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Paul Ingleby, Chief Financial Officer October 2003

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Paul Ingleby, Chief Financial Officer October 2003. Contents. The strategy Landmark – the acquisition The growth opportunity Outlook Appendix 1: AWB’s business Appendix 2: Landmark’s business. “The strategy”. Group Structure. AWB Limited. Commercial operations. Pooling operations.

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contents
Contents
  • The strategy
  • Landmark – the acquisition
  • The growth opportunity
  • Outlook
  • Appendix 1: AWB’s business
  • Appendix 2: Landmark’s business
group structure
Group Structure

AWB Limited

Commercial operations

Pooling operations

Pool Management Services

Finance & Risk Management Products

Grain Acquisition & Trading

Supply Chain & Other Investments

Grain Technology

Landmark

corporate strategy

Milling & Processing

International other grains & commodities

  • End-users Relation-ships

Shipping

Finance & Risk Mgmt.

International wheat

Pool Mgmt.

Integrated Value Chain

Australian other commodities

Value adding products and services

Acquisition & Trading

Supply Chain

  • Producers Relation-ships

Australian other grains

Rural Services

Agricultural inputs and technology

Australian wheat

Agricultural Commodities

Corporate strategy

Vision: “Australia’s leading global manager of agricultural commodity assets, services and flows”

awb s financial objectives
AWB’s financial objectives

Return on equity

- 15% return on equity in the medium term

Solid EPS growth (including Landmark)

- EPS accretive (pre-goodwill, post synergies, post one-off costs) in 2003-04

- More than 35% EPS accretive by 2005-06

Stable dividend payment

- 11 cents per share for the 2003 final dividend

- Expect to maintain dividend payment at current levels for 2003-04

Efficient capital management

- Surplus capital utilised to part fund the acquisition of Landmark

- Appropriate credit rating

Improve quality of earnings

- Reduced exposure to crop size

- Reduced proportion of earnings subject to principal risk

slide8
Landmark strengthens AWB’s core wheat business & achieves substantial diversification in rural & financial services
  • Integration, extraction of synergies and building of growth platforms will be a major focus in 2003-04
  • Landmark distribution network and Rabobank relationship will be growth enablers in Financial Services
  • AWB will continue to strengthen its grain business by seeking arrangements with bulk handlers allowing competitive access to ports and by securing end user demand
  • Strong focus on cost and capital management will help prioritise business opportunities, whether in existing business streams or beyond
the acquisition of landmark creates a unique one stop shop for the farmer
The acquisition of Landmark creates a unique ‘one stop shop’ for the farmer

Enhanced access to global markets for Australian agriculture

  • Access to over 40 countries around the world

Cross-selling

  • Cross-selling of products and services to farmers and international customers

Overhead cost savings

  • Consolidation of AWB and Landmark corporate, head office and network functions, where appropriate

Supply chain cost savings

  • Consolidation of procurement functions
  • Leveraged logistical capability
slide10

AWB and Landmark

Distribution Network

  • Acquisition of Landmark dramatically expands AWB’s foot print across rural Australia
    • Better able to service customers and complement Single Desk marketing / risk management activities
    • Platform to leverage growth for AWB financial services business

AWB office locations (49)

Landmark outlets (430)

awb and landmark indicative financial position as at acquisition date 1
AWB and LandmarkIndicative financial position as at acquisition date1

Notes

Subject to completion accounts

Indicative only, following placement. Does not include equity raisings under the Share Purchase Plan and Dividend Reinvestment Plan

slide12

AWB and Landmark

Profit Opportunities

  • Total EBIT enhancement opportunities, derived primarily from finance growth opportunities, assessed at A$5 - A$10 million in FY2004 increasing to A$30 - A$40 million by FY2006
  • Detailed implementation plan has been established to pursue opportunities from Day 1

Notes:

Net profit after tax, pre goodwill amortisation including all one-off costs

Based on AWB forecasts for FY2004 and FY2006, pre goodwill amortisation, includes all one-off costs for FY2004

funding the acquisition
Funding the acquisition

A$250m Underwritten Equity Offer in Three Tranches

Placement

Share Purchase Plan (SPP)

Underwritten Dividend Reinvestment Plan (DRP)

