2006 Half Year Results Analyst Presentation – 24 May 2006.

2006 Half Year Results Analyst Presentation – 24 May 2006

2

Content

• Half year review and highlights (Brendan Stewart)

• Financial performance (Paul Ingleby)

• Strategy & outlook (Brendan Stewart)

3

Half year review and highlightsBrendan Stewart

Executive Chairman, AWB Limited

4

Underlying profit & dividend maintained

Financial result – half year ended 31 March ($m)

2005 2006 Change (%)

Underlying PBTA 81.6 85.6 5

Underlying NPAT 63.3 60.3 (3.0)

Reported NPAT 105.1 46.0 (59.1)

Dividend (cents per share) 16 16 0

0

50

100

150

200

2002 2003 2004 2005 2006

Und

erly

ing

PB

TA

($m

)

05

1015

2025

30

Pro

duct

ion

tonn

es (

m)

Underlying PBTA ($m) 2nd Half

Underlying PBTA ($m) 1st Half

Production (million tonnes)

5

Business Strategy

• Growing our core business– Strong out-performance from 2004/05 Pool

– 20% increase in Landmark loan book to $1.64 billion

– Record deliveries into Grain Centres

• Diversifying our business– AWB Geneva, AWB India and AWB Brazil

– ‘Rural Trust’ funding vehicle

– Strengthened fertiliser position

– Joint venture and strategic Dairy Alliance with Fonterra

6

Financial Performance - Business Streams

Paul Ingleby

Chief Operating Officer / Chief Financial Officer, AWB Limited

7

Statement of financial performance AWB Group Summary

($m)

Half Year Ended 31 March

2005 2006

Revenue 2622.6 2623.4

EBITDA 117.0 112.1

Depreciation & amortisation (26.2) (21.8)

EBIT 90.8 90.3

Interest (14.2) (9.7)

PBT 76.6 80.6

Tax (13.1) (20.3)

Outside equity interest (0.2) (0.0)

Underlying NPAT 63.3 60.3

EPS (¢) 18.5 17.4

Significant items after tax 41.8 (14.3)

Reported NPAT 105.1 46.0

EPS (¢) 30.6 13.3

Underlying PBTA:

Underlying PBT 76.6 80.6

Add back: Amortisation (goodwill & software) 5.0 5.0

Underlying PBTA 81.6 85.6

8

0

20

40

60

80

100

120

March 2005EBIT

PoolManagement

Services

GrainAcquisition &

Trading

Supply Chain& Other

Investments

Finance &Risk

ManagementProducts

Landmark CorporateItems

March 2006EBIT

EBIT summary

90.8

4.3 1.3 5.9

0.9

7.7

90.3 8.4

9

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2003 2004 2005 2006

2H

1H

Pool Management Services

• Pool Management Services contributed an EBIT of $19.8 million for the half, a 74% uplift on the pcp.

• Revenue growth of 14% over the pcp was due to strong out-performance result achieved for the 2004/05 Pool. Final 20% of the 2004/05 out-performance incentive brought to account this half.

• 2004/05 Pool finalised in May 2006 – total base fee was $65.1 million. 45% of base fee for 2005/06 Pool received this half, providing revenue of $30 million.

• Costs allocated to Pool Management Services comparable to the pcp.

Half Year Ended 31 March ($m)

2005 2006 Change

Revenue 42.2 51.0 21%

EBITDA 11.4 19.8 74%

Depreciation and amortisation 0.0 0.0 0%

EBIT 11.4 19.8 74%

EBITDA – Pool Management Services

EB

ITD

A $

m

10

0.0

20.0

40.0

60.0

80.0

100.0

120.0

2003 2004 2005 2006

2H

1H

Grain Acquisition & Trading

• Grain Acquisition & Trading contributed EBIT of $34.5 million, 4% up on the pcp.

• AWB’s international trading activities continued to provide strong earnings for the Group.

• Chartering continued to perform strongly in a less volatile freight market.

• Restrained local trading conditions in a lower priced environment reduced the contribution from domestic operations.

Half Year Ended 31 March ($m)

2005 2006 Change

Revenue 1,272.9 1,114.3 -12%

EBITDA 34.2 35.0 2%

Depreciation and amortisation (1.0) (0.5) 48%

EBIT 33.2 34.5 4%

EBITDA – Grain Acquisition & Trading

EB

ITD

A $

m

11

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2003 2004 2005 2006

2H

1H

Supply Chain & Other Investments

• Supply Chain & Other Investments contributed $3.1 million for the period, significantly higher than the $1.2 million expense in the pcp.

• Grain Centre receivals were at record levels, with 1.9 million tonnes delivered during 2004/05 harvest, up 46% on the pcp.

