Wesfarmers Limited (WES) Earnings Call Transcript & Summary

Hello, ladies and gentlemen, and welcome to the Wesfarmers Annual General Meeting for 2022. My name is Ruth Callaghan, and I will be the moderator for today's meeting. In relation to some housekeeping matters, in the unlikely event of an emergency, you'll be asked to leave the room in an orderly fashion through the exits which are clearly marked around the room. Convention center staff will be available to assist you if you need help. If you have not already done so, may I remind you to please switch off your mobile phones. Now before our Chairman, Michael Chaney, commences proceedings, I'd like to begin today by introducing Dr. Richard Walley OAM to perform a Welcome to Country on behalf of the traditional owners of this part of Western Australia, the Whadjuk Noongar people. Ladies and gentlemen, please welcome Dr. Walley.

[Foreign Language] So may the good spirit keep everyone safe. This is called the Whadjuk section of the Noongar language group. It's a place where we've been conversing and meeting, creating, exchanging and passing on stories for many generations. And today, we talk about passing on some more of these stories. It's also a place where we share food and share drinks. And those conversations not only in the formal, but the casual, is also taken into considerations, the meetings before the meeting, the meetings after the meetings are significant. So we do not take those for granted as well. [Foreign Language]. May the good spirit give those who are presenting today the strength for those who require it. I'd like to thank you for including a welcome. We do not take it for granted. We'd also like to thank you for paying tribute to the Noongar people and the Whadjuk people and having these welcomes as a part of your presentation. [Foreign Language] At the end of this presentations today, may the good spirit take each and every one of you safely back to your families and your homes. I will finish up with a little song called the [Foreign Language]. It's the story of the river traveling back to the ocean. [Foreign Language] May the good spirit be with us. Take care. [Foreign Language].

Good afternoon, everyone, and welcome to this meeting. I'm Michael Chaney, the Chairman of Wesfarmers. I'm advised that we have a quorum present, and I now officially open the 41st Annual General Meeting of Wesfarmers Limited. Can I start by thanking Dr. Richard Walley for his Welcome to Country on behalf of the Noongar people, who are, of course, the traditional owners of this part of Australia from which I'm joining you today. And I pay my respects to their elders past and present. And thank you to everyone who's joined today's meeting in person and online and listening in by phone. After the disruption of the last 2 years, we are so pleased this year to be hosting a more normal Annual General Meeting for Wesfarmers held with our entire Board and executive leadership in attendance as opposed to last year when half of them were on video, and showcasing so many of our businesses in the pavilion outside. Since we met last meeting this way, we've all experienced and learned a lot during a time, I think, that reinforced our confidence in Wesfarmers' corporate purpose. I'm joining you today from the Perth Convention and Exhibition Center. On stage with me are our Managing Director, Rob Scott; and our Company Secretary, Vicki Robinson. Also joining us today are our Board of Directors. And this year we have 3 directors who are retiring by rotation and standing for reelection, and we'll get to that later on in the business of the meeting. You'll be hearing from each of them later when they seek your support for their reelection. But first, I'd like to invite all of my director colleagues to stand while I introduce them. First, Fiona Wallace -- sorry, Vanessa Wallace. Sorry, Vanessa. And we don't even have a Fiona. Vanessa is our longest-standing director who joined the Board in 2010. Next to Vanessa is Jennifer Westacott, who's been a Board member since 2013 and is standing for reelection for final term today. Next to Jennifer is Sir Bill English, who joined the Board in 2018, and as you may know, is a former Finance Minister and Prime Minister of New Zealand. Next to Bill is Mike Roche, who joined the Board in 2019. Mike is the Remuneration Committee Chairman, and he's standing for reelection today as well. Alongside Mike is Sharon Warburton, also standing for reelection today. And then we have Anil Sabharwal, who joined the Board in 2021. Next to Anil are our 2 newest board members, Alison Watkins and Alan Cransberg, who both joined the Board during 2021. Thank you, directors, you can be seated. Also with us at today's meeting at the front are the group's senior executives, including the managing directors of our business division, some of whom at least you may have heard from in the room outside before the meeting. I welcome all of them on your behalf and really thank them for their great efforts throughout the last year, which is, to say the least, been a pretty trying year. As you would have seen coming into the meeting, all of our businesses are represented here today, and I know how pleased they all are to have been able to demonstrate some of their merchandise and wears before the meeting. So if you have any particular matters that you'd like to raise that go into any detail of their operations, please make contact with them after the meeting. They will still be around out there. Now we also have in attendance Wesfarmers' audit partners from EY, Trevor Hammond and Jemma Newton, who are available to answer any questions on the audit and related matters. And lastly, I extend a special welcome to all of our current team members and also to all former directors and executives and team members who have joined us here today, and it's great to see you. And now on to some procedural matters. Many of our shareholders have taken the opportunity to submit their voting instructions and questions through the online voting platform, and we thank them for doing so in advance of this meeting. As outlined in our Notice of Meeting, shareholders and proxy holders may vote and submit their questions during this meeting either in person or using the Lumi AGM online platform. We've also provided shareholders and others, who may not be able to be present today or participate online, with the opportunity to listen to the AGM by telephone. But please note that shareholders and proxy holders joining the meeting by phone will not have the ability to ask questions or to vote. All resolutions today will be decided on a poll, and to provide ample opportunity for shareholders and proxy holders, including those participating in the meeting online to submit their votes, I now open the poll on all resolutions. I'll provide a reminder to submit any outstanding votes later in the meeting before the poll is closed for the purpose of conducting and determining the results of the poll on each resolution. And the results will be announced through the ASX Company Announcements platform later today and will also be available on the Wesfarmers' website. EY, the company's auditor, will act as Scrutineer. We'll now play a short video outlining further procedural matters. [Presentation]

