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WESFARMERS LIMITED Financial Supplement Data 2009

Aug 19, 2009

66054_rns_2009-08-19_f5fe1c07-9e4b-41b6-9399-563aa816cfd1.pdf

Financial Supplement Data

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2009 Full Year Results Supplementary Information (To be read in conjunction with the Full Year Results Teleconference presentation) 20 August 2009

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Table of Contents
1
G
P
f
3
roup er ormance
2
Coles
5
3
H
I
t & Offi
S
li
8
ome mprovemen
ce upp es
4
Target
12
5
K
t
16
mar
6
Resources
22
7
I
33
nsurance
8
Industrial & Safety
39
9
Ch
i
l & F
tili
45
em ca s
er
sers
10
Energy
52
11
Other B sinesses
55
u

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2

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Group Performance

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Movement in Shares on Issue

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m shares
1,200
63.2 15.4 5.0
128.7
1,000
145.4
800
600
1,157.1
400 799.4
200
0
1 July 2008 Rights Issue Rights Issue Placement DIP Other 30 June 2009
Institutional Retail Offer
Offer
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4

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Coles

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5

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Our customer franchise at 30 June 2009

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Selling Area
Supermarkets (sqm) 1,600,578
Liquor (sqm) – ex hotels 173,886

7 8 11 153 230 78 81 93 6 117 62 30 6 43 67 251 252 5 211 16 ~~1~~ 195 162 763 Supermarkets 14 15 775 Liquor stores 95 Hotels 625 Convenience

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6

… Improving our customer franchise

Open at
Opened
Closed
Open at
30 June 2008
30 June 2009
Supermarkets
Coles
685


705
31
11

Bi-Lo
65
-
7
58
Total Supermarkets
750
31
18
763
Liquor
1st Choice
52
12
-
64
Vintage Cellars
85
1
6
80
Liquorland
630
17
16
631
H t l
o e s
95
2
2
95
Total Liquor
862
32
24
870
Convenience
619
9
3
625

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7

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Home Improvement & Office Supplies

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Bunnings Network at 30 June 2009

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175 Warehouse stores 56 Smaller format stores 2 22 Trade Centres 29 5 7 22 7 3 8 2 1 53 16 5 12 25 43 5 4 2 1 1

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9

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Officeworks & Harris Technology Network at 30 June 2009

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Retail Stores
123 Officeworks
5 Harris Technology
Business
24 1 1
4 Fulfilment Centres
11 1 1
8 3 Service Centres
40 2 1 2
38 1 1 1
2
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10

Store Network Movements 6mths to 30 June 2009

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Under
Dec 2008
Opened
Closed
Jun 2009
construction
Home Improvement
Bunnings Warehouse
171
4
0
175
10
Bunnings smaller formats
59
1
4
56
1
Bunnings Trade Centres
19
4
1
22
3






Frame & Truss plants
8
0
1
7
-
Office Supplies
Officeworks
119
4
-
123
3
Harris Technology
5
-
-
5
-

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11

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Target

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12

Target Performance - 2H09 vs 2H08

($m)
Revenue		 2H09
2H08
1694
1593
6.3
%*
EBIT


 ,
,

142
103
37.9
EBIT
i
(%)
marg n
Comp. store sales growth (%)		 8.4
6.5
1.9pt
4.4
3.4

*Includes two additional trading days due to the re-alignment of the Coles and Wesfarmers reporting calendars

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13

Target Store Network at 30 June 2009

3

56 26 97 68

31

286 Target stores (incl 116 Target Country) 5

14

Store Network Movements Store Network Movements
Under
Dec 2008 Opened Closed Jun 2009 construction
Target
167		 3 0 170 3
Target Country
116		 2 2 116 1
•
One of the Target openings is a		 replacement store, ie: a Target Country closure.

15

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Kmart

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16

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Kmart Performance – 2H09 vs 2H08

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Year ended 30 June ($m)
Revenue		 2H09
2H08
1,750
1,762
(0.7)
%*
EBIT^ 34
10
240.0
EBIT margin (%)
Comparative store sales growth (%)		 1.9
0.6
1.3pt
0.0
1.2
(1.2)pt

*Includes 1 additional trading day due to the re-alignment of the Coles and Wesfarmers reporting calendars

^Excludes non-trading items. Refer slide 53 of Presentation.