• Melbourne Port Terminal’s (MPT) overall contribution reduced on the pcp, while overseas investments remained steady.

• MPT experienced lower throughput volumes due to decreased 2004/05 crop size and slow early shipping program for 2005/06 crop.

Half Year Ended 31 March ($m)

2005 2006 Change

Revenue 46.4 48.3 4%

EBITDA 4.0 8.3 107%

Depreciation and amortisation (5.2) (5.2) 0%

EBIT (1.2) 3.1 362%

EBITDA – Supply Chain & Other Investments

EB

ITD

A $

m

12

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2003 2004 2005 2006

2H

1H

Finance & Risk Management Products

• $14.1 million EBIT contribution from Finance & Risk Management Products, compared with $21.8 million in the pcp.

• Contribution from Harvest Finance increased 4% on pcp due to higher levels of wheat production and improved portfolio management.

• Harvest Finance loan book peaked at $1.3 billion, up 18% on the pcp.

• Lower than forecast earnings from OTC desk in Portland, USA, was main contributor to reduced result this half.

• Risk Assist performed strongly.

Half Year Ended 31 March ($m)

2005 2006 Change

Revenue 462.8 610.7 32%

EBITDA 21.8 14.1 -35%

Depreciation and amortisation 0.0 0.0 0%

EBIT 21.8 14.1 -35%

EBITDA – Finance & Risk Management Products

EB

ITD

A $

m

13

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

2003 2004 2005 2006

2H

1H

Landmark

• Landmark EBIT down by $5.9 million on pcp to $28.6 million.– Other income in pcp included one-off items (approximately $5 million) such as sale and leaseback of

motor vehicles.– Enhanced staff levels in targeted growth activities and through acquisition and integration activities.

• Merchandise and fertiliser sales increased by 5% on the pcp.

• Livestock profitability marginally down on pcp.

• Real Estate profitability down on the pcp.

• Strong result from Wool – profitability up 24%.

• Finance gross profit increased by 25%.

• Insurance increases Gross Written Premiums by 10%.

• Investments – decreased contribution with Hi-Fert operational losses in first quarter.

Half Year Ended 31 March ($m)

2005 2006 Change

Revenue 710.7 778.0 9%

EBITDA 42.6 33.2 -22%

Depreciation and amortisation (8.1) (4.6) 43%

EBIT 34.5 28.6 -17%

EBITDA – Landmark

EB

ITD

A $

m

14

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

2003 2004 2005 20062H

1H

Corporate Items

• Corporate division contributed an EBIT expense of $9.8 million, compared with $8.9 million in the pcp.

• Result is consistent with the pcp; lower overheads offset by lower miscellaneous revenue items.

• Result excludes costs associated with Cole inquiry which are included in significant items.

• Depreciation and amortisation includes amortisation of software associated with acquisition of Landmark of $5.0 million (pcp: $5.0 million)

Half Year Ended 31 March ($m)

2005 2006 Change

Revenue 87.6 20.5 -77%

EBITDA 3.0 1.7 0%

Depreciation and amortisation (12.0) (11.5) 4%

EBIT (8.9) (9.8) -10%

EBITDA – Corporate Items

EB

ITD

A $

m

15

Financial Performance – AWB Group

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Statement of financial position   30 September 31 March

($m) 2005 2006

Cash 54.2 34.8

Working Capital Items 625.2 768.1

Landmark Lending (incl Rural Trust) 0.0 1,626.9

Grower Loan Receivables 410.9 813.8

Advanced & Deferred Payment Products 167.0 445.9

Finance Options 577.9 2,886.6

Investments & Available for Sale Assets 69.5 102.2

Intangible Assets 566.0 562.4

Property, Plant, and Equipment 202.6 195.9

Short Term Deposits 393.2 264.5

Interest Bearing Deposits (Landmark) (535.4) (505.0)

Deposits - AWB National Pools (565.9) (672.5)

Bank Loans (257.3) (2,474.0)

Net Debt (965.4) (3,387.0)

Net Assets 1,130.0 1,163.0

Shareholders' Equity 1,130.0 1,163.0

17

Cashflow Half Year Ended 31 March ($m) 2005 2006

Profit before tax 131.8 61.3

Add: depreciation & amortisation 26.2 21.8

Less: profit on sale of n/c assets (58.4) (1.3)

Add: other non-cash items 8.4 14.1

  108.0 95.9

Increase in working capital balances (313.2) (142.9)

Finance options (184.8) (708.9)

Income taxes paid (net) (42.9) (21.4)

Cash flows from operating activities (432.9) (777.3)

Payments for pp&e (net) (0.1) (5.5)

Proceeds from / (purchases of) investments (net) 151.7 (10.0)

