Presentation is loading. Please wait.

Presentation is loading. Please wait.

1 Investor Presentation December, 2004. 2 2001 WES acquired IAMA, merged it with Wesfarmers Dalgety to form Wesfarmers Landmark 2003 AWB acquired Landmark.

Similar presentations


Presentation on theme: "1 Investor Presentation December, 2004. 2 2001 WES acquired IAMA, merged it with Wesfarmers Dalgety to form Wesfarmers Landmark 2003 AWB acquired Landmark."— Presentation transcript:

1 1 Investor Presentation December, 2004

2 WES acquired IAMA, merged it with Wesfarmers Dalgety to form Wesfarmers Landmark 2003 AWB acquired Landmark from WES 1993WES acquired Dalgety Farmers, merged it with Wesfarmers Rural to form Wesfarmers Landmark 1985 Wesfarmers Rural expands to eastern states 1984The Cooperative listed on ASX as Wesfarmers Limited (WES) Frederick Dalgety began servicing farmers in western Victoria; the well known Dalgety business eventually covered all States The Cooperative diversified with a rural focus 1914Westralian Farmers Cooperative established “Australia’s Leading Agribusiness” 2003 Landmark acquisition 2001Listed on ASX 1999Privatised - Wheat Industry Fund converted to B class shares - A class shares issued to wheat growers - Government guarantee of AWB borrowings removed 1998Corporatised Domestic market deregulated and Wheat Industry Fund established 1989 Australian Wheat Board established as a statutory authority 1939 Where we have come from … 1915Australian Wheat Board created during World War I

3 3 B class shareholders: Market capitalisation: Shares on issue: Shareholder’s equity: Index inclusion: $1.6 billion 342 million $1 billion S&P/ASX 100 (75% IWF) A class shareholders:26,161 64,383 Institutional investors: Growers / retail shareholders: Employee shareholders: 25.89% 73.20% 0.91% What we have achieved …

4 4 90 th largest company in Australia with market capitalisation of $1.6 billion, and revenues of $9 billion (incl Pool revenue) shareholder funds of $1 billion Consistently out performed the S&P / ASX 200 since listing Top quartile TSR (total shareholder return) last three years Weathered the worst drought in 100 years Success in Iraq – 1.5m tonnes renegotiated AWB constructed 21 grain centres with a total capacity of over 3m tonnes Positioned to tap into growing Asian markets Integration of Landmark 95% complete EBIT enhancements for 2003/04 of $13 million exceeded target of $5-10 million Strategic focus on customer management, introduction of CMS system Progressive business expansion What we have achieved …

5 5 Merch $1.2b sales 431 outlets 2,700 employees Finance & Insurance $2.0b loan book $300m on deposit $120m premium 100,000 customers Real Estate $800m sales Wool 500k bales Livestock 2.0m cattle 11m sheep Fertiliser 1.2m tonnes Grain $5-$6b revenue What we are today …

6 6 Markets approx. 18 mmt wheat internationally representing 16% of total world wheat trade Largest supplier of farm inputs and rural merchandise Handles approx. 20% of national wool clip Handles approx. 20% national livestock trading Annual turnover in excess of $4.0b Finance Loan book in excess of $2.5b Over 2,700 staff in Australia and overseas US/ Euro commercial paper issued this financial year totals USD3.8b FX spot transactions (ytd Sep 03) totals USD20b Australia’s leading agribusiness What we are today …

7 7 AWB Limited Pooling operationsCommercial operations Supply Chain & Other Investments Pool Management Services Finance & Risk Management Grain Acquisition & Trading Grain Technology Landmark Group structure

8 8 Financial objectives Return on equity - Achieve 15% return on equity for the AWB Group in the medium term Solid EPS growth - Landmark acquisition to be more than 35% EPS accretive (pre-goodwill, post synergies, post one-off costs) by Stable dividend payment - Expect to maintain dividend payment at current levels for Improve quality of earnings - Reduce exposure to crop by achieving more than 20% of PBT not related to Australian wheat by

9 9 Targets will be achieved by implementing three dominant business strategies AWB’s overarching goal is to implement an Integrated Business Model... Leading position in Australian rural services Leading rural financial services and insurance provider Australia’s leading global grain trading business People and Capability

