STRATEGIC APPROACH

The four key strategies that we follow to achieve our objective of satisfactory shareholder returns were all relevant in the year under review.

The first – to strengthen existing businesses through operating excellence and satisfying customer needs – has particular application to the way in which Bunnings and the industrial and safety businesses have lifted performance to deliver such good results. It is evident also in the way in which improved cost containment and margin management in fertilisers saw that business defy unfavourable conditions and produce a better outcome.

Our second strategy is to secure growth opportunities through entrepreneurial initiative. We are really pleased with the growth prospects of each of our businesses.

Bunnings will continue to roll-out new stores, refurbish existing ones and, importantly, add to its product and service range. Our coal division is undertaking feasibility studies with a view to increasing production at the Curragh and Bengalla mines. During the year we significantly boosted the prospects for the insurance division through the acquisition of OAMPS and Crombie Lockwood.

The industrial and safety division acquired the Bullivants lifting business which is performing well, as is the new Queensland distribution centre. CSBP has nearly completed the 235,000 tonne ammonium nitrate expansion at Kwinana and is also looking at increasing production of sodium cyanide for the Boddington gold mine project and of ammonium nitrate at our QNP joint venture in Queensland. In the energy division we have integrated the Sydney-based Coregas business, and construction is well under way on the 175 tonne-per-day liquefied natural gas production facility at Kwinana to provide LNG for the heavy duty vehicle and remote area energy markets.

The third strategy – to renew the portfolio through value-adding transactions – has seen us devote substantial resources to work on the Coles offer which is still in progress and to which I will refer in more detail a little later.

Our fourth strategy – to ensure sustainability through responsible long-term management – is covered in more detail later in this report and even more comprehensively in the separate report which will be available at the time of the annual general meeting.

Wesfarmers remains active in the pursuit of sustainable outcomes. New initiatives by Bunnings on water conservation and climate change continue its industry-leading role. They follow the plastic bag reduction programme that has been so successful in Australia and is now operating in Bunnings’ New Zealand stores and the attention to supply chain issues on wood and wood products.

At the parent company level, we commissioned an external report on greenhouse risks and opportunities that will provide a basis for future action across the group. In a submission to the Prime Minister’s Task Group on Emissions Trading we supported the introduction of a truly global scheme as a contribution to reducing atmospheric greenhouse gases.

Sustainability is a multi-faceted concept, encompassing amongst other things the environment, the way in which we treat our employees, ethical business conduct and the community contributions we make. One of these aspects, the attraction, development and retention of quality people, is becoming an absolutely key issue in the context of ongoing strong economic growth. I believe it is likely to be the biggest single challenge facing public companies over the next decade.

Wesfarmers has always aspired to be an employer of choice and that is linked to remuneration we offer and the sort of workplaces we provide. But a crucial further element is that increasingly people are factoring in the reputation enjoyed by a potential employer. That is where a genuine and demonstrable commitment to being a sustainable company plays such an important part, especially for those skilled young people with wide choice in the job market.