Well, I hope you enjoyed that new innovation of putting all that on video. In prior years, I've had to read it and even I glazed over, I must say. Now please submit your votes anytime from now until I close the poll at the end of the formal items of business. Are there any questions about the poll procedure? Okay. Well, consistent with the approach taken at our previous AGMs, we'll respond to questions on a particular item of business during discussion on that item, unless those questions have already been addressed through the earlier remarks. I'll also answer general questions at the end of the meeting while the voting results are being counted. In the interest of all participants, please ensure that your questions are relevant to all shareholders. Written questions submitted online [Audio Gap] either before or during the meeting, which are to be put to the meeting will be read to us by our external moderator, Ruth Callaghan, who you saw earlier. A number of shareholders also submitted questions in advance of the meeting and individual responses have been sent to those shareholders ahead of the meeting. We'll also address a number of key themes raised in my and Rob's address. That's key themes that have been raised in questions before the meeting, and transcripts of those addresses are available on our website and on the ASX platform. A recording of the meeting will be made available on the Wesfarmers' website after the meeting. As you'd be aware from the Notice of Meeting, there are 4 items of business to be discussed when we move into the formal proceedings. But before that, I'll make some general observations about the last 12 months and the business environment, and then Rob Scott will provide us with some reflections on the current trading environment and on the outlook for the group. Well, for the third year in a row, the 2022 financial year proved to be a period of great uncertainty and challenge. On account of the pandemic, our operations were disrupted very much in the first half of the year by government-imposed lockdowns, by absenteeism, skill shortages, and by bottlenecks in our supply chain. During the second half, conditions improved markedly, and it's particularly gratifying that once again Wesfarmers managed to produce a very solid profit result for the year. As I noted in my introduction to the annual report, this result was principally due to the efforts of Wesfarmers' management and team members in modifying business models to suit the changed times and finding innovative ways to serve our customers. The diversified nature of our group of companies was also a big help. For some years, management of our retail businesses had been working to gear up for the inevitable rise of online trading, and these efforts were accelerated during the year to cope with increased online demand from customers, including for click and collect and delivery during times of shutdown. Pleasingly, throughout the pandemic, we've been in the very fortunate position of having the financial capacity to keep paying our permanent team members on our annual profit result. We did it because we saw it not as an expense, but as an investment, an investment in our people, in maintaining our skills base, in generating loyalty, and demonstrating to our team members how much we value their contribution. During the year, the benefits of Wesfarmers conglomerate structure were clearly demonstrated with profit falls in Kmart Group and Officeworks, mainly due to those shutdowns, being compensated by increases in Chemicals, Energy and Fertilizers, and the Industrial and Safety divisions, the former resulting from increased production and productivity and also by commodity price rises. Bunnings achieved comparable profits to those of the previous record year and continued to be the principal contributor to the group's profits and cash flow. Details of the financial results for 2022 are in our annual report and I don't propose to repeat all of that here. But in summary, net profit from continuing operations was $2.35 billion, down 2.9% on the prior year. That's an incredible figure when you think that when we went public, we were making about $10 million after tax and it's now $2.9 billion. Our fully franked ordinary dividends rose $0.01 this year to $1.80 per share. During the year, the company's strong balance sheet also enabled the payment of an additional $2 per share as a capital return following the approval of shareholders at the AGM here last year. Now while the annual financial performance and healthy dividends are important, the main focus of the Board and management is on long-term returns, as has been the case since our listing on the stock exchange back in 1984. As a listed company, we've always been very clear on our central purpose, that is, to provide a satisfactory return to our shareholders. That's why, after all, people buy shares in Wesfarmers, rather that being core to the company's success with an investment in Wesfarmers providing a return around 1,600% greater than the ASX All Ordinaries Index since 1984. That financial focus has ensured that we remain disciplined through a range of economic conditions and minimize the danger of Empire building or paying too much for an asset that we would have loved to have owned. But we've always emphasized that having a shareholder return focus goes hand in hand with a determination to look after the interest of all of our stakeholders: our team members, our suppliers, our customers, our communities and the environment, and to act honestly and ethically in all of our dealings. If we don't look after all those stakeholders, people won't want to work for us. They won't want to buy our products, invite us into joint [Audio Gap] ventures or sell their businesses to us. Indeed, it’s because our businesses have been so focused on stakeholders that they've developed such strong reputations and produced outstanding long-term shareholder returns. The two go hand in hand. Of course, actual returns depend both on those matters we can control within our businesses, but also on the external environment. And with regard to the latter, we are facing some pretty challenging times. Internationally, as we all know, there are troubling political and geopolitical events that are impacting communities and markets and, with that, our businesses. Domestically, Australian businesses are faced with rising inflation and rising interest rates, continuing skill shortages and supply chain bottlenecks. And while these challenges will likely continue for some time, there is an opportunity for the new federal government to refocus our economic settings to better address them and to mitigate their impact by encouraging [Audio Gap] productivity, entrepreneurship and growth: all of which are the foundation of long term prosperity for our nation. Following 2 years of closed borders and the disruption to the Australian workforce, the recent Jobs and Skills Summit was timely. It was an opportunity to reset our workplace relations system to lock in much needed productivity increases. Today, as you may have heard already, the Australian government released details of its proposed changes to our workplace laws. We haven't yet had a chance to examine them in detail, but the changes do appear to have some positive for the Better Off Overall Test in enterprise agreements, which hasn't worked not only against productivity improvements, but also has worked against the interests of workers themselves, because it's lost its original intended meaning. We're also pleased that the government has said they are open to working in good faith and to improve the legislation and that enterprise agreements will have primacy. So companies like Wesfarmers with a history of bargaining and paying our workers above award rates can continue to do so. We're concerned about the government's multi-employer bargaining proposal. This is significant industrial relations reform and it should not be rushed through parliament. Now while the government is intending to incorporate some safeguards against unintended detrimental outcomes, we're concerned that this could result in more efficient individual businesses being disadvantaged and the lower common denominator approach to wages. It's unclear how the proposal drives productivity, which is always the foundation of wages growth. We're also concerned that the government hasn't accelerated the critical work to simplify awards, which underpin most Australians' employment arrangement. We employ, I think, about 30% of our team members under awards and another 30% or 35% under workplace agreements, and they're based on the awards. So the great majority of our team members are influenced by what's in an award, and you wouldn't believe the complexity [Audio Gap] for the last century. And it's no longer fit for purpose for our changing economy. Many sensible reforms were detailed in the Henry Tax report, which you may recall, but it's unfortunately been sitting on shelves for more than a decade now. Industrial relations and tax reform are essential if we're going to continue to build Australia's prosperity and provide the sort of social services that all of us have come to take for granted. In closing, I again pay tribute to the outstanding Wesfarmers' management team, led so capably by our Managing Director, Rob Scott, and to all of our team members in what has again been a hugely challenging year. They've given their all to the achievement of the company's success. We think that with our strong portfolio of diversified growing businesses, our strong balance sheet and our dedicated team members, Wesfarmers' future looks bright. And I now invite Rob to deliver his Managing Director's address.