10 10 Three growth areas Leading position in Australian rural services Leading rural financial services and insurance provider Australia’s leading global grain trading business Fertiliser and merchandise are the main areas targeted for growth Cross selling Leverage buying power in the network Improve merchandise and supply chain effectiveness Increase product base – build on AWB’s natural advantage to provide a wider range of products, better interest rates, and streamline credit processes Specific areas targeted for growth include lending, deposits, wealth management and general insurance Continue to focus on mandate to maximise grower returns Expand the suite of commodities, origins and risks managed Strengthen the differentiated position for Australian wheat

11 11 Strengthen core business, in particular preserve and enhance the value of the Single Desk system Grow and diversify to improve the quality of the earnings base and reduce wheat harvest volatility Acquisition expected to achieve target 15% ROE by FY2005 EPS accretive in FY 2004 and by more than 35% in FY2006 % of PBT not related to Australian wheat: >20% in 2004/05 Landmark will diversify AWB’s earnings base and reduce volatility of AWB’s earnings AWB Group will achieve 15% ROE in the medium term “To be both the primary producer’s and end-use consumers’ business partner of choice” The way ahead …

12 Full Year Results Slide Rural services Slide Network operations Slide Wheat prices, futures & global supply Slide Financial services Slide Trading Slide 79

13 13 APPENDIX 1: 2004 Full Year Results

14 14 AWB has delivered a strong result Exceeded profit guidance ( forecast) Strong revenue growth Significant progress on the integration of Landmark Strong balance sheet Quality credit ratings Positive outlook for next year

15 15 Result highlights Net profit after tax (pre goodwill and amortisation) of $134.7 million, up 191% (exceeded forecast of $110 - $120 million pre goodwill and amortisation). Net profit after tax of $96.9 million, up 121%, post goodwill and amortisation Total operating revenue of $5.3 billion, up 142% Landmark integration targets exceeded, with $13 million achieved in revenue, cost synergies, and finance growth Earnings per share (pre goodwill and amortisation) of 40.1 cents, up 139%. Earnings per share of 28.8 cents, up 81.1%, post goodwill and amortisation Final dividend of 11 cents per share, fully franked, amounting to 25 cents per share for Significant contribution from Grain Acquisition and Trading, particularly Chartering AWB Harvest Finance loan book peaked at $1.6 billion in February 2004 Landmark loan book balance of $1.1 billion at 30 September 2004 (record high) Gross Pool Value currently estimated at $4.8 billion for the Pool ($1.3 billion in ) Australian wheat production rebounded to 25.2 million tonnes (9.7 million tonnes in )

16 16 Statement of financial performance $million For the 12 months ended 30-Sep-04 For the 12 months ended 30-Sep-03 % Change Revenue from ordinary activities5,344.62, % Cost of sales(4,612.1)(1,889.2)(144%) Borrowing costs(113.9)(70.5)(62%) Depreciation & Amortisation(83.3)(29.9)(179%) Other expenses(397.3)(165.5)(140%) Share of profits of associates % Operating profit before tax % Net profit after tax & OEI * % 1 OEI = Outside Equity Interests * Post goodwill and amortisation

17 17 * Net of proceeds Change in debt position $million For the 12 months ended 30-Sep-04 Profit from ordinary activities before tax147.1 Depreciation & amortisation83.3 Write down in value of investment2.8 Tax refund received8.7 Finance options for growers (net)(368.3) Purchase of property, plant and equipment * (19.7) Purchase of controlled entities & investments (32.3) Increase in cash & short term deposits(473.3) Dividends paid(54.6) Proceeds from issue & ordinary shares75.7 Changes in working capital(208.6) Change in debt – (increase) / decrease(839.2)

18 18 Capital expenditure $million For the 12 months ended 30-Sep-04 For the 12 months ended 30-Sep-03 % Change Grain Centres (97%) System Development & Other Plant & Equipment (24%) Motor Vehicles % New building fit-out % Total (62%) Depreciation % 3 year building program for grain centres has been completed Expenditure on system development and other PP&E is related to IT, upgrades, motor vehicles (Landmark) New building costs relate to the relocation of Head Office in January 2004 (new building is leased)

19 19 $million As at 30-Sep-04As at 30-Sep-03 Assets Cash Receivables1,725.81,012.6 Intangibles Investments Inventories Property, plant & equipment Other financial assets Other ,735.22,494.4 Liabilities Payables Interest bearing liabilities1,902.11,062.9 Provisions Financial liabilities Other ,689.01,562.4 Net Assets1, Statement of financial position

