WESFARMERS LIMITED — Call Transcript 2013

Aug 14, 2013

2013 Full-Year Results Teleconference 15 August 2013

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2

Presentation outline

	Item Presenter Page
1	Group Performance Highlights Richard Goyder 3
	Coles Ian McLeod 13
2
	Home Improvement & Office Supplies John Gillam 22
3
	Target Stuart Machin 31
4
	Kmart Guy Russo 37
5
	Insurance Anthony Gianotti 41
6
	Resources Stewart Butel 46
7
	Chemicals, Energy & Fertilisers Tom O’Leary 50
8
9	Industrial & Safety Olivier Chretien 54
10Balance Sheet & Cash Flow Terry Bowen 58
11Outlook Richard Goyder 70

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Group Performance Highlights Richard Goyder Managing Director, Wesfarmers Limited

4

Group performance highlights

• Operating revenue of $59.8 billion, up 3.0%

• Earnings before interest & tax of $3,658 million, up 3.1%

• Net profit after tax (NPAT) of $2,261 million, up 6.3%

• Earnings per share of $1.96, up 6.4%

• Operating cash flows of $3,931 million, up 8.0%

• Free cash flows of $2,171 million, up 47.5%

• Fully-franked final dividend of $1.03 declared taking full-year dividend to $1.80, up 9.1%

• Capital return of 50 cents per share including a proportionate share consolidation (subject final ruling by the ATO & shareholder approval)

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5

Group performance highlights (cont)

• Strong earnings growth at Coles, Bunnings, Officeworks & Kmart

• Improvements in value, offer & service driving strong transaction growth

• Improved product sourcing, in store execution & stock management enhancing earnings growth

• Target’s earnings were disappointing; price deflation, clearance of excess inventory & increased costs

• Significant increase in Insurance earnings; underwriting turnaround due to higher premiums, improved risk selection & lower claims experience

• Reduced commodity pricing & strong AUD affecting Resources; sustainable cash cost reductions achieved

• Mining slowdown impacting customer activity (volume & margin) in WIS

• Solid WES CEF performance; earnings growth in Chemicals offset by lower Fertilisers earnings & deterioration in LPG production economics

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6

Group performance summary

Year ended 30 June ($m)	2013	2012	%
Revenue	59,832	58,080	3.0
EBITDA	4,729	4,544	4.1
EBIT	3,658	3,549	3.1
Finance costs	(432)	(505)	14.5
Tax expense	(965)	(918)	(5.1)
Net profit after tax	2,261	2,126	6.3
Operating cash flows	3,931	3,641	8.0
Earnings per share (ex. employee res. shares) (cps)	195.9	184.2	6.4
Earnings per share (inc. employee res. shares) (cps)	195.6	183.9	6.4
Operating cash flow per share (inc. employee res. shares) (cps)	339.7	314.6	8.0
Dividends per share(cps)	180.0	165.0	9.1
Return on shareholders' funds (R12 %)	8.9	8.4	6.0

cps: cents per share

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7

Lon term erformance g p

TSR WES: 12.0% (CAGR) ASX 200: 9.3% (CAGR)

1 Assumes 100% dividend reinvestment on the ex-dividend date, & full participation in capital management initiatives e.g. rights issues, share buybacks.

Source: Bloomberg

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8

Strength through diversified earnings

Coles Home Improvement Office Supplies Target Kmart Resources WES CEF WIS Insurance 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Industrial 15%; (FY12: 24%) Department store retailing 13%; (FY12: 14%) Big box retailing 26%; (FY12: 25%) Food, liquor & petrol retailing 41%; (FY12: 37%) Insurance 5%; (FY12: 0%) Divisional EBIT Percentage of Divisional EBIT

12012 includes additional reserves of $108 million relating to the 22 February 2011 Christchurch earthquake. 22012 includes Premier Coal earnings. 3 Year ended 30 June EBIT($m) 2013 2012 % Coles 1,533 1,356 13.1 Home Improvement 904 841 7.5 Office Supplies 93 85 9.4 Target 136 244 (44.3) Kmart 344 268 28.4 Insurance1 205 5 n.c. Resources2 148 439 (66.3) Chemicals, Energy & Fertilisers3 249 258 (3.5) Industrial & Safety 165 190 (13.2) Divisional EBIT 3,777 3,686 2.5 Other (11) (36) 69.4 Corporate overheads (108) (101) (6.9) Group EBIT 3,658 3,549 3.1

3 2012 includes enGen & the Bangladesh LPG JV earnings.

