 2004
Sales Volumes9 Months 2004 versus 9 Months 2003
Kleenheat Gas +4%
Wesfarmers LPG -1%
Air Liquide* -2%
Premier -2%
Curragh +16%
Bengalla +5%
*Pipeline Sales
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8May 2004
Financial Performance
EBITA/Capital
0
5
10
15
20
25
30
35
1999 2000 2001 2002 2003 R12Mar
%
0
50
100
150
200
250
300
1999 2000 2001 2002 2003 9 Mths2004
EBITA*$m
* Excludes Girrah $80.5m in 2003
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9May 2004
Logistics Bottlenecks
Demurrage Mar-03 Mar-04
Gladstone 1.46 2.09
Newcastle (40%) 1.56 2.40
9 Months
($m)
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10May 2004
Energy 2003/04 Outlook
Gas
International prices lower than pcp…..maybe
Coal
Demand strong, logistics bottlenecks continue
Contract and spot prices up significantly
Minimal unallocated tonnage
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11May 2004
Energy 2003/04 OutlookSaudi Contract Price
150
200
250
300
350
400
US$/t
Propane 2002/2003 Propane 2003/2004
Jul Dec JunSep Mar
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12May 2004
Energy 2003/04 OutlookHard Coking Coal Prices
JRP US$/Tonne FOB nominal
Japanese Financial Year
30
35
40
45
50
55
60
83 85 87 89 91 93 95 97 99 01 03 04
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13May 2004
Energy 2003/04 OutlookThermal Coal Prices
Source: Barlow Jonker
Apr-04-
10
20
30
40
50
60
US$/Tonne FOB nominal
Spot Price
Apr-00 Apr-01 Apr-02 Apr-03Apr- 96 Apr-97 Apr-98 Apr-99
0
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14May 2004
0.4
0.5
0.6
0.7
0.8
0.9
Jul Dec Jun
AUD/USD 2002/2003 AUD/USD 2003/2004
Energy 2003/04 OutlookExchange Rates
$A/$US
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15May 2004
Energy 2003/04 OutlookCoal Sales
(million tonnes) Domestic
Steam Export Steam
Export Coking
Total
Premier, WA 3.4 3.4
Bengalla*, NSW 0.6 1.6 2.2
Curragh, QLD 2.4 4.7 7.1
Total 6.4 1.6 4.7 12.7
*Wesfarmers 40% share
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16May 2004
Energy Issues Last Quarter
LPG prices and demand
• Atypical price trend
• Autogas weakness
• Supermarket success
Coal volumes, prices, costs
• Production performance (dragline shutdown)
• Inventory effects
• Logistics performance
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17May 2004
PGT Challenges
Asset & People Productivity
Aligning Stakeholders
Acquiring New Competencies
Changing the Business Model
A Sense of Urgency
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18May 2004
Performance Drivers
TIME
PE
RF
OR
MA
NC
E
Costs
Volumes & Margins
People & Processes
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19May 2004
Safety LTIFR
0
5
10
15
20
25
30
1995 1996 1997 1998 1999 2000 2001 2002 2003
Kleenheat Gas
0
5
10
15
20
25
30
35
1995 1996 1997 1998 1999 2000 2001 2002 2003
WLPG
0
5
10
15
20
25
30
35
40
45
1996 1997 1998 1999 2000 2001 2002 20030
2
4
6
8
10
12
14
16
18
1996 1997 1998 1999 2000 2001 2002 2003
Premier Curragh
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20May 2004
Strategy Summary
Premier - contracts, new markets, unit costs
Curragh - Curragh North delivery and optimisation
Bengalla - JV Alignment, mine plan, sales mix
KHG - “focus on fundamentals” III
WLPG - flexible operation
ALWA - delivering new projects
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21May 2004
PGT ActivitiesGas & Power
LPG market development post excise decision
WLPG post 2005
LNG for road transport
HIsmelt
MidWest
WA base load power
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22May 2004
LNG
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23May 2004
Update on HIsmelt Project
• No lost time injuries
• Project on schedule and within budget
• All major equipment now on site
• Fourteen days lost (RIO IR)
• October completion date unchanged
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24May 2004
StateWest PowerMid West project
5 diesel power stations:
Cue, Meekathara, Sandstone, Wiluna and Yalgoo
1 gas power station:
Mt Magnet
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25May 2004
PGT ActivitiesCoal
Premier Market Development
• Mineral sands
• Hismelt
• Char
Curragh North
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26May 2004
Coal Market Development
1998/1999
0%Coking Export