17

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Kmart Store Network
at 30 June 2009
184 Kmart stores
255 KTAS centres
2 3
36 52
20 28
13 20
50 72
12
43 74
5 6
3
18
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Store Network Movements

Under
Dec 2008 Opened Closed Jun 2009 construction
Kmart 183 1 - 184 1
Kmart Tyre & Auto 263 - 8 255 -

19

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Resources

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Coal Production – Resources Division

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• C h tonnes m( )
urrag
16
– Record coal production
14
– Mix change due to lower PCI demand
12
•
Premier
10
– Increased sales to Verve Energy 8
•
Bengalla 6
– Port constraints impacting production 4
2
0
2002 2003 2004 2005 2006 2007 2008 2009
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21

Coal – Production Volumes

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Mine Beneficial
Interest		 Coal Type Y
ear
('000		 d d
en e
tonnes)
Jun-09 Jun-08
Curragh, QLD 100% Metallurgical 6,711^ 6,888
Steaming 2 925
,		 2 484
,
Premier, WA 100% Steaming 3,366 2,774
Bengalla, NSW 40% Steaming 2,105 2,172
Total* 15,107 14,318
^ Includes 400kt of PCI which was sold into steaming market
  • Wesfarmers attributable production

22

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Seaborne Metallurgical Coal Market

CONSTRAINED SUPPLY

REBOUNDING DEMAND

Australia rail & port constraints re-emer g in g (Hay Point ship loader down / 50 vessels DBCT)

US high cost mines closed Limited pace of ramp up to meet demand Russian domestic steel pro d uc ti on re b oun di ng – li m iti ng coal exports

Seaborne Metallurgical Coal Market Customer stock rebuild Spot price increasing

Canadian coal production ramp up pace restricted after heavy cuts

China domestic demand and mine closures limiting exports

Source: McCloskey, Macquarie Research, AME, Barlow Jonker, Tex Report, IISI

China imports increase (June YTD 30 mtpa rate)

Recommencement of steel production (ex China) Coke o v ens , significant Blast f u rnace restarts, increased auto sales

Improving seaborne coke demand Indian import demand up Indian coke makers resume production

Spot market metallurgical coal rise Recent settlements up to US$160 per tonne

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23

Australian coal market rices p

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Steaming coal

Hard coking coal

US$/Tonne (Nominal) FOB Australia (annual verse spot)

US$/Tonne (Nominal) FOB Australia (annual verse spot)

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200 400
350
160
300
250
120
200
80 150
100
40
50
0 0
2003 2004 2005 2006 2007 2008 2009 2010 2003 2004 2005 2006 2007 2008 2009 2010
Spot Price JPU Reference Price Spot Price Annual Reference Price
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Source: Barlow Jonker, Energy Publishing, ANZ, Tex Report, Macquarie Research, CRU

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24

Coal – Sales Volumes

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Mine Beneficial
Interest		 Coal Type Year ended
('000 tonnes)
Jun-09 Jun-08
Curragh, QLD 100% Metallurgical 6,454 6,548
Steaming 3,325# 2,418
Premier, WA 100% Steaming 3,432 2,864
Bengalla, NSW 40% Steaming 2,065 2,228
**Total *** 15 276
,		 14 058
,

# I nc u l d es 953kt o f t s t i l f w hi c h 400kt was di ver t e d me t a ll i l l expor eam ng sa es o urg ca coa (PCI) * Wesfarmers attributable sales

25

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Curragh Metallurgical Sales Growth

  • Sales volumes is forecast to be in the range of 6 . 2 to 6 . 7mt
7
tonnes (m)		 7
tonnes (m)		 7
tonnes (m)		 7
tonnes (m)
5
6
Wesfarmers ownership
4
3
2
0
1
1998
1999
2000		 2001
2002
2003
2004
2005
2006		 2007
2008		 2009
2010

26

Curragh Metallurgical Sales Mix

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Semi Hard
25% Semi Hard
Hard Hard
20%
44% 47 - 50%
PCI
PCI
31%
30 - 33%
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2008/09 actual

2009/10 estimate

6.5 million tonnes

6.2 - 6.7 million tonnes

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27

Curra h focus on cost control g

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  • Aggressive cost reduction program in place