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FY13

9

Return on Capital

• Focus on return on capital to deliver satisfactory shareholder returns

Year ended 30 June	2012 EBIT R12 Capital Employed ROC ROC $m $m % % 2013
Coles Home Improvement Office Supplies Target Kmart Insurance Resources Chemicals, Energy & Fertilisers Industrial & Safety	1,533 16,114 9.5 8.7 904 3,492 25.9 25.9 93 1,147 8.1 7.1 136 2,930 4.6 8.4 344 1,329 25.9 18.9 205 1,396 14.7 0.4 148 1,480 10.0 29.5 249 1,400 17.8 20.1 165 1,119 14.7 16.0

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10

Strategic growth initiatives

Retail

• Coles: continue category & network development, realise supply chain & operational efficiencies, improve multi-channel integration & targeted loyalty offers; leverage the improvements achieved at Liquor; optimise Convenience network

• HIOS: continue to invest in value & the customer experience; deliver more merchandise innovation; deliver store pipeline growth & recycle property capital

• Kmart: continue to drive sales through lower prices; drive further cost & process efficiencies; invest in the store network

• Target: focus on getting back to basics; strengthen leadership team; execute long term transformation strategy

Insurance

• Continue to improve Underwriting disciplines & operational efficiencies; further investment in Coles Insurance; grow Broking through bolt on acquisitions where returns are satisfactory

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11

Strategic growth initiatives (cont)

Industrials

• Resources: continue strong mine cash cost focus

• WES CEF: complete the $550 million ammonium nitrate expansion; debottleneck Sodium Cyanide (SC) plant

• WIS: leverage strong contract base & further develop product range & services; continue industry diversification; focus on cost structure

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12

Strategic growth initiatives (cont)

Group

• Manage the portfolio to deliver satisfactory returns to shareholders

• Continue to improve capital efficiency

• Maintain strong balance sheet & access to capital

• Continue to leverage & build human resource capability

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Coles Ian McLeod Managing Director

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**Colesperformance summary **		Coles	Coles		14	14
Year ended 30 June ($m)	2013	2012		%
Revenue	35,780	34,117				4.9
EBIT	1,533	1,356			13.1
ROC %	9.5	8.7
Safety (R12 LTIFR)	9.5	13.0
Food & Liquor Revenue1	27,933	26,561				5.2
Headline sales growth %2,3	5.5	4.6
Comparative salesgrowth %2,3	4.3	3.7
Trading EBIT4	1,368	1,232			11.4
EBIT Margin %	4.9	4.6
Convenience Revenue	7,847	7,556				3.9
Total store sales growth %2	1.5	0.2
Comparative fuel volumegrowth%2	2.3	2.8
TradingEBIT	165	124			33.1
1Includes property revenue 2013 $28 million, 2012 $27 million. 22013 growth reflects the 53 week period 25 June		2012 to 30 June 2013, and the			53
week period 27 June 2011 to 1 July 2012. 2012 growth reflects the 52 week period 27 June 2011 to 24 June 2012 and the 52 week period 23				June		2010
to 26 June 2011.3Includes hotels, excludes gaming revenue & property.4 Includes property EBIT 2013 $16 million, 2012 $25 million.

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Coles 15

Leadin financial erformance g p

• Strong ROC improvement over last 5 years

• $750m of EBIT growth

• 190bps EBIT margin expansion

• 440bps ROC expansion

• Motivated to do more

• Continue to grow EBIT faster than revenue

• Cost reduction focus

• Maintain return focused capital management

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9.5%
5.1%
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Coles 16

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Value, quality & innovation

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• Investing in better value

• 100s more big brands & Coles brands added to Down Down

• flybuys enlarged & enabling targeted delivery of value

• Investing in better quality

• Locally sourced for freshness

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• Supply chain velocity for longer life at home

• Investing in innovation

• New categories trialled in concept stores

• New branded & Coles brand ranges in food & non-food

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Coles 17

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Efficiencies in & above stores