4%Steaming Export
96%Steaming Domestic
98/99
Premier
Curragh Export
Curragh Domestic
Bengalla Export
Bengalla Domestic
9 Months 2003/2004
9M 03/04
51%
14%
35%
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27May 2004
Curragh
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28May 2004
The Key Focus – Curragh North• Award of Mining Lease
• Marketing program underway
• Project management – scope, timetable, procurement
• Selection of infrastructure delivery mechanisms
• Logistics
• Integration with Curragh operations
• Recruitment
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29May 2004
Overview of Curragh North
N
McKenzie River
Curragh
Yarrabee
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30May 2004
Reserves History
0
50
100
150
200
250
Acquisition
(2000)
Post Girrah Sale
(2003)
With CN
(2004)
Curragh Girrah Curragh North
MT ROM
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31May 2004
Curragh ProductionROM tonnes
0
2
4
6
8
10
12
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
mtp
a
Curragh stand-alone
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32May 2004
Curragh ProductionROM tonnes
0
2
4
6
8
10
12
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
mtp
a
Curragh plus Curragh North Curragh stand-alone
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33May 2004
Mining Lease
Completed:
• Environmental Impact Statement
• Qld EPA Environmental Authority
• Cultural Heritage Management Plan
• Confirmation – native title extinguished
• 6 Compensation agreements
Outstanding
• 1 landowner objector to Mining Lease
• Resolved through negotiation or LRT
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34May 2004
Coal Processing
Fine coalcircuit
DeslimingScreens
PrimaryDMC
SecondaryDMC
Reject10 t
Steaming coal
Product21 t
Coking coal Product
58 t
Tailings
11 t
CHPP Plant Feed
Raw Coal Distribution2 Modules4 Loops
Fine coalcircuit
DeslimingScreens
PrimaryDMC
SecondaryDMC
Reject
Steaming coal
Product
Coking coal Product
TailingsCHPP Plant Feed
Raw Coal Distribution2 Modules4 Loops
Yield upgrade in 2002
Capacity (1600tph) and yield upgrade now for CN
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35May 2004
Export Sales
Curragh brand name and reputation
Positioned as “independent” supplier
World leading steel makers as key customers
Contracts secured to underpin CN expansion
New PCI product
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36May 2004
Export Customer Mix
Japan
Other NorthAsia
Europe
South Asia
19%
18%
13%
50%
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37May 2004
Export Customer ContractsDuration
5 Years
3 – 5 Years
Annual
1 – 3 Years
32%
40%15%
13%
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38May 2004
w w w . w e s f a r m e r s . c o m . a u
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Chemicals and Fertilisers
John GillamManaging Director
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40May 2004
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41May 2004
CSBP’s Objective
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42May 2004
CSBP Background
Established 1910
Member of Wesfarmers Group since 1980
Only major fertiliser supplier in WA until ~ 1990
Diversification into chemicals from 1987
Major chemicals investments post 1996
Post 1999, around 60% of EBITA generated from chemicals activities
WA’s leading fertiliser supplier in a competitive market
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43May 2004
CSBP Background
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, Albany and Esperance - WA
• Moura, QLD (joint venture)
540 employees
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44May 2004
EBITA and EBITA/Capital5 Year Trend
0
20
40
60
80
100
1999 2000 2001 2002 2003
$m
0
2
4
6
8
10
12
14
16
18%
EBITA EBITA/Capital
EBITA EBITA/Capital
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45May 2004
CSBP July 2003 – March 2004 Results
Chemicals
• volumes up 7% on last year
• margin pressure on sodium cyanide continuing• steady production performance
Fertilisers
• volumes up 10% on last year
• strong market focus, liquid fertiliser growth
Revenue and earnings (9 months to March 2004)
• revenue:$319m ($290m pcp)
• EBITA: $49.4m ($40.2m pcp)
R12 LTIFR 2.6 (6.9 pcp)