Payments for intangible assets (net) (1.5) (11.3)

Purchase of loan book 0.0 (1,599.8)

Proceeds / (placements) of short term deposits (50.0) 128.8

Cash flows from investing activities 100.1 (1,497.8)

Proceeds from issues of shares 8.3 8.0

Net increase in interest bearing liabilities 350.1 2,292.8

Dividends paid (38.0) (45.1)

Cash flows from financing activities 320.4 2,255.7

Net increase / (decrease) in cash held (12.4) (19.4)

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Capital expenditure & Intangibles

*excludes goodwill and software amortisation

($m) Half Year Ended 31 March Change

  2005 2006 %

PP&E:

Grain Centres construction 5.0 2.4 -52

System development & other property, plant & equipment 17.4 6.9 -60

New building costs 0.0 0.0 0

Total 22.4 9.3 -58.5

Intangibles:

Software development 1.5 2.2 47

Other Intangibles 0.0 9.1 n/a

Total 1.5 11.3 653.3

Depreciation and amortisation * (26.2) (21.8) -16.8

19

Strategy & OutlookBrendan Stewart

Executive Chairman, AWB Limited

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Strategy

• AWB’s strategy is to be Australia’s leading agribusiness through becoming the ‘business partner of choice’ for primary producers and end customers.

• Execution of this vision will enable AWB to deliver its financial objective of:» Strengthening core business.» Growing and diversifying to improve the quality of earnings and

reducing the share of ‘Pool’ based earnings.

• In the medium term, AWB expects to be less reliant on Pool and Pool related earnings.

• AWB will achieve its financial objectives by working towards growth in the following three segments:

1) Commodity Management

2) Financial Services

3) Rural Services

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Commodity Management

How will we achieve our financial objectives?

Diversification into select profitable segments (eg other origin grains) and niche assets.

Expansion and diversification of the international trading network.

What we’ve delivered in the first half…

Grain Centre receivals at record levels, 1.9 million tonnes received during the 2005/06 winter crop, up 0.6 million tonnes on 2004/05.

AWB’s International Trading business remains a strong contributor, led by AWB (Geneva), and more recently India.

Outlook…

AWB’s forecast for domestic wheat production for 2006/07 is 23 to 25 million tonnes.

World wheat production forecast to reach 600 million tonnes for 2006/07, 3% lower than previous year.

Global ending stocks for 2006/07 season projected to be lowest in 25 years, based on lower world production.

World wheat consumption forecast to fall 2% despite expected increased demand from India.

International activities continue to provide strong revenue platform.

22

Expanding AWB’s international presence

• AWB (Geneva) remains a strong revenue platform for the AWB Group.

• AWB (India), established in 2005, is on track to deliver a strong profit contribution in 2006 and is well positioned for further growth.

• AWB (Brazil) is expected to be operational by June 2006.– Brazil is an emerging agricultural market and has a dominant position

across many commodities.

– AWB (Brazil) will trade local and export markets and will compliment AWB’s operations in Geneva and India.

23

Financial Services

How will we achieve our financial objectives?

Growing the lending and insurance business.

Moving into selected new financial products and services.

What we’ve delivered in the first half…

Rabobank’s $1.58 billion ‘Landmark managed’ loan book purchased.

‘Rural Trust’ funding vehicle implemented.

New range of Landmark lending products launched – strong demand seen.

Landmark lending book grew over 28% on pcp to $1.6 billion.

AWB harvest finance loan book peaked at $1.3 billion, up 18% on the pcp.

Outlook…

Strong competition exists in both the finance and insurance industries across rural Australia. Despite this, growth has been strong and is expected to continue for the remainder of 2006.

‘Rural Trust’ loan book experiencing solid growth – attributed to the success of recently launched lending solutions and the knowledge and expertise held by specialised staff.

24

Rural Services

How will we achieve our financial objectives?

Optimising network operations.

Growing merchandise, fertiliser and real estate.

Retaining market share and managing profitability in livestock and wool.

What we’ve delivered in the first half…

Landmark strengthened its fertiliser position, following ELF Australia acquisition of BHP Billiton’s 33% shareholding in Hi-Fert.

Landmark successfully completed a fertiliser supply agreement with Incitec Pivot.

Landmark’s urban growth strategy delivered results, with an increased presence in Western Australia.

Outlook…

Cattle prices modestly weaker over coming months due to strengthening AUD. Strong lamb prices expected to continue throughout 2006.

Australian beef exports continue to benefit from absence of US and Canadian exporters in traditional markets.

Merchandise and Fertiliser business looks positive with improved margins expected in second half of 2006.

Rural property market expected to remain flat with slight downturn.

Wool prices expected to continue decline - lack of global demand.