• More efficient DC operations

• Leveraging best practice across locations

• Optimising product flows for fast & slow moving lines

• Optimising transport network

• In-house load planning trials commenced

• Route optimisation

• Simpler in-store replenishment & production

• Selective centralised procurement delivering further savings

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Coles 18

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Compelling & engaging

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• Investing in a better experience

• Concept stores performing well

• Redesigned Coles Online site in final customer trial phase

• Investing in future growth

• New store activity increased in FY13 with 1.6% net space growth

• − Pipeline remains strong at ~2% net space growth per annum

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• Engaging team members & communities

• Raised $30 million for charities in FY13

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Coles 19

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Repositioning for growth

• Network restructure well progressed

• Better mix of co-located & retail associated stores

• Some closures of stores still required

• Stronger focus on sales mix profitability

• Shift towards higher margin categories & exclusive labels

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• Better range architecture for each format

• Investing in channel growth

• Trials underway for small & large

  • format

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Coles 20

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Winning with customers

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• Better fuel offer

• Positive change in fuel mix towards diesel & premium fuels

• Volume growth

• Improved shop offer

• Down Down campaign extension performing well

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• Stronger mix of grocery sales

• Quality sites to drive growth

• Enterprise approach to network planning & site selection

• Mix of co-located sites & network gaps

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Coles 21

Deliverin sustainable transformation g

• Turnaround successful so far; regearing for growth transformation

• Cost of living pressures remain a key concern

• Value to remain at the heart of what we do

• Strong supplier relationships critical for quality & value plans

• Strength & depth in building an innovative & dynamic culture

• Investing in opportunities for future growth

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Home Improvement & Office Supplies John Gillam Managing Director

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Home Improvement & 23 Office Supplies

HIOS erformance summar p y

Year ended 30 June ($m)	2013 2012 %
Revenue Home Improvement Office Supplies EBIT Home Improvement Office Supplies	7,661 7,162 7.0
	1,506 1,482 1.6
	9,167 8,644 6.1
	904 841 7.5 93 85 9.4
	997 926 7.7

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Home Improvement & 24 Office Supplies

Home Improvement Performance summary

Year ended 30 June ($m)	2013	2012	%
Revenue	7,661	7,162	7.0
**EBIT1 **	904	841	7.5
Trading EBIT Margin (%)	11.7	11.6
ROC (R12 %)	25.9	25.9
Safety (R12 AIFR)	31.7	39.7

1 Includes net property contribution 2013 $8 million, 2012 $9 million.

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Home Improvement & 25 Office Supplies

Home Im rovement hi hli hts p g g

• Trading revenue growth of 7.0%

• Consumer sales growth of 6.4%; commercial sales growth of 9.6%

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• Store-on-store growth of 4.4%

• Pleasing improvements to core business

• Better customer outcomes & stronger offer

• Deeper brand reach

• Stock flow & productivity enhancements

• Continued investment in the best team

• Product knowledge, development & safety

• Lift in engagement & retention both off a high-base

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Home Improvement & 26 Office Supplies

Home Im rovement hi hli hts p g g

• Opened 23 trading locations

• 10 new warehouse stores

• 10 smaller format stores & three trade centres

• Industry leading ROC with growth-focused investment

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• Targeted investment

• Accelerated new store pipeline with efficient property development & construction activity

• Faster take-up of best opportunities

• Reinvigorating existing network

• $531 million capital invested in FY13

• $2.1 billion capital invested in past four years

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Home Improvement & 27 Office Supplies

Home Im rovement outlook p

• Continued growth expected to be driven through:

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• More customer value

• Better customer experiences

• Greater brand reach

• Expanding commercial

• More merchandise innovation

• Continued investment in strengthening the core business

• Team, stock flow, productivity & community involvement

• Faster network expansion

• Expected to open at least 20 warehouse stores in FY14

• Strong focus on innovative capital recycling

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Home Improvement & 28 Office Supplies

Office Supplies Performance summary

Year ended 30 June ($m)	2013	2012	%
Revenue	1,506	1,482	1.6
EBIT	93	85	9.4
EBIT margin (%)	6.2	5.7
ROC (R12 %)	8.1	7.1
Safety (R12 AIFR)	33.9	35.9