Well, thanks very much, Chairman, and thank you too, Richard, for your Welcome to Whadjuk Country. As our Chairman said, the 2022 financial year was the most disrupted period for many of our businesses since the start of the pandemic. There were times when we had absenteeism levels in some businesses of around 10%, and during the first half, over 34,000 store trading days were impacted by trading restrictions or closures. And despite the disruption, we maintained our focus on the group’'s strategic agenda and continued to stand by our teams, our customers, our suppliers and the community. This focus on the long term enabled us to rebound strongly in the second half of the year and emerge from the pandemic with positive momentum and a number of new business opportunities. We have continued to renew the portfolio and we've made excellent progress on a number of strategic projects with potential to generate attractive returns to shareholders over time. Wesfarmers' resilience and performance in 2022 is a testament to our almost 120,000 team members across Australia, New Zealand and in Asia. Together, they've helped us navigate the challenging and unpredictable operating environment. Our responses to COVID are well summarized in our Annual Report and the Chairman spoke to some of these in his address. So today, I won't focus on these, but I will focus more on the operational and strategic highlights during 2022, while also providing an update on recent trading performance of our businesses and some of the areas of focus going forward. We are continuing to make good progress around workplace safety with a 4.2% reduction in our total recordable injury frequency rate in the last financial year. We regained indigenous employment parity a year ahead of plans– and our teams now better reflect the communities in which we operate. We released our 8th Reconciliation Action Plan, which for the first time received the highest ‘Elevate’ status and this includes information about how we are helping to build cultural competency of our businesses. We've also continued to build climate resilience in our businesses, achieving a further reduction in emissions and making good progress towards our net-zero targets. Just to cite one example in our businesses, over 50% of the entire Bunnings network is powered by renewable energy from a combination of our own solar PV generation and renewable energy contracts. Now not only is this good for the environment, it's also good for our profitability by reducing our expenses. All our retail divisions are committed to sourcing 100% of their electricity needs from renewable sources by 2025. [Audio Gap]Our investment in rooftop solar assets reduces our exposure to expensive and volatile energy costs and reduces our operating costs. After many years of work, our WesCEF division, which is a so-called hard-to-abate business, has released its roadmap to achieve net-zero by 2050. The detail behind this roadmap emphasizes the importance we place on delivering on our commitments. This positions our businesses well for the future –[Audio Gap] by improving their operating and financial performance, better managing risks, and aligning around the areas of focus for our teams, customers, shareholders and the community. At our Strategy Briefing Day in June this year, I provided an update on 3 focus areas across the Group, all aligned with our core strategies and our corporate objective. And I'm pleased to report solid progress on each, during the year. The first priority is the development of a market-leading data and digital ecosystem, to better connect our fantastic retail brands with our customers. And this recognizes the importance of developing a deeper digital engagement with our customers to enhance and complement what we hope is a fantastic in-store experience. It will also support the growth and profitability of our retail businesses over time. [Audio Gap] This year we launched our new OneDigital division, led by Nicole Sheffield, who you heard present on this stage earlier today. OneDigital includes our group's subscription program, OnePass; our Group data asset, OneData; and the e-commerce marketplace, Catch. And if you haven't already, I encourage you to join OnePass. There's a booth outside, and the friendly team can sign you up for a free trial that provides benefits when you shop online at Bunnings, Kmart, Target and Catch and will soon offer benefits shopping in our stores. Our second priority is to realize value from the investments we're making in new platforms for growth. We've recently invested in opportunities arising from the digitalization and decarbonization of the economy, and the growing demand in health and wellness, setting the group up to benefit from these long-term megatrends. For example, we continue to progress the Mt Holland lithium development. In about 2 years' time, we'll be selling lithium hydroxide, refined right here at Kwinana in Western Australia, to support the accelerating global uptake of electric vehicles. Each year, the production from our lithium hydroxide project, on a 100% basis, will [Audio Gap] be equivalent to powering 1 million battery electric vehicles, resulting in annual savings of around 1.8 million tonnes of emissions. This time last year, we’ had recently announced an offer to acquire API. And with that acquisition now complete, Emily Amos, leading our new Health division, is leading a team that is going to show exciting and new opportunities to build a leading business in this space, focusing on the growing health, beauty and wellness sectors, all of these being new platforms for growth within Wesfarmers. Now like other areas of our business, we continue to pursue expansion opportunities and shareholder value opportunities like Bunnings continuing to expand its commercial offering with the acquisition of Beaumont Tiles and the rollout of Tool Kit Depot. [Audio Gap] I should stress that our investments in these new areas are all about delivering returns to shareholders. We do not seek growth for the sake of growth. Rather, we focus on building businesses where we have unique assets and capabilities where we can deliver attractive returns to our shareholders over the long terms. Now in June, I also spoke about a third priority – to accelerate the pace of continuous improvement across the group and further integrating sustainability into our strategies. And the pandemic highlighted the agility of our teams. We can move incredibly fast when we need to, to improve our operations and to better meet the changing needs of our customer needs. And this is particularly important in the current environment as businesses and consumers navigate various cost pressures. [Audio Gap] Elevated supply chain costs, rising wages and the higher cost of utilities, together with the lower Australian dollar, will impact the Group’s businesses in the 2023 financial year. Importantly though, Wesfarmers’ businesses are well placed relative to their competitors to manage costs and will continue to leverage the benefits of scale, sourcing capabilities and employment brand. I would now like to provide some comments on recent trading across the group. Consistent with our update at our full-year results in August, retail trading conditions have remained robust, and we have been pleased with the sales through the 2023 financial year-to-date. Australian consumer demand continues to be supported by low unemployment and high levels of accumulated savings, but rising interest rates and the impact of inflation are starting to affect consumer behavior. Over recent months, shopping patterns and customer feedback indicate that some customers are becoming more price sensitive as they try harder to manage their household budgets. Now we see these conditions as an opportunity for our businesses, and our retail businesses, as you know, are well regarded for their everyday low prices, and we're confident of outperforming relative to others in this more challenging market. In Bunnings, sales in recent months have been impacted by unusually wet weather over the start of Spring, particularly on the East Coast, but overall sales growth remains resilient and continues to be supported by strong demand from commercial customers. While sales growth from our DIY customers remains positive, it has moderated from the very high levels experienced through COVID. Combined sales growth for Kmart and Target through the year-to-date continues to be pleasing, with strong trading results even when adjusted for the impact of the lockdowns experienced last year. This highlights the strength of their offers as well as the benefits of the store conversion program undertaken in recent years across those businesses. Kmart's market-leading value and low price points position it very well to meet the customer needs and profitably grow its market share in an environment where shoppers are more focused on value. Target continues to benefit from good progress in delivering on quality and style at affordable prices. Officeworks’ sales for the year-to-date remains broadly in line with the prior year. A continued normalization of demand in categories such as office supplies and print and create services, which were very impacted by COVID, has been positive for Officeworks’ sales mix. Sales for the Catch marketplace have declined through the year-to-date, as online demand generally has adjusted from the very high levels recorded during periods of lockdown. The new CEO of Catch, Brendan Sweeney, has recently joined the Group and will focus [Audio Gap] on plans to improve the customer offer while managing the ongoing investment program to support scalability and long-term growth. Now 2023 is a foundational year for our OneDigital division, as we invest in the systems, processes, and capabilities to support our data and digital ambitions. As customers become more digitally savvy and value conscious, the enhanced multi-channel experience and value provided through the OnePass subscription program will be even more important. Our investment in OneDigital is in line with the prior guidance we provided, being an operating loss of $100 million this financial year, excluding Catch. We will provide further update on the progress of our businesses at the half-year results, which we'll release in February next year. Now the Chemicals, Energy and Fertilizers division has continued to benefit from strong customer demand and elevated commodity prices, and the development of the Mt Holland lithium project is progressing well. Performance in the Industrial and Safety division has continued to improve, with sales growth recorded across all business units on a year-to-date basis. And the results from the new Health division have also been pleasing, with strong growth in wholesale and improvements in the performance of Priceline and [Audio Gap] Clear Skincare relative to the lockdown affected prior year. The Health team remains focused on integration activities, investing in new capabilities to support business growth, and initiatives to improve their financial performance. Consistent with the broader macroeconomic environment, the group's businesses are managing cost pressures associated with rising inflation and wages, elevated supply chain costs and the lower Australian dollar. And while these factors will impact costs in the 2023 financial year, Wesfarmers businesses are well placed relative to our competitors, and we'll continue to leverage the benefits of our scale, our sourcing capabilities and our employment brand. So in closing, I wanted to thank you very much for the privilege of leading Wesfarmers. And while there are some risks on the horizon [Audio Gap] including elevated inflation, rising interest rates and geopolitical tensions, I continue to believe that Wesfarmers is well positioned for this environment and has the capacity to effectively manage a range of economic scenarios. Our balance sheet is strong. We have a diverse portfolio of high quality, cash-generative businesses and a number of new opportunities for value creation. I wanted to thank our team members across the group and a special thanks to our Group Leadership Team for their commitment, the commitment that they show every day to our corporate objective, together with supporting their teams and their businesses. And also a special thank you to our Board for their continued advice and support. And with that, I'll now hand back to our Chairman.