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Chemicals
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47May 2004
Ammonia/Ammonium Nitrate
Nitric Acid Plant
AN SolutionPlant
PrillingPlant
Sodium Cyanide
Production
FertiliserProduction
Ammonia sales to nickel industry and export
AN Solution sales to Dynofor explosives
Ammonia Plant
AN Prill sales to Dyno for explosives
Air
Water
NaturalGas
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48May 2004
Ammonia Background
Sole WA manufacturer and supplier
Replacement plant commissioned in 2000
• original plant capacity 650 tpd / 225,000 tpa
• debottlenecked to 240,000 tpa
• further expansion now underway
40,000 tonnes import / export storage terminal
External customers
• primarily nickel industry and exports
Internal customers
• ammonium nitrate, sodium cyanide and fertilisers
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49May 2004
Ammonium Nitrate Background
Sole WA manufacturer
160,000 tpa nitric acid plant / 200,000 tpa AN plant commissioned 1997
AN plant debottlenecked to 230,000 tpa
• distribution for mining explosives via Dyno Nobel
• Flexi-N liquid fertiliser consumes balance of production
Queensland Nitrates plant at Moura
• project financed 50:50 joint venture with Dyno Nobel
• recent incremental debottlenecking successful
• 185,000 tpa integrated facility
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50May 2004
Sodium Cyanide
Solution salesto WA gold mines
Solid sales toAustralian and overseas gold mines
Sodium CyanideSolution
Plants 1 & 2
CausticSoda
Ammonia
NaturalGas
Sodium CyanideSolids Plant
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51May 2004
Sodium Cyanide Background
Australian Gold Reagents - sole WA manufacturer
75 : 25 joint venture with Coogee Chemicals
• plant operation and marketing by CSBP
First solution plant commissioned in 1988
• progressively expanded to ~ 48,000 tpa solution
• further expansion possible with limited expenditure
Investment in solid sodium cyanide plant in 2002
• 20,000 tpa nameplate capacity
• reviewing debottlenecking opportunities
Strong Australian market position
Developing export markets for solid product
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52May 2004
Industrial Chemicals Background
5,000 tpa chlorine plant commissioned 1987
• baseload production for WA Water Corporation
• co-production of caustic soda, hydrochloric acid, sodium hypochlorite, hydrogen
Traded products
• Sulphuric acid
• Industrial urea
• Fluorosilicic acid
• Sulphur
• Ammonium sulphate
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53May 2004
ChemicalsCurrent Influences
Strong resource sector conditions
• short term softness in local ammonia offtake
• export excess ammonia production
Good ammonia / AN plant performances
• continued lift in Queensland Nitrate operations
Sodium cyanide solids plant at design expectations
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54May 2004
ChemicalsStrategies
Profitably build on existing businesses
• examining AN & sodium cyanide production
expansion opportunities
• debottlenecking of ammonia plant underway
Evaluating growth opportunities
• exploit core competencies
• expand product range in existing markets
• assess opportunities in new markets
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Fertilisers
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56May 2004
Fertilisers Background
Only major fertiliser supplier in WA until ~ 1990
• manufacturing focus at that time
Market share and profit erosion in last decade
• emergence of import-based competitors
Post 2000, market share and profit stabilisation
• strong market and distribution focus
• working capital, cost base and supply chain efficiencies
• around 50% sales (by volume) imported
Cropping driven nutrient growth in WA market
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57May 2004
Fertilisers Background
Unmatched infrastructure in WA market
• volume growth readily handled
Extensive distribution network
• commission based reward structure
• AWB Landmark, Elders & independents
• all collections ex-CSBP facilities
CSBP market support
• field staff supporting distribution network and account managing key customers
• agronomic advisory services, product development, soil and plant testing services.