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Home Improvement & 29 Office Supplies

Office Su lies hi hli hts pp g g

• Strong earnings growth

• Higher sales with pleasing growth in transactions & units sold

• Double-digit online sales growth

• Good progress on actions to improve the customer offer

• Website enhancements, range expansion & service investment

• Improved performance in margin & stock productivity

• 13 new stores & continued investment in existing network

• New format now in place in half the network

• Continued ROC improvement (uplift of 14% in FY13)

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Home Improvement & 30 Office Supplies

Office Su lies outlook pp

• Modest sales growth expected

• Competitive pressure on sales & margin remains strong

• Focus on strategic agenda

• Improve customer offer & service

• Expand & upgrade store network

• Extend reach to new customers

• Reduce complexity & cost of doing business

• Develop & engage the team

• Grow the business customer offer

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Target Stuart Machin Managing Director

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Target 32

Tar et erformance summar g p y

Year ended 30 June ($m)	2013	2012	%
Revenue	3,658	3,738	(2.1)
EBIT	136	244	(44.3)
EBIT margin (%)	3.7	6.5
ROC (R12 %)	4.6	8.4
Safety (R12 LTIFR)	7.8	8.2
Total sales growth1(%)	(1.7)	(1.8)
Comparable store sales growth1(%)	(3.3)	(2.1)

1 2013 growth reflects the 53 week period 24 June 2012 to 29 June 2013 & the 53 week period 26 June 2011 to 30 June 2012. 2012 growth reflects the 52 week period 26 June 2011 to 23 June 2012 & the 52 week period 27 June 2010 to 25 June 2011.

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Target 33

Tar et – FY13 earnin s im act g g p

• Earnings affected by:

• Price deflation

• Excess inventory requiring high levels of clearance activity

• Higher than expected shrinkage

• Restructuring costs & increased costs of doing business

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Target 34

Start of a transformation

• First 15 weeks:

• Listened to customers & team members

• Strategic review & direction reset

• Met key suppliers & all store managers & store support teams

• – Commenced improvement of store presentation standards & service

• Stock reduction action taken & continuing

• Begun implementing cost efficiencies including store support office restructuring

• Strengthened leadership team (to be in place by Christmas)

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Target 35

FY14 – Back to basics

• Strong leadership team in place

• Clear organisational structure & accountabilities established

• Cleaner, de-cluttered stores with no queues

• • Development of ‘store of the future’

• Increase alignment of online & in-store offers

• Launch of brand ‘personality’

  • Start SKU reduction

• Stop cost expansion

• Design of productivity, COGS

• & GNFR programs

• Review IT & supply chain infrastructure

• Pricing & promotional effectiveness review

• Introduce clear pricing & differentiation between Good, Better & Best

• Clearer in-store customer messaging

• Improve direct sourcing

• Optimise inventory

• Improve space allocation & assortment practices

• Progress pull replenishment

• Everyday fashion

• Define Target style across Good, Better & Best & to be fast-followers of fashion

• Define quality benchmarking (durability & fit)

• Improve promotion of style & quality features on Better & Best ranges

• • Development of new ticketing & packaging

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Target 36

Tar et outlook g

• Challenging trading conditions have continued into FY14

• High levels of clearance activity in 1H FY14

• Late launch of Spring/Summer

• Cycling high levels of promotional activity

• Focus on getting ‘Back to Basics’

• Strengthened leadership team in place by Christmas to oversee longer term transformation

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Kmart Guy Russo Managing Director

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Kmart 38

Kmart erformance summar p y

Year ended 30 June ($m)	2013	2012	%
Revenue	4,167	4,055	2.8
**EBIT1 **	344	268	28.4
EBIT margin (%)	8.3	6.6
ROC (R12 %)1	25.9	18.9
Safety (R12 LTIFR)	9.2	9.3
Total sales growth2(%)	2.7	0.0
Comparable store sales growth2(%)	2.1	0.0

1 2013 includes $2 million earnings relating to Coles Group Asia overseas sourcing operations (2012: $2 million).

2 2013 growth reflects the 53 week period 25 June 2012 to 30 June 2013 & the 53 week period 27 June 2011 to 1 July 2012. 2012 growth reflects the 52 week period 27 June 2011 to 24 June 2012 & the 52 week period 23 June 2010 to 26 June 2011.