Well, thank you, Rob. So now on to the formal business of the meeting. I've referred to the minutes of the 40th Annual General Meeting of the company held on 21 October last year. I've reviewed these minutes and I've signed them as a true and correct record of the meeting. The minutes are available for inspection at the [Audio Gap] Company's registered office, if anyone wishes to do so. Voting on all resolutions today will be carried out by way of a poll. All resolutions are ordinary resolutions requiring approval by a majority of shareholders who vote on that resolution. Where as Chairman, I've been nominated as the shareholders' proxy, I intend to vote all undirected and available proxies in favor of each of the resolutions. There are also voting restrictions for some resolutions, as outlined in the Notice of Meeting, which apply to those who've got an interest in the resolutions and certain of their related parties. A reminder that if you're having any issues about casting your vote or submitting a question, please speak to a Computershare representative if you're attending in person. Or if you're participating online, please refer to the user's guide on the Wesfarmers website or call Lumi on the numbers that are [Audio Gap] set out on the slide shown for each resolution, and I'll provide details of the percentage for the benefit of those listening to the meeting through the telephone line. As mentioned earlier, the final results of the poll on each resolution will be available on the ASX company announcement platform and on the Wesfarmers website later today. I'll now proceed with the formal business of the meeting. The notice of Annual General Meeting was distributed to shareholders on Friday, the 23rd of September, this year. And [Audio Gap] I'll take the notice as read. And we'll now proceed with the items of business as listed in the Notice of Meeting. Now for each item of business, we'll display the wording of the relevant resolution on the slides. And for those listening to the meeting on the telephone, please refer to your Notice of Meeting for the relevant wording. The first item is to receive and consider the financial statements and the reports of the directors and of the auditor for the year ended 30 June 2022 [Audio Gap] sitting over in the front row there was the lead audit partner for the company for the last year. And Trevor and his co-signing partner, Jemma Newton, who's sitting with him there, are here and available to answer questions on the audit and related matters. So I'll now invite shareholders to ask in person or submit online any questions regarding this resolution on the accounts. For those shareholders and proxy holders who are participating online, just a reminder, there's a short delay in the broadcast. So please follow the instructions that were outlined on the video earlier to ask your questions online. Now are there any questions on item 1? Ruth, you have one online, I believe.