  • Up to $90 million of annualised cost reductions implemented since 4Q09

  • Strategies targeted include

  • Mining and processing practices, equipment utilisation and productivities

  • Procurement optimisation on key input costs

  • Optimisation of contractor usage and roles

  • Completion of Blackwater Creek Diversion will alleviate short-term mine sequencing issues

  • Softening of costs driven by external factors

  • Export royalty estimated 50+ percent reduction from financial year 2009

  • Lower steel p rice to flow throu g h industr y costs

  • Fuel subject to international market

  • Reducing contractor costs due to market conditions

  • Curragh in lowest quartile of Aust. hard coking coal industry cost curve

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28

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Hedging profile as at 30 June 2009

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Curragh –Open Contracts
Bengalla– Open Contracts
Year end
30 Jun
Current US$
sold forward
(US$m)
Average
A$ / US$
hedge rate
Year end
30 Jun
Current US$
sold forward
(US$m)
Average
A$ / US$
hedge rate
2010
350
0.78
2011
285
0.79
2010
97
0.79
2011
65
0.79
2012
62
0.80
2012
34
0.77
2013
24
0.76
2013
10
0.78

Closed contracts: I n a dditi on o t th e a b ove open con rac s; n nanc a year en t t i fi i l d 30 J une 2010 US$210 m forward exchange contracts have been ‘closed out’ by offsetting US$ buy contracts in response to changed global market conditions

  • A$65m locked in losses to be booked in H1 2010 ; A$20m locked in losses to be booked in H2 2010

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29

Coal delivery systems

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  • Gl a d s one t

– Short-term rail capacity currently constrained

    • Ongoing rail duplication projects

  • Adequate port capacity in place

  • Wiggins Island Coal Terminal feasibility study continues

  • Newcastle

  • Port constraints continue

  • Ongoing vessel queues and demurrage

  • Shi ers a reement with NSW Government on lon term allocation pp g g

  • Enabling port expansions and take or pay port contracts

  • Capacity Balancing System extended by ACCC to 31 August 2009

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30

Demurrage

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  • Constrained export coal chains eased in financial year 2009

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$Am
20
18
16 $2.64/t
14 $2.03/t
12
10
8
$1.96/t $1.61/t
6
4
2
0
FY 2008 FY 2009
Curragh Bengalla (40%)
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31

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Coal port congestion East coast Australia as at 31 July 2009

• Port con estion re-emer in g g g

No. of ships at anchor

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180
160
140
120
100
80
60
40
20
0
Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09
Gladstone Newcastle Other Ports
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Source: McCloskey Fax

32

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Insurance

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33

Geographical Presence

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3
1 UK
6 1
3
14
4
19
1
2
1 1
4
16
8 17 11
8
17 6
1
Lumley Insurance (Australia) 12
6
Lumley General New Zealand 10
3 2
1
WFI 86
2
OAMPS 34
Crombie Lockwood 17
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34

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Underwriting Performance Summary

Y dd 30 J 2009
2008^
ear ene une ($m)
Gross Written Premium
Net Earned Premium		 %
1,358
1,328
2.3
1013
947
7.0

Net Claims
Net Commission and Expenses		 ,


(738)
(629)
17.3
(307)
(309)
(0.6)
Underwriting Result
Insurance Margin		 (32)
9
(455.5)
11
49
(77.6)
EBITA
EBIT		 33
73
(54.8)
31
73
(57.5)
Net Earned Loss Ratio (%)
Combined Operating Ratio (%)
 72.9
66.5
(6.4) pt
103.2
99.1
(4.1) pt
Insurance Margin(%) 1 1
5 2
(4 1) pt
.
.
.
  • Excludes non-trading items. Refer slide 53 of Presentation.

^ Includes $10m prior year adjustment and $3m reclassification

35

Broking Performance Summary

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Year ended 30 June ($m) 2009
2008
Commission and Fee Income
Other Income
 27
31
(12.9)
Total Income
Expenses		 218
209
4 3
.
(157)
(153)
2.6
EBITA
EBIT		 61
56
8.9
51
43
18.6
EBITA Margin (%) 27.9
26.7
1.2 pt

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36

Underwriting KPIs

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Year ended 30 June (%)
2009
2008
Gross Earned Loss Ratio
79.4
64.8
14.6
%pt
Net Earned Loss Ratio
72.9
66.5
6.4
Reinsurance Expenses (% GEP)
230
246
(16)

.