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Kmart 39

Kmart hi hli hts g g

• Strong earnings result with double digit growth

• Comparable sales growth of 2.1% for the year

• Strong growth in customer transactions & units sold

• Excluding the effect of removing Christmas lay-by from the Toy sale event, comparable sales growth of 3.0%

• Improved range assortment, inventory management & store execution

• Strong performance of everyday core ranges

• Summer seasonal ranges & Christmas event performed well

• Improved on shelf availability

• Strong cash realisation

• Focus on working capital management maintained

• Continued investment in store network

• Opened six new Kmart stores & five new Kmart Tyre & Auto stores

• Completed 10 major Kmart store refurbishments

• Store format development (Southlands)

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Kmart 40

Kmart outlook

• Continued focus on growth

• Volume retailer

• Operational excellence

• Adaptable stores

• High performance culture

• 1Q FY14 sales affected by the removal of Christmas lay-by for Toy Event

• Exchange rate hedging in place for FY14

• Continuation of improvement initiatives in team member safety

• Further enhancement of ethical sourcing program

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Insurance Anthony Gianotti Managing Director

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Insurance 42

Insurance erformance summar p y

Year ended 30 June ($m)	2013	2012	%
Total Revenue	2,083	1,915	8.8
EBITA Underwriting	136	(58)	n.m.
EBITA Broking	86	79	8.9
EBITA Other	(4)	(4)	-
EBITA Insurance Division	218	17	n.c.
EBIT Insurance Division1	205	5	n.c.
EBIT Margin (Insurance Division) (%)1	9.8	0.3
ROC (R12%)1	14.7	0.4
Safety (R12 LTIFR)	2.0	2.7
Combined Operating Ratio (%)	95.3	111.2
EBITA Margin (Broking) (%)	29.3	29.6

1 2012 included a $108 million one-off impact on underwriting earnings from reserve increases in relation to the 22 February 2011 Christchurch earthquake (EQ2). Upon exclusion of this one-off impact & restatement of 2012 key performance metrics, EBIT (Insurance Division), EBIT margin (Insurance Division) & ROC (R12) for 2012 are $125 million, 5.9% & 8.8% respectively.

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Insurance 43

Insurance hi hli hts g g

• Strong Underwriting performance

• Significantly improved loss ratio through disciplined underwriting practices with a focus on risk selection & exposure management

• Higher earned premiums benefiting from rate increases in FY12 & FY13

• Favourable claims experience in most portfolios, partially offset by deterioration in Builders’ Warranty run-off

• Claims from natural perils in line with internal expectations

• Continued growth in Coles Insurance

• Release of remaining LAT deficit reflecting improvements in portfolio profitability

• Lower investment yields adversely affecting investment earnings

• NZ Earthquake reserves remain largely unchanged

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Insurance 44

Insurance highlights (cont)

• Continued income & earnings growth in Broking

• Strong revenue & earnings growth in NZ benefitting from full year contribution from ACM & strong performance in the underlying business

• Challenging trading conditions in the Australian SME sector constraining growth

• Increased investment in broking systems resulting in slightly lower broking margin

• Strong contribution from Premium Funding

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Insurance 45

Insurance outlook

Underwriting

• Further improvement in performance, benefiting from a continued focus on underwriting disciplines & operational efficiencies

• Premium rate increases expected to slow across most classes of business

• Continued strong growth in personal lines offering through Coles Insurance

• Low interest rate environment will continue to affect investment income

• Broking

• Higher costs in broking associated with on-going investment in systems

• Challenging trading conditions in the Australian SME sector expected to continue

• Continue to assess & pursue bolt-on broking acquisitions

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Resources Stewart Butel Managing Director

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Resources 47

Resources erformance summar p y

Year ended 30 June ($m)	2013 2012 %
Revenue1 Royalties2 Mining & other costs3 EBITDA Depreciation & amortisation **EBIT4 **	1,539 2,132 (27.8)
	(262) (368) 28.8 (978) (1,175) 16.8
	299 589 (49.2) (151) (150) (0.7)
	148 439 (66.3)
ROC (R12%)	10.0 29.5
Coal production (‘000 tonnes)5	13,730 14,056
Safety (R12 LTIFR)	1.9 1.7

1 Includes traded coal revenue of $20 million in 2013 (2012: $135 million). 2 Includes Stanwell royalty expense of $154 million (2012: $219 million).[3] 2012 includes one-off costs at Curragh of $55 million associated with final flood recovery and mine ramp-up ahead of expansion.[4 ] The divestment of Premier was completed on 30 December 2011.[5 ] Includes Premier Coal production of 1.6 million tonnes in 2012.