Chairman, this is a question from [ Ms. Athena Pezoli ]. How much in dollars is it costing Wesfarmers to undertake its net-zero action? Is Wesfarmers painting itself into a corner to decarbon only to find demand for these initiatives drop off in the future?

Well, I think to answer your question in reverse, I think on the contrary, demand for these actions will increase, not drop off. There's a building move around the world in all countries to make sure that we reduce carbon emissions, and I think that is going to accelerate. As far as the cost is concerned, there are a couple of tangible costs that I can mention. If you've read the sustainability report, you would have seen, for example, that in CSBP, the Wesfarmers Chemicals, Energy & Fertilizers division to reduce 30% by 2030. And that's costing us about $8 million to $10 million a year. So that's something that there'd be no tangible return on. And that's through adding catalysts in the nitric acid plant. It will enable us to get our emissions down by another 30%, and they've outlined plans to go to net-zero by 2050, some of which rely on new technologies and so on, carbon capture and storage. As far as the retail operations are concerned, they have a plan to move to total renewables by 2025, and net-zero by 2030. And that's largely through things like putting solar panels on roofs of warehouses and buying renewable energy off the grid. The cost of this we see as an investment. And I don't have a figure for what that's costing today. It's an essential investment if we're going to continue to receive the support of customers and investors. And there's a real enthusiasm around the group moving down towards those targets. In the case of putting solar panels on roofs, it's much more effective than in a house, because your usage is mainly during the day when your customers and you are generating energy at the same time. And so those things have a relatively quick payback period and are a good investment financially. Are there any further questions? Microphone 8?

Mr. Chairman, microphone 8. May I introduce John Campbell, who is a proxy holder.

Chairman, I'm John Campbell representing Australian Shareholders' Association. We have proxies from 1,400-odd shareholders for about 3 million shares. The results for 2022 didn't quite match those for 2021. But on the other hand, we feel that we should congratulate Board and management on achieving the results in the conditions that you've described as disruptive and very difficult. We really don't have any questions directly on the accounts, but I'd like to congratulate Wesfarmers too on winning the Gold Award from the Australian Reporting Awards, not only the Gold Award for an excellent annual report, but also the best in your industry category, which was pretty wide. I think it included a number of things. So I think I want to congratulate your accounting team particularly and Wesfarmers generally on that achievement. And I'm sure that this year's annual report probably [Audio Gap].

It does mean a lot to us to gain the endorsement of the Australian Shareholders' Association. Are there any other questions on the accounts? Okay. Well, if there are no further questions, I'll now move to the next item of business.

[Audio Gap] themselves for reelection today. Now displayed on the screen is the position in relation to direct votes and proxies received on the reelection of each director prior to any revocations that may have occurred during the meeting. For the benefit of those listening on the phone, there are 96% of the votes in favor of Jennifer's reelection, 98% in favor of Mike's reelection and 94% in favor of Sharon's reelection. The first director to speak today is Jennifer Westacott. Thank you, Jennifer.

Well, thank you, Mr. Chairman, and good afternoon, everyone. Thank you for the great opportunity and privilege to stand again to represent your interest on the Wesfarmers Board. This continues to be one of the most successful and admired companies in Australia, demonstrating its resilience during challenging times and going from strength to strength. A company that is able to grow with the time, servicing its customers, strengthening the communities it operates in, and increasing its value to shareholders. I occupy a number of roles that I believe bring enormous benefit to Wesfarmers. The first is as the Chief Executive of the Business Council of Australia. This role gives me unparalleled access to Australian and international companies and a deep understanding of the trends and issues they face, including supply chain blockages, labor shortages, the crucial role of decarbonization of our economy, skills deficits, and the need for greater investment to drive innovation and productivity. My BCA role also gives me a strong working relationship with federal and state government and regulators. This means I have an unprecedented and unique insight into the regulatory and policy issues that will impact on Wesfarmers. As a Board member of the Cybersecurity Cooperative Research Center, I have a front row seat to the latest developments surrounding cybersecurity attacks and the responses of companies. This will be one of the central issues confronting companies here and around the world, and all companies will need to take action to strengthen their cyber resilience. I will continue to bring those insights to Wesfarmers. And as Chair of the Western Parkland City Authority, I am overseeing the reinvention of Western Sydney and New South Wales with the building of a world-class aerotropolis and the world's most modern city. In this role, I am working with some of the world's biggest companies and most innovative companies in areas such as digital, new technologies and industries, energy transformation, and the huge innovation in supply chain and logistics. These are insights that will help Wesfarmers as it focuses on the future. So in summary, I seek reelection to serve you. I will continue to apply my insights and my broad experience to improve value for your investment and improve your returns. I am committed to meeting your needs and to the objective of delivering satisfactory returns to shareholders. I'm honored to serve your interests, and I'm so proud to be part of this great Australian company, which is revered for its ethics, its diversity, its commitment to the communities it operates in, its strong and lasting financial performance and discipline, its commitment to create value for shareholders and its commitment to strengthen our country. Thank you.