20 20 A-IFRS Impacts Employee share schemes, including performance rights, to be expensed Goodwill to be subject to annual impairment testing rather than amortised Asset impairment testing will allow for fair value or discounted cash flows as recoverable amount Inventories held as a commodity trader will be able to be measured at fair value less costs to sell Financial instruments will be subject to prescriptive classifications and hedge accounting requirements. May lead to more fair value recognition in P&L and Balance Sheet Deferred tax liabilities and assets will incorporate the tax consequences of transactions recognised in the balance sheet

21 21 Business operations (PBT) $million For the 12 months ended 30-Sep-04 For the 12 months ended 30-Sep-03 % Change Profit before tax Pool Management Services % Grain Acquisition & Trading % Supply Chain & Other Investments(9.9)(20.4)51% Finance & Risk Management (17%) Landmark ,917% Corporate(16.3)(1.6)(919%) Software Amortisation (Landmark)(10.8)0n/a Goodwill Amortisation (Landmark)(27.0)(2.4)(1,025%) Operating profit before tax % Net profit after tax & OEI *43.9*121% 1 OEI = Outside Equity Interests * Post goodwill and amortisation

22 22 Business operations - performance $43.9m + $8.6m +$56.3m +$10.5m - $6.1m - $14.7m +$69m -$10.8m -$24.6m -$35.2m $96.9m Note: + / – change is PBT * Post goodwill and amortisation * *

23 23 $million (PBT) For the 12 months ended 30-Sep-04 For the 12 months ended 30-Sep-03 % Change Pool Management Fee % Agrifood and R&D(5.2)(4.4)20% Total Pool Management Services % ($million) For the 12 months ended 30-Sep-04 For the 12 months ended 30-Sep Pool PoolTotal Pool PoolTotal Base Fee Out performance Administration costs (62.6) -(53.8) Total Pool Mgt Services Pool Management Services Agrifood and Research & Development (formerly Grain Technology) Agrifood technology and R&D now reported under Pool Management Services (the Seeds business is now in Landmark) AWB will continue to fund a significant R&D program for the long term benefit of the company – this is an important investment for the future

24 24 Grain Acquisition & Trading $million (PBT) For the 12 months ended 30-Sep-04 For the 12 months ended 30-Sep-03 % Change Grain Acquisition & Trading % Domestic Trading Increased its PBT contribution by 104%, with 3.2 million tonnes of wheat traded and 953,000 tonnes of other grains traded domestically Chartering Chartering division contributed $48 million PBT to the Trading division’s result, with freight volumes increasing by 83% compared to the previous year Successfully employed a long physical trading strategy in a rising freight market Chartering strategy was backed by robust risk position management, with limits monitored daily AWB Geneva Significant improvement to PBT contribution with over 2.0 million tonnes traded, which is a 67% increase on the previous year’s tonnage Significant contribution by Chartering

25 25 Supply Chain & Other Investments $million (PBT) For the 12 months ended 30-Sep-04 For the 12 months ended 30-Sep-03 % Change Supply Chain & Other Investments(9.9)(20.4)51% GrainFlow Record receivals of 1.8 million tonnes for AWB GrainFlow, up from 185,000 tonnes in , mainly due to improved seasonal conditions Melbourne Port Terminal (JV with Australian Bulk Alliance) Throughput of over 1.3 million tonnes, up 177% from the previous year Overseas Investments Overseas investments performed well AWB has determined to divest its interest in Vietnam Flour Mills AWB will continue to explore other overseas investment opportunities

26 26 Finance & Risk Management million (PBT) For the 12 months ended 30-Sep-04 For the 12 months ended 30-Sep-03 % Change Finance & Risk Management (17%) Financial Services Market share has been maintained by offering a varied combination of products, and the interest rate spread has been maintained Tonnage underwritten increased to 11.7 million tonnes as a result of improved seasonal conditions RiskAssist, Basis Pool and OTC (over-the-counter) operations Decreased PBT contribution from the risk management businesses due to a decline in popularity of the Basis Pool product and a return to more normal market conditions (compared with and ) Growth in RiskAssist sales to Australian and International customers Treasury Treasury management contributed PBT of $6.5 million which was $4.0 million below the previous year due to a return to normal market conditions