.
.
Exchange Commission (% RI excl XOL)
24.7
24.6
0.1
Cii E % GWP
13 9
139
ommsson xpense ( )


.
.
-
Total Earned Expenses (% GEP)
27.8
29.4
(1.6)
C
bi
d O
ti
R ti
(% NEP)
103 2
99 1
4 1
om ne
pera ng a o
.
.
.
Insurance Margin (% NEP)
1.1
5.2
(4.1)

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37

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Gross Written Premium (underwriting)

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Total $1,358m
Liability
Personal
$248
$284
Marine $59
Engineering
$75
Commercial Other $47
$272
Crop $28
Commercial
Motor $345
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38

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Industrial & Safety

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Industrial & Safety Business Portfolio

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Australia New Zealand “All your Safety Industrial workplace needs” Specialist Specialists (1)

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(1) Manufacturing and services

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40

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Industrial & Safety - Distribution Network 240 locations (163 Australia, 77 New Zealand)

240 locations (163 Australia, 77 New Zealand)
Australia
No
.
69
MRO, “All your workplace needs”
6
Electrical		 6 2
1		 1 16
12
7
14
42
Safety
22
Materials handling, lifting, rigging		 9 1
5		 17


9
4
5
4
4		 2
2
16
Fasteners
8
Engineering		 1 6

4
11
New Zealand
No.
20
MRO, hose, conveyor(1)		 7
1
1
2
3
1
24
Safety
22
Safety(1)		 20
22
11
24
41
11
Packaging, hygiene
As at 30 June 2009; (1) Including 11 co-located Blackwoods Paykels and Protector Safety branches

Industrial & Safety Results

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  • Operating revenue of $1,294m down 1.1%

– Solid performance despite challenging economic environment in second half

– Blackwoods and Bullivants performed strongly

– Sales to small customers and manufacturing sector most impacted

– Substantial slowing in business activity in Victoria and New Zealand

  • Earnings of $114m down 12.3%

  • Sales and margin pressure only partially offset by expense management

– Strong EBIT growth by Bullivants and Western Australian activities

  • Return on Capital decreased to 14.1%

– Lower EBIT offsetting good capital management results

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42

Business Activity Highlights

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  • Growth initiatives mitigating downturn impact on volumes and margins

  • Introduced mobile sales tools and Sales Academy training programme

  • Further invested in e-business capability, delivering growth in channel

  • – E xpan d e d pro d uc an t d serv ce o i ff er ng, nc u i i l di ng or n ras ruc ure sec or f i f t t t

  • Completed new oil and gas investment for Bullivants

  • Opened 5 new Australian specialist branches in growth locations

  • Acquired Expresspak in New Zealand, servicing food services industry

• Further strengthening business competitiveness

  • Further lifted delivery performance, continued DCs (Perth, Auckland) and branch upgrades

  • Strengthening relationships with key suppliers and sourcing capabilities

  • Closed 7 under-performing branch locations

  • Restructured specialist businesses and New Zealand organisations

  • Mi rated Blackwoods Pa kels to common New Zealand IT latform g y p

  • Ongoing safety focus, substantial reduction in lost days and severity of injuries

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43

Industrial & Safety Outlook

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  • M ar k e con t diti ons expec e t d t o rema n c i h a ll eng ng i

  • Lower market demand from manufacturing and small customer base

  • Infrastructure based activity expected to provide growth opportunities

  • Margin pressure expected to continue

  • Focus on improving competitiveness and further strengthening capabilities

  • Strong expenses & capital management and sourcing & pricing disciplines

  • Improving delivery performance & organisational effectiveness, investing in technology

  • Increasing share of customers’ spend through improved value proposition

  • Further penetrating selected growth sectors, enhanced focus on acquisition opportunities

  • Investments in people development and ongoing safety focus

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44

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Chemicals & Fertilisers

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45

Chemicals Performance

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  • Ammonia

  • Plant production was down 35% due to disruption of gas supplies

  • Business recorded a loss for the year due to lost production and having to source gas at above contract prices