Well, thank you, Jennifer. I invite shareholders to ask any questions regarding this resolution. Thank you very much. Well, as there are no questions, I'll now introduce Mike Roche.

Good afternoon, ladies and gentlemen. It's a great privilege actually to stand before you, and I want to give you a little bit of insight into myself and what contribution I can continue to make to the Wesfarmers Board. As you know, I've been on the Board a little over 3 years, and I'm Chairman of the Remuneration Committee. That's since 2019. I thoroughly enjoyed the experience and it has confirmed my going-in expectation, that is that Wesfarmers is [Audio Gap], and I'm proud to be a small part of it. What I like about being part of the Wesfarmers Board are 3 things that I can single out. The first, and the Chairman and Rob have both mentioned this, is it thinks and acts long term. I think this is very important as it's very, very easy to get caught up in short-term factors, which there are many, but one has to be conscious of what the long-term impact is. I believe this is part of my DNA. I grew up on a farm in regional Australia, and I think one thing you learn from that is you have to think about the longer-term consequences of decisions that you make. So I think that stands me in good stead in alignment with Wesfarmers. The second factor is that Wesfarmers cares about how things are achieved and what the broader impact is. It is concerned about the community in which it operates, not only the people, but the impact on the environment. Wesfarmers cares deeply about its staff, its customers, its suppliers, the broader community. And these are not just words. What I've seen is it behaves this way as evidenced by its willingness to pay staff during COVID, support of communities in flood zones, et cetera. This action has demonstrated this in spades. And as I've gotten older, I've appreciated how important this is and how you go about it and what you stand for. It's very consistent with my values. My wife, Geraldine, and I established Sally Foundation 10 years ago, and we are heavily involved in communities and trying to make their lives better. The third aspect is Wesfarmers is very disciplined about shareholders' funds, that is your money. And I like this. You may recall my background. I have a science degree, but I'm also a qualified actuary. And if you happen to know what they do, you'll know that they think and are required to think about the long term. That's the job of the actuary, really. And I worked for 10 years as an actuary. And I started in the mid-70s, which, as you might know, there was a little recession in the mid-70s. And I've been through quite a lot of cycles. And I think this stands me in good stead to contribute to Wesfarmers as we go through future cycles. We might even be entering one at the moment, who knows? So during my time on the Board, I led a review of the remuneration plans at Wesfarmers, which we announced the outcome of that in 2020. I've also been actively involved in portfolio decisions that the company has made. A couple of these that have been mentioned today, the lithium acquisition, API more recently. And I want to mention one other thing. I spent over 25 years at one of the global investment banks, largely giving independent advice on capital, portfolio, construction, et cetera. So I believe I bring a combination of commercial acumen, experience in divestments and acquisitions, and a long-term focus for situations, coupled with independent thought. But over the years, I've learnt that one needs to be part of a team, and this is what creates real value: be an independent thinker, but be collegiate in how you operate. And I have to say that my observation is that both the management team and the Board at Wesfarmers are such a team. And I'd like to continue to be part of that and contribute to it going forward. So hopefully with your support, I can continue to make a contribution to Wesfarmers going forward. Thank you very much.

Thank you, Mike. Well, I invite shareholders to ask any questions regarding this resolution. So I gather there are no questions. And I'll now introduce Sharon Warburton, who also joined the Board in 2019. Thank you, Sharon.

Thank you, Chairman, and good afternoon, ladies and gentlemen. It certainly does not feel to me like 3 years since I last addressed you. So time is certainly flying by. I consider it both an honor and a privilege to have the opportunity to serve Wesfarmers shareholders as a member of the Board and to have the important role of chairing the committee that oversees key governance requirements for this great company. These are significant responsibilities, and with your support today, they are duties to which I will continue to bring my dedication, my experience and my expertise. Through my role on the Audit and Risk Committee, I maintain a particular focus on areas such as team member safety, mental health, cybersecurity, data protection, and ethical sourcing. While the ever-changing nature of our external environment means that work on many of these matters will never be complete, they are passions of mine and topics that I know are of great importance to many shareholders. In undertaking my role, I draw on my formal accounting and governance qualifications, together with my professional experience. I am a fellow of the Institute of Chartered Accountants, Australia and New Zealand and a fellow of the Australian Institute of Company Directors. And following executive roles in finance, risk and strategy, I have been a full-time company director for more than 9 years, including as Committee Chairman for most of that time. The diversity of my Board portfolio enables me to bring experience to the Wesfarmers Board room from across a range of sectors, including chemicals, mining and mining services, engineering, health, property and major project construction as well as experiences of indigenous culture and heritage that I have gained through my work with one of Australia's largest registered native title Indigenous Body Corporates. This is an outstanding Board of Directors, and I am really privileged to be part of it. I am and will continue to be team focused while bringing my independent thoughts to the table. Today, I ask for your support for another 3-year term on the Wesfarmers Board. Thank you very much.

Well, thank you, Sharon, and I invite shareholders to ask any questions regarding this resolution. Okay. If there are no questions, I'll ask that you vote on resolutions 2A to 2C. Each of these resolutions, of course, is independent and should be voted on separately. Shareholders who are voting in person should place a mark in the for, against or abstain box for each of the resolutions on your green voting cards. And similarly, proxy holders voting in person who've been given open votes should place a mark in the appropriate box on your blue voting card to indicate whether you're voting the open votes for, against or abstaining. Shareholders who've already voted have received a yellow card. Now if you need any assistance in completing your voting card, please raise your hand, and a Computershare staff member will help you. Shareholders and proxy holders who voted online should follow the instructions that we've already provided. The user guide is available on the voting platform as well as on the Wesfarmers website. So if you need any assistance, please call Lumi on the numbers shown on the slide. Item 3 relates to the company's remuneration report for the year ended 30 June 22. Displayed on the screen is the position in relation to direct votes and proxies received on this resolution prior to any revocations that may have occurred during the meeting. And for the benefit of those listening on the phone, there are 96% of votes in favor the resolution. The remuneration report provides information regarding the remuneration of our directors and those senior executives who are considered to be key management personnel of the group. And you can find that on Page 98 of the company's annual report. The Board remains committed to an executive remuneration framework underpinned by our guiding remuneration principles that is focused on driving leadership and behaviors to deliver satisfactory returns to our shareholders over the long term. The total remuneration of our senior executives is set at levels which reflect the executive's contribution, competencies and capabilities and at a level that enables Wesfarmers to attract and retain the best people. The remuneration report in our annual report, including the covering letter from the Chair, Mike Roche, provides a detailed explanation of the remuneration outcomes for the 2022 year. So I'm not going to -- remuneration report continues to address, I think, the desire for greater transparency regarding our variable remuneration, in particular, with the descriptions of the outcomes of the group ecosystem perform measure for our senior executives.