27 27 Finance & Risk Management ( continued ) $36.1m +$7.8m -$9.9m -$4.0m $30.0m

28 28 Landmark $million (PBT) For the 12 months ended 30-Sep-04 For the 12 months ended 30-Sep-03 % Change Landmark % Key statistics – note months are for comparative purposes only. Only one month of trading (Sep 2003) included in AWB Group’s result. Landmark was purchased by AWB on 29 August Sales Revenue 1,619.91, % Gross Margin % All activities (except Wool operations) have outperformed when compared with the previous year Merchandise & Fertiliser sales increased by 10%, margins also improved Livestock gross profit increased by 17% due to higher cattle prices and increased sheep volumes Wool gross profit reduced by 8% due to lower wool prices Real Estate sales value increased by 31% due to increased demand for prime rural property Finance gross profit increased by 54% with the loan book balance of $1.1 billion (record high) and IBD’s increasing to $304 million Insurance gross written premiums increased by 20% AWB Seeds – gained over 60% of available wheat variety licences over the past 5 years, and captured 7 new licences during (chick pea and lupin varieties)

29 29 Landmark - gross profit growth across product lines Only one month incorporated in AWB Group’s results in Gross profit $million

30 30 Corporate $million (PBT) For the 12 months ended 30-Sep-04 For the 12 months ended 30-Sep-03 % Change Corporate(16.3)(1.6)(919%) Corporate items Costs include governance, compliance, shareholder services and strategic development Integration and restructuring costs associated with Landmark of $8.0 million Group funding interest Group funding interest revenue of $4.8 million Interest previously earned from surplus capital now reported under “Corporate” - significantly lower than the previous year due to funding requirements for the Landmark acquisition Miscellaneous Revenue items $5.3 million profit on sale of Ceres House (Melbourne) and Grains House (Adelaide) $7.4 million in Futuris dividends Corporate items includes corporate overheads, miscellaneous revenue items, and the net result from group funding

31 31 Integration achievements and on going initiatives Integration achievements thus far Network consolidation and re-branding of all branches Back office consolidation - relocation of critical staff to Melbourne Recruitment of finance and insurance specialists Incentive program implemented for all staff AFS license and transfer of IBD arrangements with 85% retention rate Phase 1 procurement completed with improved terms and conditions negotiated Launch of Fastrak Finance At least 95% of the way through the integration stage, and 15% of the way through the growth stage Ongoing initiatives Implementation of the Integrated Business Model due to take place over the next year Financial Services will continue to focus on product development to improve overall offer to the customer Grain Marketers and key branch staff will continue to focus on cross-sell opportunities The final Procurement category - IT will be finalised by the middle of next year

32 32 The first year synergy result of $13m exceeded the target $5-10m EBIT uplift Revenue, cost synergies and finance growth (EBIT) $13m (actual) FY forecast $ m FY forecast $ m

33 33 With the integration of AWB & Landmark now achieved, the focus is on creating value and implementing the Integrated Business Model

34 34 Dividend Final dividend of 11 cents per share Full dividend = 5.2% yield (as at 18/11/04) Dividend dates: Ex dividend date – 29 November 2004 Record date – 3 December 2004 Payment date – 17 December Dividend Reinvestment Plan (changes) DRP shares will be sourced by a combination of an on-market purchase of shares and new issue Nil discount offered Pricing period will be of 7 days trading immediately after the record date (3 December 2004), therefore from 6 December 2004 to 14 December, 2004 inclusive DRP election form must be received by 3 December 2004

35 35 AWB remains focused on its financial objectives Landmark integration Focus on further integration and achieving earnings targets of $20-25 million EBIT in , and $30-40 million in Finance & Insurance businesses Continue with current strategy of leveraging strong relationships with AWB and Landmark customers to offer the full range of lending, deposit and insurance products Landmark - Livestock, wool and merchandise Sheep flock forecast to grow 4.3% during , though we do expect some lagging impact from the previous drought on overall volumes of livestock and wool Cattle numbers are expected to reach 27.6 million head, and the sheep flock is forecast to reach 99.5 million head in , (Source: MLA) Australian wool volumes are forecast to increase to 470 million kilograms greasy in (Source: ABARE) The market for merchandise and fertiliser is promising, and meat prices look set to remain strong AWB will focus on achieving solid financial growth, stable dividend payments, efficient capital management, improved quality of earnings and 15%* return on equity in the medium term (subject to normal seasonal conditions) * Pre goodwill and amortisation