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Resources 48

Resources hi hli hts g g

• Ongoing focus on safety performance

• Pleasing reduction in Total Recordable Injury Frequency Rate (TRIFR)

• Lower export prices & continued high US$:A$ exchange rate resulted in a significant decline in export revenue

• Significant reduction in Curragh mine cash costs in FY13

• Achieved unit cash cost reduction of ~30% (from 1H FY12 peak)

• Reduction of 9% in 2H FY13 (from 1H FY13)

• FY13 metallurgical coal production of 7.4 million tonnes affected by scheduled shutdown and rail & port disruptions due to Cyclone Oswald

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Resources 49

Resources outlook

• Export Markets

• Global economic uncertainty resulting in variable short term metallurgical coal demand

• Continued low export prices expected in 1H FY14

• Financial Year 2014

• Forecast Curragh metallurgical coal sales of 7.5 – 8.5mt

• Estimated full year sales mix (Hard 42%; Semi-Hard 31%; PCI 27%)

• Continuing strong mine cash cost focus

• Stanwell royalty estimate of A$100 - $120 million assuming A$:US$ of 0.95

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Chemicals, Energy & Fertilisers Tom O’Leary Managing Director

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Chemicals, Energy 51 & Fertilisers

Chemicals, Energy & Fertilisers Performance summary

Chemicals, Energy & Fer Performance summary	Chemicals, Energy & Fertilisers tilisers
Year ended 30 June ($m)	2013 2012 %
Revenue Chemicals Energy1 Fertilisers EBITDA2,3	731 698 4.7
	577 561 2.9
	497 527 (5.7)
	1,805 1,786 1.1
	348 348 -
Depreciation & amortisation	(99) (90) 10.0
EBIT2,3	249 258 (3.5)
Sales volume (‘000t): Chemicals	819 843 (2.8)
LPG1	265 283 (6.4)
Fertilisers	933 941 (0.9)
ROC (R12 %)	17.8 20.1
Safety (R12 LTIFR)	5.1 6.5

1 Includes Kleenheat Gas (KHG), ALWA, enGen prior to Aug 2011 divestment & Bangladesh LPG joint venture (BLPGJV) prior to Jan 2012 divestment .[2] Includes enGen & Bangladesh LPG joint venture earnings prior to divestment ($43 million gain on enGen disposal in Aug 2011 & $9 million gain on Bangladesh LPG joint venture disposal in Jan 2012 excluded).[3] 2012 includes $9 million earnings from HIsmelt air separation unit agreement termination payment.

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Chemicals, Energy 52 & Fertilisers

Chemicals, Energy & Fertilisers Highlights

• Construction progressing well to expand ammonium nitrate (AN) production capacity from 520ktpa to 780ktpa

• On track to be operational during 1H CY14 & within budget

• Higher Chemicals earnings driven by good plant performances & stronger pricing

• External ammonia sales volumes converted to import parity pricing

• Approval for Sodium Cyanide (SC) debottlenecking ($22 million) to increase solution capacity from 64ktpa to 78ktpa & solid capacity from 34ktpa to 45ktpa by end of CY13

• Economic conditions remain challenging for Australian Vinyls (AV)

• Lower Kleenheat Gas earnings due to deterioration in feedstock LPG content & volume & margin pressures

• Launch of Kleenheat Gas natural gas retailing business

• Lower Fertilisers earnings due to declining fertiliser prices, a poorer harvest, along with a dry June affecting sales volumes & margins

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Chemicals, Energy 53 & Fertilisers

Chemicals, Energy & Fertilisers Outlook

• Continued focus on delivery of AN expansion & SC debottlenecking projects

• Chemicals expected to continue to drive good earnings performance with strong demand & production