Now I invite shareholders to ask any questions regarding the remuneration report resolution. I think we have a question on microphone 8.

Mr. Chairman, may I introduce John Campbell, who is a proxy holder?

Mr. Campbell?

Wesfarmers remuneration plan will face our 3 million open votes in favor of the report. But I wanted to mention take-home pay, and I think you'd probably be disappointed if I didn't. The continuing debate -- we support the disclosure of take-home pay because it is simpler and easier for retail shareholders to understand. And by comparison, the statutory disclosure in the annual report is quite -- and I just want to ask really is any likelihood of a solution to this dilemma that we have, it'd be nice to see some...

[Audio Gap] let the ASA raises with us each year. And our position has been that while there's no standard for reporting take-home pay, it can be quite [Audio Gap] the statutory remuneration table is of no use at all really. I mean if you look at it this year, it says Rob Scott's income went up. Well, it's all a function of the amortization or the portioning of long-term incentive plans each year and often has very little to do with actual remuneration received. You can actually work it out by looking at the annual report and saying, well, the fixed remuneration was so much. And during the year, for example, in this year, the 2018 key program, the long-term incentive program vested to these proportions and so on. The problem is, in reporting take-home pay, when I actually modeled it. I found that in a way it goes like this with the results because often take-home pay -- long-term take home incentives can vest in a year when the whole market is down, and it looks like the company didn't have a good year, but everyone got paid more. And so you get this out-of-sync timing and the -- for example, the vesting of the 2018 long-term incentive occurs this year and as reported and if you did it in take-home pay this year when that actually relates to the last 4 years' performance and has nothing at all to do with this year's performance of the company. So that's why we don't do it. And I think if you ask me what the solution is, so solution may be that people in government mandate some sort of formula and then one could stick with it, knowing that everyone is doing the same. But I'm afraid, based on what I've seen to date, it would be just as hopeless as the statutory table is. There's a question at microphone 2.

Thanks. Mr. Chairman. Microphone 2, may I introduce David Wood, who is a shareholder?

Thank you, Mr. Chairman. I apologize for any lack of eloquence, but I have some concerns in the recent rise in the U.S. with the increasing disparity between the haves and haves-not. Wesfarmers is part of corporate Australia and corporate Australia is sort of getting a bit out of hand, I think, in respect to the young people in housing, they can't afford it these days because people with the money have just gone in and paid big buck, $16 million, $20 million. It pushes the housing prices up. But you just mentioned the basis of remuneration. Just out of a thought. One is the pension as the base and then multiples of the pension for each level of employee and team leader and CEO, and then you've got a solid base and people know what's happening and put a cap of maybe 100x the pension so that everything is equitable.

Well, thanks for your question, Mr. Wood. It's a very important issue. And I'm sure in the community, there are many people who would share your views on this. The bottom line really is that in attracting and retaining people to the company, we need to pay market rates. And this is the case all the way down through the company. If we take on an engineer in the energy chemical fertilizer division, we have to pay a package comparable to what they can get elsewhere. If we take on people leading a division, they need to be paid at a level comparable to what they get in other companies. And some of our divisional teams are leading a division that's as big, like Bunnings as most Australian large companies. And the simple fact is that if you don't pay remuneration that's comparable to what's paid elsewhere, you won't get the right people and you won't retain them. It's a particularly difficult issue in times of skill shortages, and we're finding it now, for example, in IT, in information technology, where there's this great leapfrogging going on where people are lured away and it's very hard to find them, and it takes a lot longer when you're recruiting them to find them, and so it is what it is. What we make sure we do is to benchmark, and so we want to make sure we're not paying more than we should be paying and that we are competitive and are able to attract people. So that's the best answer I can give you. It's -- the other part of it is we have operated in an international market. And there are times when a company need to attract someone from America or from England and to match the sort of salaries they're getting there or they simply won't come. I'm satisfied that our people and at the senior executive level who are paid very large amounts of money are paid in line with what is required and actually, given the company's performance, what they deserve.

Major shareholders in most global countries are fund managers, and their salary levels are benchmarked against the same benchmark that you guys are using. So they're not going to vote against any remuneration at all because [ they are taking a grand profit ].

Well, they do. I mean there are plenty companies who get a first strike and some who get a second strike. They don't get 25% in favor. Sorry, they get 25% against on this particular resolution. And I've experienced it, and that's because in a particular instance, they believe that the remuneration was out of kilter with the performance or they didn't like the structure of the remuneration package. The fact that we've had very high votes in favor, including from many retail investors, obviously, indicates, I think there's a broad understanding of the sense of our remuneration packages.

Just sort to the pension, which is the base, then the pensioners were get rise to compensate with you guys. Thank you.