36 36 Wheat production forecast Estimated by AWB to be between million tonnes in Global wheat market outlook – production, consumption and price World ending stocks forecast to increase for the first time in five years with world wheat production expected to reach 616 million tonnes in as a result of good crops in both the major and non traditional exporting countries World wheat consumption forecast to be 605 million tonnes, with human consumption demand increasing at a long term trend of 1% Production and export supply from the Russia and the Ukraine are likely to increase Production risk premium has been removed from the market and this has seen Kansas futures decline from in excess of US$4 bushel to US$3.40 bushel APW National Pool return currently estimated to be $200 per tonne (weaker currency is supportive to price) Markets AWB has a clear strategy to generate more value from the Australian wheat crop through an increasingly differentiated market position AWB will focus on opportunities in various markets including China and Iraq Global wheat market and opportunities

37 37 Earnings forecast for Based on current seasonal and market conditions: AWB’s earnings forecast is expected to be comparable to the earnings AWB will focus on achieving Return on Equity target of 15% (pre goodwill and amortisation) in the medium term.

38 38 APPENDIX 2: Rural Services

39 39 A period of change 2001 & 2002 Merger Dalgety & IAMA Achievement synergies Maintain revenue in existing businesses Establish new brand identity Capture merchandise and logistics opportunities 2003 Growth phase Nationalised structure Merchandise sales recovery East Coast fertiliser expansion Drive wool and livestock growth and productivity National finance and insurance expansion 2004 Integration and growth Capture cost and revenue synergy benefits Centralise head office function Expansion of financial services and growth Drive wool, livestock and merchandise growth and productivity Network optimisation Account management OBJECTIVE : Integrated Business Model

40 40 Merger of Wesfarmers Dalgety and IAMA in 2001 resulted in Landmark becoming Australia’s largest rural merchandise distributor Stores across Australia stock a range of animal health, cropping, fencing, fertiliser and farm hardware product Merchandise products are distributed via 230 company owned branches, 47 franchises and 120 members and agents, and supported by over 200 agronomists Australia wide Merchandise

41 41 Merchandise overview Competitive environment Key opportunities Intense price competition Commoditisation of products Rationalisation of suppliers, particularly in the chemical sector Channel proliferation leading to increased competition in distribution Low demand for cotton inputs due to lower production, irrigation cuts and biotechnology Livestock carrying numbers reduced following drought with expected impact on Animal Health and management sales Cotton prospects improved with increased water availability Commoditisation of products – 75% of chemical products expected to be off -patent by 2005 – Generic products are becoming a bigger part of the farmer’s decision making process Operational improvement opportunities Meet all price points … a generic strategy will be important

42 42 Significant supplier of fertiliser distributing over 1 million tonnes per annum, as well as retailing liquid, trace element and specialist fertilisers The major fertiliser products are globally traded commodities, resulting in: –Limited scope for differentiation between retail outlets; and –Importer traders ensuring world price movements rapidly flow through to domestic price (i.e. volatility) Fertiliser

43 43 Fertiliser overview Competitive environment Key opportunities Limited product differentiation Large number of agents and dealers competing locally Requirement for logistics services in some markets Ongoing rationalisation of industry players Market volumes increasing Nitrogen use increasing Local prices driven by world prices Increased market share through acquisition of independents Cross sell bundled product offering … growing market share and volume is important

44 44 One of Australia’s largest marketers of livestock Operating in all States and Territories throughout Australia Handles 20% of livestock trading in Australia Core business is sale of livestock through saleyards - 70% sold via auction Livestock trading is also a part of the business Landmark supplies processors, supermarket processors, lot feeders and live export markets Livestock

45 45 Livestock overview Competitive environmentKey opportunities Pressure on core agency business from increased direct selling to processors Major competitors involved in vertical integration Private agents cutting commission rates to gain share Rationalisation of saleyards Increase business into grain fed markets Strong meat and live export markets Productivity improvements, saleyard rationalisation … prices are expected to remain strong

46 46 Handle approximately 25% of the National Wool Clip (500,000 bales) Provide traditional broking / auction selling services as well as a comprehensive range of Risk Management products 50% interest in Australian Wool Handlers ‘AWH’ (with Elders) – wool handling Not involved in any downstream processing Wool

47 47 Wool overview Competitive environment Key opportunities Strong competition for a record low volume of wool (sheep numbers at 96 million in ) Small, low cost regional brokers have increased market share Ongoing price discounting Rationalisation amongst brokers to occur Move from wool to meat likely to continue Fall in wool production has created an opportunity for industry rationalisation and consolidation Good prospects for sheep meat will assist building flock numbers Low levels of supply will provide support to wool prices … increased throughput is the key

48 48 Landmark real estate has two main activities: Real Estate - Rural property sales - Residential property sales