Completed

Commences next dividend

(Dec 2003)

Offer mailed out

  • Institutional offer via bookbuild completed on 2 Sept 2003 with 41.1m shares issued at A$3.70. The placement was oversubscribed.
  • The SPP currently on offer to retail shareholders with the offer closing 20 Oct 2003
  • AWB will implement the DRP effective for the final dividend at a 5% discount, underwritten for the next three dividends to the extent that the placement and SPP raise less than A$250 million
harvest finance market
Harvest finance market
  • Environmentbecoming increasingly competitive
      • Traditional players – NAB, Rabo, BHC’s
      • Others players– WBC, ANZ, Regionals
      • AWB product enhancements for 2003
  • Performance & take up rates
      • 70% market share
      • Majority Harvest Loan, but other product use increasing
  • Cross sell opportunities between AWB & Landmark
      • Product bundling
      • Landmark finance staff to sell AWB Harvest Finance
the opportunity
The opportunity

$30b of agribusiness lending in three broad segments

‘Farmers’

‘Corporations’

Product set

Segment ‘B’

65,000 SME agribusiness customers

$20b loans

Segment ‘C’

5,000 Corporate Enterprise

$8b loans

Finance to all agribusiness

Segment ‘A’

30,000 Grain / Broadacre

$2b loans

Harvest finance to grain growers

Turnover

Small

<$200k

Medium

$200k-$1m

Large

>$1m

Source: ABARE, ABS, RBA, APRA, Jun 2002. Neil Clark & Assoc.

competitive opportunities
Competitive opportunities

Competitors vary in their primary focus of attention

Major Banks

Large

Rabo

Value Proposition #1:

Commodity led

Value Proposition #2:

Finance led

Oppor-tunity 1

Regionals

  • 300 agronomists
  • Broad product range
  • Rural distribution
  • Product bundling
  • Brand appeal to agribusiness
  • Balance sheet strength, funding, liquidity capacity
  • 60 RFM/RFO’s
  • Understanding of agribusiness risk
  • Rural distribution
  • Product bundling
  • Brand appeal to agribusiness
  • Balance sheet strength, funding, liquidity capacity

Oppor-tunity 2

Landmark

ERB

Small

Low

Profitability

High

growth in agribusiness lending
Growth in Agribusiness lending

$Bn’s

50

10% CAGR

40

30

20

10

0

1997

1998

1999

2000

2001

2002

2003(f)

2004(f)

2005(f)

2006(f)

Source: ABARE, ABS, RBA, APRA, Jun 2002. Neil Clark & Assoc., Bank Annual Reports. (f) = forecast

outlook awb is well positioned as australia s leading agribusiness
Outlook – AWB is well positioned as Australia’s leading agribusiness

Agricultural outlook is improving

- AWB forecast 22 to 24m tonnes of wheat for 2003-04

- Outlook solid for finance, insurance, fertiliser and real estate

2002-03 Group NPAT forecast in the range of $40-45m

2003-04 Group NPAT forecast in the range of $100-110m

- Pre goodwill amortisation, including all one-off costs

Ring fencing of National Pool

- Targeted credit ratings achieved and protected

Integration of Landmark

- Total EBIT enhancement opportunities, derived primarily from finance growth opportunities, assessed at $5-$10m in 2003-04 increasing to $30-$40m by 2005-06

introduction
Introduction
  • Australia\'s major grain marketer and one of theworld\'s largest wheat managers and marketers – over 60 years experience in marketing Australian wheat
  • AWB markets wheat and other grains to more than 40 countries and is the world’s second largest wheat exporter with 16% global market share (based on 2001-02). The AWB National Pool is a significant contributor to the Australian economy, accounting for around 3% of the total value of Australia’s exports. AWB employs more than 550 people, with a network of 43 offices in Australia and around the world
  • AWB is chosen by most Australian wheat and grain growers to market and financetheir grain
  • AWB operates and manages the AWB National Pool on behalf of AWB (International) Ltd via the Single Desk system
slide24

AWB Business Streams

  • Base Fee
  • Out-Performance Incentive

Pool Management Services

  • AWB National Pool Payment Options
  • AWB Basis Pool
  • AWB riskassist

Finance & Risk Management Products

  • Grain Contract Acquisition Products
  • Domestic Trading
  • Non-Wheat Trading
  • Global Operations - Geneva