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58May 2004
Fertilisers WA Infrastructure
Geraldton
Dongara
Kwinana
Bunbury
Carnamah
Gnowangerup
Manufacture Facility
Import Facility
Regional Sales RepsInland Depot
Esperance
Wagin
Narrogin
Merredin
Katanning
Lake Grace
Albany
Wongan Hills
Moora Dalwallinu
Corrigin
Tambellup
Northam
Goomalling
Soil and Plant Lab
Distribution Centre
(Not Including Sales Agents)
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59May 2004
Fertilisers3 Year Sales Volumes
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2001 2002 2003
million tonnes
Western Australia Other
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60May 2004
FertilisersCurrent Influences
Anticipate good 2004 conditions
record 2003 harvest
offset by strong $A
Solid sales programme
good distributor support
competitive pricing
enhanced range of products and services
Continued growth in liquid fertiliser
Cost base and supply chain improvements
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61May 2004
FertilisersStrategies
Profitably build core WA business
Strong market focus
widest range of quality fertilisers
best services and technical support
competitive prices
Develop markets beyond WA for proprietary products
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62May 2004
w w w . w e s f a r m e r s . c o m . a u
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Wesfarmers Industrial & Safety
Bob Denby
Managing Director
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64May 2004
Agenda
The Wesfarmers Industrial and Safety business
Third quarter F2004 results
WIS strategy
Current business outlook
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Wesfarmers Industrial & Safety
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66May 2004
Provider of innovative distribution solutions
Two markets
• Maintenance Repair & Operating (MRO)
• Safety
Market leader Aust & NZ
500,000 SKU’s $200m inventory
17 Product trading departments
10 trading streams
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67May 2004
250+ Location Distribution Network
AUCKLAND
HASTINGS
NEW PLYMOUTH
LOWER HUTT
CHRISTCHURH
DARWIN
ALICE SPRINGS
CAIRNS
TOWNSVILLE
MACKAY
ROCKHAMPTON
BRISBANE
TAMWORTH
NEWCASTLE
SYDNEY
CANBERRA
MELBOURNE
LAUNCESTON
HOBART
ADELAIDE
PERTH
BUNBURY
WOLLONGONG
ORANGE
WHYALLA
GRIFFITH
ALBURYSHEPPARTON
BENDIGO
DANDENONG
GOSFORD
DUBBO
SOUTHPORTTWEED HEADS
COFFS HARBOUR
IPSWICH
TOOWOOMBA
GYMPIE
BUNDABERG
GLADSTONE
MT. ISA
WAGGA WAGGA
MORWELL
MARYBOROUGH
LISMORE
KWINANA
KARRATHA
KALGOORLIE
BURNIE
PORT HEDLAND
BELL BAY
ROXBY DOWNS
GERALDTON
PORTLAND GEELONG
MT GAMBIER
BALLARAT
MILDURA
BROKEN HILL
SINGLETON
TRADING STYLES:Blackwoods 64Atkins 3Blackwoods Atkins 23Bakers 7Motion 10Metals 1Mullings 10Protector Alsafe 49NZ Safety 24Blackwoods (NZ) 7Protector (NZ) 22Pkg House 11 Paykels 21
TOTAL 252BRANCHES
NSW 37VIC 30QLD 37WA 38SA 13 TAS 9NT 3NZ 85
TOTAL 252
Broome
Albany
Esperance
Newman
Kunnunurra
TAURANGA
PALMERSTON NTH
WANGEREI
GREYMOUTH
DUNEDIN
INVERCARGILL
NELSON WELLINGTON
ROTORUA
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68May 2004
Business Environment
MRO market highly fragmented
No direct national competitor
WIS is market leader but not a market name
Strong price competition from specialists
Pressure on trading margins forces continuing focus on cost base
Working capital control essential
IT capability is a competitive edge: growing e-Business opportunities
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Wesfarmers Industrial & Safety
Third Quarter 2004 Results
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70May 2004
Financial Highlights (Year to Date)
Operating Revenue up 1.5% to $851m, normalised
Operating Revenue (excluding Metals) up 3.3%.
EBITA down 2.6% to $79.8m, normalised EBITA
(excluding Metals) down 1.5%.