49 49 Real Estate overview Competitive environment Key opportunities Metro and town real estate agents moving into small farm areas causing margin pressure Sophisticated players with marketing and sales representatives Low market share in residential real estate Limited capital Variable pay structure Outlook is for steady growth … good platform to grow residential market share

50 50 Outlook Opportunities exist to grow in most activities Commodity prices expected to remain strong Real Estate values expected to plateau

51 51 APPENDIX 3: Network Operations

52 52 Branches Members Franchises / Agents Staff = Staff = Staff = Staff = Staff = 455 Network structure and rural footprint

53 53 Account Management Network Optimisation Integrated Business Model as well as……. –Training & Development –Profitability Improvements (financial services & merchandise / fertiliser) –Operational Excellence Network operations will focus on

54 54 The number of activities utilised by each customer of Landmark is low FertInsL/StockMerchWool Fert Ins L/Stock Merch Wool Activity – Key Customers Penetration across other activities (%) High cross sell growth opportunities Account management – cross sell opportunities

55 55 Utilising data to segment Landmark & AWB’s customer base Developing appropriate service level protocols & disciplines Improving differentiation in service levels Account management – customer relationship management (at branch level)

56 56 1.Institutionalise the customer knowledge historically maintained with individual employees. 2.Evolve the culture from an activity specialisation focus to a customer relationship focus, and build an account management philosophy. 3.Increase “share of wallet” from our existing customer bases. Key strategies for account management

57 57 “right store, right presence, right stock, right time, right price!” 431 outlets 218 branches 89 franchises & agents 114 members Network optimisation

58 58 Improve profitability, capture growth and improve return on capital Optimise current branch /franchise options Optimise network footprint Optimise network format Branch categorisationOutlet design and standards Identification and analysis of growth opportunities Network optimisation (continued)

59 59 Market Share Average size Corporate Branch Market Share vs Market Size Market Potential Identified opportunities within each geographic segment and branch catchment area Profit contribution by outlet is variable due to a number of factors

60 60 Branch Franchise Size of circle indicates value of channel partner’s revenue Three distinct channels to market Leveraged properly, provides a competitive advantage Principal’s share of channel partner’s product category sales Channel partner’s inflation adjusted growth rate Network configuration Member

61 61 Strategies in place to optimise our foot-print and maximise profit pool opportunities High potential business managers matched to high potential locations Optimal store configurations Optimal catchment areas Efficient channels to market What will the network look like in 3 years?

62 62 APPENDIX 4: Wheat prices, futures & global supply

63 63 World wheat production has increased 66 million tonnes to 617 million tonnes in 2004 Significant production increases occurred in the –EU mmt to 134 mmt –FSU61 mmt to 85 mmt –India65 mmt to 72 mmt –China86 mmt to 90 mmt US crop declined from 64 mmt to 59 mmt World wheat production

64 64 World wheat production & consumption Source: USDA 2004

65 65 World wheat trade – 5% major exporters * 2003/04 & 2004/05 – estimated Source: USDA

66 66 World stocks A larger world production was required as world stocks remain historically low –From 202 mmt in to 167 million tonnes in to 131 million tonnes in and 142 million tonnes 2005 Other major world crops are showing the same trend –Corn from 148 million tonnes in to 108 million tonnes in –Rice from 139 million tonnes in to 68 million tonnes in This prevents a huge production swing into one crop Human consumption demand increasing at long term trend of 1% Feed demand will increase 7 million tonnes due to larger feed wheat availability in

67 67 Kansas futures

68 68 Prices Production risk premium has been removed from the market and this has seen Kansas futures decline from in excess of US$4 bushel to US$3.40 bushel APW National Pool return has declined from $228 FOB to $200 FOB for 2004/05 pool Pool benefited from the recent weakening in the dollar through its hedging program

69 69 The future Increased production and export supply from the Russia and Ukraine likely over time Exports from the Black Sea work initially into the Mediterranean, then Africa and the Middle East This is one of the major drivers for AWB to focus on increasing exports into Asian markets over the next five years AWB exports into Asia in 2004 will be greater than 10 million tonnes for the first time

70 70 Outlook Risk premium has been taken out of current prices Strong competition from Northern Hemisphere export origins in the short term There is still a tight balance sheet that will react to any production issue in 2005 China expected to continue strong import program in 2005 AWB confident of retaining 50% of Iraq import demand