Thank you. Are there any further questions on the remuneration report resolution? Okay. Thank you. If there are no further questions, I ask that you vote on resolution 3. And as we're now moving to the final item of business for the meeting, I will take this opportunity to remind those eligible to vote who have not yet cast their votes to do so. I'll be closing the poll shortly after the final item of business. So please ensure you cast your votes before that time. The next item on the agenda is Item 4, which relates to the grant of deferred shares and performance shares to the Managing Director. And this relates, of course, to the comments that I just made in response to Mr. Wood's question. Displayed on the screen is the position in relation to direct votes and proxies received on the resolution and prior to any revocations. For the sake of those who are on the phone, there are 96% of votes cast in favor of this resolution. The Board believes it's in the interest of shareholders to provide the Group Managing Director within -- with equity-based incentives to ensure that the management is aligned with shareholders in terms of long-term returns. And approval is now sought for the grant of deferred shares and performance shares to the Group Managing Director, Mr. Robert Scott, under the 2022 key executive performance plan on terms set out in the explanatory memorandum and notes to the meeting of the notice of meeting, and I invite shareholders to ask any questions they may have in regard to this resolution. There's an online question. Thank you.

Thank you, Chairman. Shareholder, Mr. Alexander Tandy, has asked, can the group Managing Director explain why he should be granted to keep deferred and performance shares. Surely, the group Managing Director should do the job to the best of his ability without any additional incentive.

Well, thanks, Mr. Tandy. In almost all companies now, Boards have determined that paying somebody a straight cash salary is not a good idea because then they've got no incentive to perform. And so what's happened around the country and in other countries is that executives received a fixed salary and then short -- and normally, short- and long-term incentive plans. And the short-term incentive is granted for performance over the year just gone; and the long term over a number of years depending on the performance of the company. We adopted what's quite a unique structure in Wesfarmers a few years ago, and we actually thought other companies would follow. They haven't. And it's very apparent now when we talk to institutional shareholders that they're very supportive of the very plan we've got. One of its features is that in the -- instead of having a short-term cash incentive and a long-term share incentive, Managing Director and the Chief Financial Officer only get shares in the incentive plan, and they deferred so that the performance tested shares based in 4 years if the company performs well and the shareholders do well and the time-tested element based in 4, 5 and 6 years. So it's a very long-dated plan because we're trying to focus people on the long term. And the main measure of performance in these plans for the CEO and the CFO is what's called relative total shareholder return. Quite simply, if the shareholders do well over 4 years, the executives do well. And I think that's the most sensible way to structure it. If we just gave cash, I don't think the executives will be nearly as focused on long-term shareholder returns, the share price, the dividends and so on. So there's a very strong alignment between executives and shareholders. Are there any further questions? Apparently not. So we'll move on and ask you to vote on resolution 4.

Now that now concludes the formal business of the meeting, and I will close the poll in a moment. If you're eligible to vote and you haven't yet cast your vote, please do so. And for those in the room, complete your voting cards and hand them into the Computershare staff who will be walking around with -- who are actually at the back, I think, with boxes. Computershare staff, they're going to walk down the aisles now. So you'll be able to go out and put your voting papers in there. We'll just pause for a moment while people return their voting cards. [Voting]

Are there any shareholders who have yet to return their voting cards? So if not, I will now close the poll. And shortly, we'll move to general questions prior to inviting you to raise matters for general discussion in a moment. But we have a great turnout today, which means we have a lot of shareholders who I know like to ask questions about our business. And for those shareholders and proxy who are in the room, representatives, as I said, from our divisions are here, and you can go out and ask operational sort of questions at their respective booths outside. So rather than raise any customer issues at this meeting, it'd be better to do that. We've also got an information desk there where you can ask staff members any questions about your shareholding or things like that for about an hour after the meeting. So please note that afternoon tea we served at the conclusion of the meeting. And then there's some absolutely fabulous entertainment from some young opera singers that Wesfarmers support.

So I now invite any general questions. Number two.

Mr. Chairman, mic number two, may introduce David Wood, who is a shareholder?

Mr. Chairman, you're talking about -- or Rob was talking about land here producing lithium and so forth. Has Wesfarmers thought anything about the end product, the EVs that are past their used by date. Can that -- those battery materials and what Wesfarmers supply be reconstituted?

I think of course, you'll find a lot of those rarest -- well, elements and lithium in batteries will be recycled. Of course, the industry is pretty young at the moment. And I own an electric car, and the battery is hardly any different to what it was 6 years ago when I bought it. So it's an industry, I think, that will grow as more and more people have electric batteries, electric car batteries that reach their use-by date. And it's something we may well evaluate as we go forward.

I believe, in Europe, they're walking away from their cars because the batteries cost more than the new car does. So they're just left there.

Yes, I don't think that's the case. As an owner of electric car, I think if my battery's life comes to an end, it will cost me about 11% of the cost of the car to replace. Any other questions? Number eight?

Mr. Chairman, may I introduce John Campbell, who is a proxy holder.

Sure.

2 questions, Mr. Chairman. One on API. I think you answered the first part of my question, which was to confirm that the trading results were up to your expectations to date. But the second question would be how -- whether you intend to change the format of the price line type stores and whether that's part of the changes you see in the health division.

Well, our immediate task actually is to make sure that all of the things we assume in the Wesfarmers business apply in the API business, and that's policies and procedures and salaries, wages, systems and so on. And beyond that, we've got plans to expand the business, including in the Priceline franchise. It wouldn't be wise for us to talk about specifics in that regard because it is a pretty competitive market out there. But it's something that we are very focused on.

Second question then on lithium. I think Mr. Scott indicated that you are likely to reach commercial production in the second quarter of the 2024 financial year. And I'm just interested to know how long you think it would take to ramp up from that to full nameplate production for the plant.

Well, yes, we do expect currently to complete the plant and have first production out in 2024, and that's the plant at Kwinana. Prior to that, we'll be producing spodumene concentrate out of the mine at Mt Holland, and there's an opportunity for us to sell some of that concentrate before we need it in the processing plant to turn it into lithium hydroxide. As far as the ramp-up goes from first production -- bob, do you want to say something about that?