  • Sodium cyanide

  • Lower production and profit as customers adversely impacted by gas disruption

  • Closure of local gold mines has eased over the past six months

  • 8,000 tpa solution plant expansion, for Boddington Gold Project, is expected to be commissioned by October 2009

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46

Chemicals Performance

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  • Ammonium Nitrate

  • Strong demand for ammonium nitrate continued with product supplied into local resources sector, manufacture of Flexi-N fertiliser and export markets

  • Significant ammonia imported throughout the year to overcome disruption of gas supplies

  • Australian Vinyls

  • Operational and customer issues associated with Distributed Control System (DCS) now resolved

  • Business recorded a loss for the year, adversely impacted by DCS implementation issues in 1H09 and slowdown in the building market and PVC pipe production

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47

Fertiliser Performance

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  • Reduction in sales volumes attributable to:

  • Reduced farmers’ terms of trade in the pasture market

  • The break to the season was delayed due to one of the driest autumns on record in WA agricultural areas, resulting in later than normal buying decisions

  • Lower fertiliser application rates reflected tighter credit and liquidity conditions

  • International fertiliser commodity prices have stabilised – $2.8 million stock write down at 30 June 2009 to NRV; FY09 total $17 million

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48

Fertiliser Sales

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kt
1,200
1,000
800
739
670
813 589
600 612
513
400
200 381 370 387
289
249 226
0
2004 2005 2006 2007 2008 2009
1st Half 2nd Half
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49

Global Fertiliser Pricing

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USD/t
1300
1200
1100
1000
900
800
700
600
500
400
300
200
100
0
Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
----- End of picture text -----

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Urea (FOB Middle East) DAP (FOB US Gulf)

50

Global Ammonia & PVC Pricing

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USD/t
1400
1300
1200
1100
1000
900
800
700
600
500
400
300
200
100
0
Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
Ammonia (FOB Middle East) PVC (Harriman Mid-point)
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Energy

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52

World LPG prices – Saudi CP

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Average CP Average CP
Jul 07 - Jun 08 Jul 08 – Jun 09
USD/tonne
USD 748 USD 559
Propane
1,000
900
800
700
600
500
400
300
200
100
0
Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09
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Sharp reduction in LPG price reduced earnings

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WLPG Production
kt Ave t/TJ
200 1.0
0.9
150
0.8
100
0.7
50
0.6
0 0 5.
2007 2008 2009
WLPG production (kt) LPG content (t/TJ)
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Production constrained by Varanus gas disruption

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Other Businesses

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Other Business Performance Summary

Year ended 30 June ($m)
Holding
%
2009
2008
Share of net profit/(loss) of associates:
Gresham Private Equity Funds
Various
(57)
16
Gresham Partners
50
1
5
W
i
50
4
5
esp ne
Bunnings Warehouse Property Trust
23
(8)
-
Sub-total
(60)
27
Interest revenue
57
34
Dividend income - April 07 Coles Stake
-
32
N
di
i
^
(137)
(102)
on-tra ng tems
Other
(50)
5
Total
(190)
(4)*
  • Incl. BPML, self insurance trading and investments. ^ Refer slide 53 of Presentation

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Breakdown of Reported Result
Year ended 30 June ($m) 2009 2008
Divisional EBIT 3,268 2,321
Other Businesses (190) (4)
Corporate overheads (101) (88)
G
EBIT
roup		 2 977
,		 2 229
,
Less: Finance costs
-expense net of capitalisation 737 692
- other borrowing fees 37 53
- discounts* 53 55
- interest rate swap close-outs 136 -
Reported profit before tax 2,014 1,429
  • Relates mainly to Coles onerous contracts provision and Stanwell rebate

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57

Gresham Private Equity

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  • Carrying value of investment in Gresham Private Equity Funds $122m

  • Australian Pacific Paper Products divested during the period returning 4.5x cash

  • invested

  • 27% pa Cash IRR from Fund 1

    • Riviera only remaining investment; carrying value of nil following receivership

  • Investments include:

    • Barminco, Witchery, Noel Leeming, Silk Logistics Group, GEON and Anthology

  • Revaluations of remaining investments are to Wesfarmers’ earnings

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58

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www.wesfarmers.com.au
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59

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