71 71 APPENDIX 5: Financial Services

72 72 Priority Outcome AFSL licence Licence approved within timeframe Enabled AWB to continue to offer the IBD’s IBD Prospectus & major customer migration IBD Prospectus & major customer migration Prospectus launched 85% conversion Protect & shore-up Harvest Finance business Protect & shore-up Harvest Finance business On track to achieve $5m uplift On track to achieve $5m uplift Over 70% market share Improved sales mgt & RFM’s recruited Segmentation of customers Aligned targets and incentive plan What we have achieved to date

73 73 Term Loans Seasonal Finance Line of Credit Fastrak Finance Lending $1.1b book Call Investment Account Rural Cheque Account Rural Card Term Deposit Deposits $303m book General Insurance Crop Insurance Stud Livestock Insurance Transit Insurance Insurance $120m book Landmark Finance Online Plus Transfer funds Views statements Pay bills Net Access 2,800 clients Harvest Loan Flexible Drawdown Loan Advanced Payment Deferred Payment Harvest Finance $1.5b book Financial Advice Master Trust Platform Investment Products Wealth Management New business opportunity What do we offer clients?

74 74 Lending Deposits Wealth Management Insurance Total Agri-business market Earning potential of total market Harvest Finance $4b $80m $760m $140m $11b $110m $2.1b $42m $30-$35b $610m How big is the opportunity?

75 75 LendingHarvest FinanceDepositsWealthInsurance Larger clients Larger deals More professional operators Cashflow out of sector Equity in Farms unlocked Lower premiums Scope to differentiate Market share erosion Increased choice and competition Greater competition for customer ownership Pressure on smaller operators Increased need for seasonal funding E-solutionBarriers to entry Focus on choice and independence Shake-out of Intermediaries E-solutions Clients approached by brokers on fee for success basis Maintain strength Greater focus on lifetime value Greater competition for customer ownership Role of intermediary is key Lending opportunities Leverage client base Increased investment High advice need Increased complexity Competitive market Technology, scale, increased regulation Increasing role of intermediaries Farm succession issues Farm consolidation Market trends and impacts

76 76 Distribution footprint in rural 431 outlets across all regional areas Local representation and service 80 Finance specialists Often on farm & close to clients business Deeper customer relationships than other Financial Service providers Deeper customer relationships than other Financial Service providers Insight into the financials and operations of a clients total business More individualised business/product transactions per client Rural focus Specialist focus on agri means no distractions Deeper understanding of agri needs e.g. we want the physical, we see the fund flow (e.g. livestock, grain, wool etc) Supplier relationships Strong suppliers in all categories –Lending: Rabo –Deposits: NAB, WBC –Insurance: WFI, CGU Why we can win

77 77 LendingHarvest FinanceDepositsWealth MgtInsurance Product  Relationship pricing and bundling  Cross sell and bundling programs  Tap into commodity cashflows  Create agri specific offering  Fill product gaps People  Recruit and develop high calibre RFM’s  Specialist grain expertise  FSRA skill accreditation  Recruit/ acquire advisory business  Recruit and develop specialist staff Process  Enhanced loan platform  Web enabled  Improve client statements  Full online proposition  Establish new platform  Supplier sales conversions  Web enabled Positioning  Build FS brand with primary producers  Reinforce strong brand with grain clients  Build FS brand across rural, regional and metro  Build FS brand with primary producers  Build FS brand across rural, regional and metro …to be a broad-based rural and regional financial services distributor with niche manufacturing capability where we have a natural competitive advantage What are our major initiatives

78 78 Rural customers traditionally under serviced Service based proposition Leverage customer insights across all business streams Business partnership Outlook

79 79 APPENDIX 6: Trading

80 80 Trading group Sales & marketing (Services function – deal making ) Australia Trading International Trading Derivatives Trading

81 81 “To strengthen core trading capability and be a world class global niche agricultural commodity trader on a light asset base model” Trading will build on existing capabilities, domestically and internationally - Utilising a “fund-of-funds” approach to achieve: Tighter and faster decision making Dynamic capital and resource allocation Global trading focus Trading and marketing synergies Objective of the Trading group

82 82 Capturing Trading & Marketing synergies Pool Marketing (IS&M) complements Trading activities through its: Trading adds value to the Pool Marketing (IS&M) activities through its: Market position AWB brand Wheat market information Customer relationships Risk management skills Wheat acquisition skills and marketing information Customer solutions / product bundling offerings Competing product information Customer relationships