• AN plant shutdown in early FY14

• Kleenheat Gas continues to be challenged by poorer LPG content

• Fertilisers earnings heavily dependent on seasonal break & farmers’ terms of trade

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Industrial & Safety Olivier Chretien Managing Director

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Industrial & Safety 55

Industrial & Safety Performance summary

Year ended 30 June ($m)	2013 2012 %
Revenue EBITDA Depreciation & amortisation EBIT	1,647 1,690 (2.5)
	192 217 (11.5) (27) (27) -
	165 190 (13.2)
EBIT margin (%)	10.0 11.2
ROC (R12 %)	14.7 16.0
Safety (R12 LTIFR)	2.3 2.4

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Industrial & Safety 56

Industrial & Safet hi hli hts y g g

• Progressive slowdown in business activity

• Resources led, with lower volumes & cost control affecting margins

• Growth in industrial gas & services offers

• Strengthened focus on realigning cost base

• Business restructure (Blackwoods Protector, Total Fasteners)

• Announced the closure of 13 locations (June to October 2013)

• Maintained strong service levels (95% DIFOT[1] )

• Developed new platforms for growth

• Realigned organisation along three customer-focused streams

• Introduced new ranges of home brands & on-site services (vending)

• Gas distribution through Blackwoods

• Launched online businesses in Australia & New Zealand

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1 Delivery In Full On Time.

Industrial & Safety 57

Industrial & Safet outlook y

• Subdued business activity & challenging market conditions expected to continue into FY14

• Division well placed to respond to market recovery

• Opportunity to continue to grow market share

• Leveraging strong contract base & service levels

• Product range & services expansion

• Continue lowering cost base & investing in technology

• Continue to establish new growth platforms (including industry diversification)

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Balance Sheet & Cash Flow

Terry Bowen Finance Director, Wesfarmers Limited

59

Other business performance summary

Year ended 30 June ($m)	Holding %	2013	2012	%
Share of profit/(loss) of associates:
Gresham Private Equity Funds	Various	(11)	(55)	80.0
Gresham Partners	50	1	-	n.c.
Wespine	50	5	5	-
BWP Trust	24	27	16	68.8
Sub-total		22	(34)	n.c.
Interest revenue and FX adjustments on
Treasury accounts		2	22	(90.9)
Non-trading items1		-	(15)	n.c.
Other2		(35)	(9)	(288.9)
Other business sub-total		(11)	(36)	69.4
Corporate overheads		(108)	(101)	(6.9)
Total Other		(119)	(137)	13.1

1 2012 includes non-cash writedown of the carrying value of Coregas ($181 million), partially offset by gains on the disposals of enGen ($43 million), Premier Coal ($98 million), Boddington forestry assets ($16 million) & Bangladesh Gas ($9 million).

• 2 2012 includes depreciation and amortisation credit of $11 million arising from depreciation of Premier being discontinued upon its classification as held for sale.

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Portfolio generating increased operating cash flows

• Strong cash realisation of 118%

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61

Disciplined working capital management

• Working capital release despite continued business growth

• Reduction in retail working capital

• Higher retail sales & improved sourcing arrangements driving increased payables

• Inventory held largely flat despite business growth/new stores

	Cash Movement ($m)	Year ended 30 June	Year ended 30 June
	Inflow/(Outflow)1	2013	2012
	Inventory	(17)	(16)
	Payables Receivables	552 7	274 (362)
	Net working capital	542	(104)
	Net working capital consists of:
	Retail	577	63
	Other	(35)	(167)
	Net working capital	542	(104)

1 Cash movement relating to inventories, trade & other receivables, prepayments & trade & other payables.

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62

Disciplined capital investment

• Strong investment in future growth

  • Improving & growing retail networks

  • Industrial business expansion projects (AN3 & SC debottlenecking)

• Recycling of retail property

  • Proceeds from sale of PP&E of $659 million

• FY14 net capex estimate of $1.5 to $1.9 billion, subject to net property investment

• 1 Capital investment provided on a cash basis.