Grain Acquisition & Trading

  • Chartering
  • AWB Grainflow
  • Offshore Investments

Supply Chain & Other Investments

  • Agrifood Technology
  • AWB Seeds
  • Research & Development

Grain Technology

ring fence of national pool operations
Ring fence of National Pool operations
  • Ring fence structure to be effective from 1 October 2003
  • Ratings expected post 1 October 2003
    • AWB Harvest Finance
      • S&P: A1+ (s/t) AA- (l/t) stable
      • Moodys: P-1
    • AWB Commercial Subsidiaries
      • S&P: BBB stable outlook
capital requirements going forward
Capital requirements going forward
  • Level of capital required to support future growth plans
  • No major capital expenditure for 2003-04
  • Expected maintenance capital expenditure of approximately $20-$30m per annum (to 2005-06)
overview of landmark
Overview of Landmark

Landmark is Australia’s leading rural distribution network with national coverage and significant growth opportunities

  • Largest merchandise and fertiliser distribution business in Australia
  • Well diversified earnings base across regions, agricultural commodities and business activities
  • High growth finance business that can be further leveraged by AWB
  • Strong insurance agency business
  • Extensive branch network throughout regional Australia with 430 outlets and over 100,000 customers
  • Lower risk agency model relative to peers
  • Experienced management team which has presided over previous successful acquisitions and significant earnings growth
landmark a snapshot
Landmark: a snapshot

100,000 customers

Mercha-

ndise

$1.1b

Sales

Fertiliser

1.2m

tonnes

Livestock

1.9m

Cattle

11m

Sheep

Wool

500k

bales

Real

Estate

$730m

sales

Finance

$815m

book

Insurance

$119m

premium

1,890 employees

430 outlets

slide30

Overview of Landmark by business unit

Wool

Livestock

  • Handles approximately 20% of livestock trading in Australia
  • Provides saleyard auction services and private treaty services for livestock producers
  • Supplies processors, supermarket chains, lot feeders and live export markets
  • Landmark do not own feedlots or abattoirs
  • Landmark handles approximately 25% of the National Wool Clip (600,000 bales)
  • Provides traditional broking / auction selling services as well as a comprehensive range of Risk Management products
  • 50% interest in Australian Wool Handlers (with BWK), 40% interest in Arcadia
  • Not involved in any downstream processing
slide31

Overview of Landmark by business unit

Real Estate

Insurance

  • Markets large rural properties, residential real estate (regional towns) and clearing sales in country areas throughout Australia
  • Real estate sales of in excess of A$700 million in 2003
  • Landmark offers a range of insurance cover options for rural businesses and households
  • Landmark acts as an agent for WFI and CGU
  • The current arrangements with WFI and CGU will remain in place
slide32

Overview of Landmark by business unit

Merchandise

  • Supplies a broad range of agricultural inputs, including agricultural chemicals and veterinary products, to all major agricultural sectors
  • Distributed via 230 company owned branches, 50 franchises and 150 members (ie non-Landmark merchandise stores)
  • Provides agronomic advice for cropping, pasture and cotton enterprises
slide33

Overview of Landmark by business unit

Fertiliser

Finance

  • Acts as an agent for CSBP (owned by Wesfarmers) and others in WA; IncitecPivot and Hi-Fert on the east coast
  • Landmark provides a range of financial products for rural producers including seasonal and term loans, term deposits, cheque accounts and credit cards
  • Acts as an agent for Rabobank and receives a proportion of the net interest on each loan and a share of a ‘bonus pool’ (precise earning arrangements are yet to be determined)
  • Landmark is responsible for loan approvals, however there is one Rabobank credit manager in the Landmark credit team
  • Landmark still ‘owns’ the client
  • 50 Rural Finance Managers located throughout Australia
slide34

Overview of Landmark by business unit

Other

  • Other Sales and Gross Profit are derived from the following businesses
slide35
www.awb.com.au

For more information contact:

Delphine Cassidy

Head of Investor Relations

T: +61 3 9209 2404

F: +61 3 9670 1723

E: [email protected]

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