83 83 Sth Amer Other 26% 18% 11%1%11%15%1%17% Sth Amer Other 1% 28% 1% 2%47%19%1% Sth Amer Other 5% 10% 1% 5%35%9%34% Wheat Oilseeds Corn World trade based on World totalAWB Share 107 mt 75 mt 74 mt 16% 1.3% 1.4% Importers AWB’s global reach Source: USDA & AWB trade data 2004 AWB wheat exports 26% 3% 18%4%24%21%1%3%

84 84 Heavy Trading risk profile Assets Low Light High Grains industry used to look like this TRADIGRAIN CONTINENTAL ANDRE BUNGE GLENCORE TRADIGRAIN CONTINENTAL ANDRE BUNGE LOUIS DREYFUS TRADIGRAIN CONTINENTAL ANDRE BUNGE NIDERA CARGILL ADM CONAGRA CARGILL ADM CONAGRA CARGILL ADM CONAGRA CWB AWB

85 85 But has changed dramatically over the past five years … Heavy Trading risk profile Assets Low Light High GLENCORE LOUIS DREYFUS BUNGE WILMAR CARGILL ADM CONAGRA CWB AWB opening space for a global ‘niche market’ positioning

86 86 Australia Trading (formerly Domestic Trading) EnvironmentPriorities & initiativesOutlook Large crop, margins continue to be pressured Drought Consolidating customer base Strengthening competitor base – consolidation of trading houses Conservative selling by growers following drought Opportunity to develop “deeper” relationships with key customers Strengthen sales links to intensive domestic livestock industries Expand commodity base Develop business in non-regulated export grains Develop livestock value-add activity Improve efficiency of risk capital utilisation (use fund-of-funds approach) Bullish domestic crop production outlook Weakening international and domestic commodity prices Market price curve keeping grain away from market …Outcome = diversification of Trading earnings

87 87 Chartering EnvironmentPriorities & initiativesOutlook Volatility in freight rates driven by commodity boom Counterparty/market default driven by price extremities Pool chartering dependent on size of export crop Opportunity to expand primary grain export business into 3 rd party freight opportunities Opportunities to increase global presence through single operational strategy of all AWB freight books Opportunity to develop back freight businesses (e.g. fertiliser) Develop additional skills in freight market intelligence Increase operations of vessels in global freight market Increase CNF sales of Pool and Non-Pool tonnage Continue to develop a presence as a 3 rd party freight supplier Freight rates weakening globally through 2005 Increased vessel supply Economic growth rates from China …Outcome = 24 hour global market coverage in conjunction with Geneva Chartering

88 88 International Trading (formerly Global Operations) EnvironmentPriorities & initiativesOutlook larger world crops, lesser price volatility prospects (lower execution risk, but fewer trading opportunities) Inability to attract capabilities to develop niche strategy of business Increased competitive pressures from global multi- national trading entities Merchants’ industry international consolidation Improve quality and origin of earnings and build deeper tailored relationships with a range of highly valued customers Secure regular supply and/or origination agreements in key markets Diversify revenue by covering more markets and products Leverage marketing and trade finance capacity Expand and strengthen trading skill set & capability Align IT to origination and marketing strategies Larger global crop production; declining market volatility Increase penetration of AWB IT into new markets and customers …Outcome = better market coverage and increased other origin grain volume traded

89 89 Derivatives Trading EnvironmentPriorities & initiativesOutlook Drought impacting physical volume Grower willingness to forward contract Market price environment and its impact on product attractiveness Customer buying in at lower price environment Build deeper tailored relationships with a range of highly valued customers Leverage Landmark business to provide an expanded product & service offering to our suppliers and customers Continue to build on business through existing AWB customer base and physical flows Expand business to external financial clients and other commodities Broaden the grower product range to increase volumes and marketability of products Improve sales effort through regional networks Good uptake of scale with overseas buyers Opportunity to bundle with physical wheat price …Outcome = Improved quality and origin of earnings

90 90 Strong growth across all activities Only domestic trading with national presence – reliable trading partner Fewer players through industry consolidation and exit of medium sized traders Strong uptake by international customers on product range Well recognised expertise in chartering environment Outlook

91 91 For more information contact: Delphine Cassidy Head of Investor Relations Ph:


Download ppt "1 Investor Presentation December, 2004. 2 2001 WES acquired IAMA, merged it with Wesfarmers Dalgety to form Wesfarmers Landmark 2003 AWB acquired Landmark."

Similar presentations


Ads by Google