• 2 Property acquisitions & development less PP&E disposals.

t			62	62
Year ended 30 June ($m)1 Coles	2013 1,187	2012 1,193	% (0.5)
HI & OS Target Kmart	549 81 95	587 65 134	(6.5) 24.6 (29.1)
Insurance Resources	25 79	34 392	(26.5) (79.8)
Industrial & Safety WES CEF Other	50 262 3	49 167 5	2.0 56.9 (40.0)
Total capex Sale of PP&E	2,331 (659)	2,626 (275)	(11.2) 139.6
Net capex	1,672	2,351	(28.9)
Year ended 30 June ($m)1 Total net capex. Maint. capex = D&A Net capex. less D&A	2013 1,672 (1,071) 601		2012 2,351 (995) 1,356
Major capex.
Net property2
acquisitions		76	574
Coal expansions & AN3		240	230
		316	804
New store fit-out,
Coles renewal & Other		285	552

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63

Property recycling increased

• Innovative structures supporting traditional sale & leaseback

• Flexibility

• Retention of property development & management rights

• Potential future pipeline funding

• Recent transactions

• ISPT joint venture (Coles) in April 2013

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• Sale & leaseback to BWP Trust (Bunnings) in August 2013

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64

Funding costs declining

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• Effective cost of debt reduced in FY13 to 6.8%; FY14F c. 5.8%

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Diversity of funding sources & risk management of debt maturities

Sources[1 ]

• Strategy to pre-fund maturities, diversify sourcing & extend maturity profile

• FY13 activity:

• €650 million 10-year bond issue (August 2012)

Maturity profile[1 ]

2,000 1,500 1,000 500 A$m - (500) (1,000) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Bank Bilaterals Capital Markets Syndicated Facility Cash at bank & on deposit

• A$350 million seven-year medium term notes (March 2013)

• US$750 million five-year US bond issue (March 2013)

– Refinanced Tranche A syndicated facility to individual bilaterals (April 2013)

1 At 30 June 2013

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66

Maintaining strong credit metrics

Cash Interest Cover

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Fixed Charges Cover

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• Solid improvements in credit metrics

• Cash interest cover (R12) improved to 12.2 times

• Fixed charges cover (R12) 3.0 times

• Strong credit ratings

• Moody’s upgraded from Baa1 (positive) to A3 (stable)

• Standard & Poor’s A- (stable)

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67

Operating cash flows have supported strong investment phase & dividend growth

Operating Cash Flow Use

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• Final dividend $1.03 per share; full year dividend $1.80 per share

• Fully franked

• Dividend investment plan; no underwrite; shares purchased on market

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68

Capital management

• Capital management will exceed $1.6 billion over five years

• −Full neutralisation of Dividend Investment Plan

• Shares purchased for Employee Share Plan

• Capital return, if approved, to return an additional $579 million

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69

Capital return

• Capital return of 50 cents per share

• Total amount of capital return to be approximately $579 million

• To return excess capital to shareholders & to maintain an efficient capital structure

• Proportionate share consolidation

• Floor price & conversion ratio adjustments to partially protected shares

• Subject to final ATO ruling & shareholder approval

• Seeking shareholder approval at AGM in November 2013

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Outlook

Richard Goyder Managing Director, Wesfarmers Limited

71

Outlook

Retail

• Investments in the customer offer, store networks & productivity initiatives expected to drive further earnings growth within retail portfolio

• Continued focus on working capital & timely recycling of property

• Target’s performance expected to progressively improve over time; continued challenging trading conditions in 1H FY14

Insurance

• Further improvement in Underwriting earnings is expected, benefiting from a continued focus on disciplined risk selection & operational efficiencies

• Broking earnings expected to be flat, with planned system upgrades to constrain margin improvement in short term

• Low interest rates expected to adversely impact investment earnings

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72

Outlook

Resources

• Increased export sales volumes expected at Curragh; continued focus on cost control

• Low export coal prices expected in the short term; long term metallurgical coal market fundamentals remain sound & leveraged to lower AUD

Industrial & Safety

• Challenging market conditions expected to continue in the near term

• Continued focus on supply chain & operational efficiencies; product range development & growth into new, related markets

Chemicals, Energy & Fertilisers

• AN expansion & SC debottlenecking expected to generate growth, offset by increasing input costs & lower international prices for ammonia & LPG

• Plant shutdowns to impact short term earnings

• Fertilisers’ earnings dependent upon seasonal break in WA

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Questions

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For all the latest news visit www.wesfarmers.com.au