EBITA/Op. Rev. Margin improved from 9.2% (half year)
to 9.4%
EBITA/Capital up from 13.9% to 14.2%
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71May 2004
Financial Highlights
Operating Revenue
0
200
400
600
800
1000
1st Qtr Half Year 9 Mths
$M
LY TY
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72May 2004
Financial Highlights
EBITA
0
20
40
60
80
100
1st Qtr Half Year 9 Mths
$M
LY TY
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73May 2004
Business Activity Highlights
Blackwoods
• Northern & Western regions strong growth
• Central & Southern regions flat sales
Protector Alsafe
• Business improvement plan beginning to
demonstrate improvement
New Zealand
• Significant sales & EBITA increase
• Paykels integration largely complete
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74May 2004
Highlights for Year to Date
Rationalisation of distribution centres
Integration of Blackwoods & Paykels
Implementation of ERP system
• Acc Payable & Gen Ledger live 1/10/03
• Payroll live 15/10/03
• Acc Receivable live 1/12/03
Blackwoods Trade Fair
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Wesfarmers Industrial & Safety
Strategy
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76May 2004
WIS Strategies
Grow real sales and sustain gross margin
• Improved brand positioning
• Expand network
Shopfronts
• Alignment of sales force
• New catalogues
• Leverage e-business
• Customer service improvements
• Extend import programme
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77May 2004
WIS Strategies
Reduce expense to sales ratio
• Extend operation deliver
• Rationalise distribution infrastructure
• Upgrade information systems
Reduce working capital
• Enhance category management
• Refine vendor management
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78May 2004
WIS Strategies
Improve safety performance
• Improved OHS&E management
• Implementation of OHS&E systems
• Development of effective performance
management systems
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79May 2004
WIS Values
Focusing on results
Passion for service
Empowering our people
Fostering creativity
Working safely
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Wesfarmers Industrial & Safety
Current Business Outlook
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81May 2004
Outlook for Balance of 2004
Australia
• Generally positive
• Positive sales trend
• Continued spending in mining and transport
infrastructure
New Zealand
• Robust
• EBITA improvement assisted by Paykels
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82May 2004
w w w . w e s f a r m e r s . c o m . a u
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Gene TilbrookExecutive Director, Business DevelopmentWesfarmers Limited
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84May 2004
OUTLINE
Australian Railroad Group
Gresham Private Equity
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85May 2004
ARG50% Interest with Genesee & Wyoming
Revenue
0
50
100
150
200
250
300
350
400
450
2003 2004
$m
9 Months Full Year
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86May 2004
ARG50% Interest with Genesee & Wyoming
Performance continues to improve
• Large grain harvest
• New business gained, but with set up costs
• Improved safety / reduced incidents
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87May 2004
ARG50% Interest with Genesee & Wyoming
Outlook:
• Continuing improvement
• Grain season – next 6-9 months
• New business contributions
• Operational initiatives
• Mineral tonnages
Ongoing capital expenditure
Industry rationalisation
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88May 2004
ARG50% Interest with Genesee & Wyoming
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Gresham Private Equity
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90May 2004
Gresham Private Equity Fund 150% interest
No divestments in the quarter
Cashcard sold in April
Five investments remain
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91May 2004
Gresham Private Equity Fund 1Remaining Investments
EROC - mining / infrastructure contractor
Norcros - building materials, coatings
Riviera - cruisers
Virgin Active - health clubs
Raywood - vehicle control systems
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92May 2004
Gresham Private Equity Fund 2
Wesfarmers has committed up to $100m
(of 1st close $110m)
Gresham Private Equity now has team of six
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93May 2004
w w w . w e s f a r m e r s . c o m . a u
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Wesfarmers Insurance Division
Bob BuckleyChief Executive Officer
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95May 2004
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96May 2004
Agenda
Wesfarmers Insurance Division overview
Industry comparisons
Market conditions
Overview of business units
Financial summary
Outlook
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97May 2004
Wesfarmers Insurance Division
WESFARMERS INSURANCE DIVISION
(LGA)Lumley General
Australia
(LGNZ)Lumley GeneralNew Zealand
(LTL)Lumley
Technology
(WFI)WesfarmersFederationInsurance
(LFL)Lumley Finance
Australia
(LFNZ)Lumley FinanceNew Zealand
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98May 2004
Gross Premium
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
IAG/C
GUSun
corp
ProminaAllia
nz
QBE
Zurich
Lloyds
WFI/L
umley
ING
$m
Source : Deloitte and Trowbridge 2003
Industry comparisons - Australia
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99May 2004
Source : Insurance Council of New Zealand
Industry comparisons – New Zealand
Gross Premium
-
200
400
600
800
1,000
1,200
IAG Vero LGNZ AMI QBE AHA Tower ACE
NZ$m
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100May 2004
Market conditions
Favourable economic climate
Signs of a softening market are emerging
Benign claims environment
Reinsurance market has stabilised
Major storm events in Victoria and NZ
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101May 2004
LGA – Key issues
Softening rates and flat premiums
Overall claims below budget
Growing commercial account
FSRA licensing completed on schedule
Increasing burden of compliance
New system rollout completed in WA, SA & Qld
Business focus maintained during integration
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102May 2004
LGA – Key Segments
Commercial Motor/Fleet
Other Commercial
AMO
Engineering
Personal Lines
Marine
Exposure
-Short Tail 88.4%
-Long Tail 11.6%
YTD GWP $414.7m
LYTD GWP $410.6m
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103May 2004
LGA - KPIs
0.983.083.9%COR
%
%
%
%
(4.7)9.64.9Commission ratio
2.417.119.5Expense ratio
19.5
56.3
2004
1.418.1Insurance margin
3.259.5Net loss ratio
Change 2003YTD March
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104May 2004
LGNZ – Key issues
Favourable economic climate
Rate increases slowing
Emerging competition
Severe storm in lower North Island
Annualised revenue now NZ$250m
Systems related decisions
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105May 2004
LGNZ – Key SegmentsCommercial Motor/Fleet
Personal Lines
Liability
Other Commercial
Marine
Engineering
Exposure
-Short Tail 92.5%
-Long Tail 7.5%
YTD GWP NZ$186.0m
LYTD GWP NZ$158.5m
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106May 2004
LGNZ - KPIs
(1.6)89.387.7%COR
%
%
%
%
(2.1)4.62.5Commission ratio
1.821.523.3Expense ratio
12.0
63.1
2004
(0.9)12.9Insurance Margin
(1.3)61.8Net loss ratio
Change 2003YTD March
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107May 2004
WFI – Key issues
Strong crop season
Non crop claims below budget
Continued growth from key alliances
System implementation on track
Workers compensation reforms in WA
FSRA license obtained
Compliance burden growing
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108May 2004
WFI – Key Segments
Rural Packages
Commercial Packages
Personal Packages
Crop
Workers Compensation
Exposure
-Short Tail 77.1%
-Long Tail 22.9%
YTD GWP $191.9m
LYTD GWP $165.6m
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109May 2004
WFI - KPIs
2.689.592.1%COR
%
%
%
%
0.38.79.0Commission ratio
(0.2)18.918.7Expense ratio
14.0
61.9
2004
2.211.8Insurance margin
2.464.3Net loss ratio
Change 2003YTD March
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110May 2004
Divisional - KPIs
1.515.313.8%Insurance margin
1.287.488.6%COR
%
%
%
(2.5)8.35.8Commission ratio
1.619.621.2Expense ratio
59.4
2004
2.161.5Net loss ratio
Change 2003YTD March
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111May 2004
Divisional – Financial Summary
9.8Investment income on TR
56.2Insurance margin
(28.3)Net commission
(206.8)Net claims
367.9NEP
0.2Non - insurance activities
7.2Investment income on SHF
46.4U/W result
(86.4)Expenses
63.6
564.6
2004
EBITA
GEP
March YTD $m
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112May 2004
Outlook
Increasing weather events (?)
Moderation of insurance cycle
Systems development and deployment
Efficient capital management
MCR = 1.8 times
Lower investment earnings
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113May 2004
w w w . w e s f a r m e r s . c o m . a u
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Peter DavisManaging Director, Bunnings
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115May 2004
LOWEST PRICESWIDEST RANGEBEST SERVICE
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116May 2004
Agenda
1. Year to Date Results
2. Year to Date Highlights
3. Key Issues
4. Outlook
5. Questions
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117May 2004
10.3%
236.7
37.2
273.9
2,650.1
2003
0.0%10.3%EBITA/Sales Ratio
11.1%262.9EBIT
0.0%37.2Amortisation
9.6%300.1EBITA*
10.1%2,919.0Revenue*
Change2004($m)
Year to Date ResultsSegment Result
*Includes Revenue and EBITA from property and other
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118May 2004
10.1%
223.8
37.2
261.0
2,576.1
2003
0.0%10.1%EBITA/Sales Ratio
13.1%253.1EBIT
-0.0%37.2Amortisation
11.2%290.3EBITA*
11.9%2,883.4Revenue*
Change2004($m)
Year to Date ResultsTrading Result
*Excludes Revenue and EBITA from property and other
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119May 2004
Cash store on store growth 12%
• Strong result – Queensland, New South Wales,
Western Australia & New Zealand
• Difficult trading conditions – Victoria
Clearance sale March 2003
• Seasonal and deleted stock (ex-BBC)
• Sales impact – mainly NSW
Year to Date Results
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120May 2004
Industry Performance
National Retail Sales vs Bunnings Cash Sales (Indexed to 100)
020406080
100120140160180200
Jul-0
2Aug
-02Sep
-02Oct-
02Nov
-02Dec
-02Ja
n-03Feb
-03Mar-
03Apr-
03May
-03Ju
n-03Ju
l-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
Jan-04
Feb-04
National Retail Sales Bunnings Cash Sales
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121May 2004
Trade credit sales increased by 1%
• Australia –2%
• New Zealand +16%
• Trade strategy development – next 6 months
Store network refits and upgrades
• Customer disruption
• One-off costs
• Increased average cash transaction
Year to Date Results
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122May 2004
Industry Performance
Bunnings Credit Sales vs National Housing Commencements (Indexed to 100)
0
20
40
60
80
100
120
140
Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03
Housing Commencements Bunnings Credit Sales
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123May 2004
Store Network Development
• 11 new warehouse openings (to end April)
NSW 5
VIC 2
QLD 2
NZ 2
• 3 warehouse closures
QLD, VIC, NSW
• 7 traditional store closures
QLD & NSW
Year to Date Highlights
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124May 2004
Store Network Development
• Bunnings Warehouse upgrades
3 completed (QLD, SA)
• Former Hardwarehouse refits
5 completed (NSW)
• Traditional store upgrade
3 completed (VIC, NSW)
Year to Date Highlights (cont.)
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125May 2004
1
32
17
84
Totals
TraditionalStores
Warehouses124
86
3
2
2
7
41
923
25
5
31
18
WA SalvageStores18
As At 1 May 2004Excludes Frame & Truss Operations
Store Network Update
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126May 2004
Key Issues
1. Inventory management
2. Trade business strategy
3. Store network development
4. Safety – attitudes, awareness, culture
5. Quality team members – attract, develop, retain
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127May 2004
1. Inventory management
Data warehouse
New system 2-3 years
Stockturn and working capital management
Review logistics model
Key Issues
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128May 2004
2. Trade business strategy
New East Coast Manager
Review international best practice
Develop/implement business plan (6 – 8 months)
Key Issues
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129May 2004
3. Store network development
Continue 8 –12 new warehouse openings
Series 3000 developments
Format and development adaptability
Store upgrades and refits
Key Issues
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130May 2004
4. Safety
Senior Safety Leadership Team
DuPont leadership training
BSAFE management system
Team level safety process training
Key Issues
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131May 2004
5. Attracting, developing and retaining quality people
Recruitment Manager in New South Wales
Vacancy rate targets
Accelerated Management Development
Programme
Corporate "University” and e-learning system
Key Issues
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132May 2004
Continued growth in DIY and renovation markets
Rising interest rates affecting new housing
Store development pipeline
Store network upgrades and conversions
Continuous improvement
Outlook
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133May 2004
Industry Outlook
+4.0%+5.2%3. Renovation Expenditure
-5.8%-2.0%2. Housing Starts
+4.0%+5.6%1. Retail Sales
2004/052003/04Indicator
Sources: 1. BIS Shrapnel; 2&3 Housing Industry Association
Forecast Annual Growth Rates
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134May 2004
In summary:
• Drive costs down through growth in sales and
productivity improvements
• Continued market share development and
upgrade
• Focus on key strategic platform – price, range
and service
Outlook
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135May 2004
Increase Sales
Reduce Prices
Reduce Operating
Expenses
InvestmentBITS
Productivity Loop
InventoryLogistics
Processes
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136May 2004
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137May 2004
Questions
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138May 2004
w w w . w e s f a r m e r s . c o m . a u