25

Landmark Fonterra Joint Venture

Joint Venture with a global dairy leader providing further geographical earnings to the Landmark base

Landmark investment of NZ$35-$45m

EPS positive year 1

Timely entry into the NZ market with strong platform for future growth

Strengthens Landmarks dairy profile and capability in Australia

Furthers Landmark’s commitment to maintaining its leading position in Australian rural services and follows on from the successful Hi-Fert fertiliser and Growmart (horticulture) investments.

Joint Venture

AustraliaNZ

• 50% investment in RD1

• Business well positioned for growth through introduction of agency services being livestock, real estate, financial services, insurance and real estate

• Exclusive Dairy Alliance

• Landmark to leverage Fonterra expertise in growing dairy market share

• Through Landmark stores Fonterra to promote its regional profile

• Fonterra has 2,000 Australian milk suppliers

• 100% owned rural services subsidiary

• National network of 51 stores• 360 staff• $NZ 400m in annual revenue • Key customer interface for wider

Fonterra Group in NZ

26

AWB Group profit - 2006

• As stated at February AGM, forecast for 2006 underlying PBTA similar to 2005 underlying PBTA, subject to normal seasonal and operating conditions

• As previously indicated, reported earnings to be impacted by following significant items:

• Hi-Fert acquisition benefit• Costs associated with the Cole inquiry• Redundancies and restructuring• A-IFRS transition adjustments

27

Looking forward

Stabilise GrowRestore

January 2006 Next 6 – 24 months 24 months onwards

Questions

29

Additional Information

30

IFRS update

31

A-IFRS impact

• The half-year ended 31 March 2006 is AWB’s first A-IFRS compliant reporting period.

• Prior comparative period data has been restated with the exception of financial instruments (AASBs 132 and 139)

• Major impacts:– Goodwill amortisation was replaced by impairment testing. The written

down value of goodwill as at 30 September 2004 remains on balance sheet

– Grain centre carrying value was reduced on transition with reduced depreciation from 2005 onwards

– Expense share based payments

– Grain trading inventory at fair value

– Full profit and loss for all derivatives with a 2006 opening equity adjustment given no restatement of comparatives for financial instruments

– Tax impacts largely confined to balance sheet, exception is the tax effect of reduced depreciation

32

A-IFRS Analysis – High ImpactAASB Ref Description Impact

AASB 1 First Time adoption – elections available

Grain centre plant and equipment at fair value (see also AASB 136). Use of discounted expected future cash flows from grain centre assets resulted in recognition of a lower carrying value with a consequent lower depreciation expense.

No AASB 139 comparatives.No AASB 3 re-opening of business combinationsNo AASB 121 transfer of cumulative translation differences to opening retained earnings.

AASB 2 Expensing share based payments Fair value of executive performance rights with 4 year amortisation period. Other schemes expensed as incurred except loans. Loan schemes recognised as a financial asset – amortised cost using effective interest.

AASB 136 Goodwill impairment testing 30 September 2004 carrying value supported by impairment testing at 31 March 2005. 2005 amortisation entries have been reversed for A-IFRS comparatives.

AASB 139 Grain Acquisition and Trading Financial Instruments

No hedge accounting sought given onerous documentation and transaction matching requirements. All trading activities recognised at fair value with gains and losses recognised in P&L.

AASB 102 Inventories Full P&L for trading businesses as inventory standard is not applicable to commodity traders (fair value less costs to sell permitted). Landmark inventory remains lower of cost or net realisable value.

AASB 139 Available for Sale Financial Assets

Investments and memberships previously recognised at cost are now recognised at fair value with gains and losses recognised in reserves (no P&L impact).

33

A-IFRS March 2005 High Impact ($)

March 2005

Impact $'000

Share Based Payments Negative

Increase in operating expenses 2,098

Reduction in opening equity 226

Increase in equity reserves 2,324

Fair value of grain trading inventory Positive

Increase in revenue 1,318

Increase in inventory 1,318

Business Combinations Positive

Reduction in operating expenses 13,595

Increase in intangible assets 13,595

Property, Plant and Equipment Negative

Reduction in P, P&E 30,658

Reduction in opening equity 30,658

Reduction in depreciation expense 1,363

34

A-IFRS Financial Instruments Impact

1 October 2005

Impact $'000

Recognise derivatives at fair value Positive

Increase in financial assets 30,824

Increase in deferred tax liability 8,429

Increase in equity 22,395

Fair value of A-GAAP hedges Negative

Decrease in financial assets 13,220

Reduction in deferred tax liability 3,966

Reduction in equity 9,254

N-C financial assets reclassified Positive

Increase in available for sale assets 8,453

Reduction in non-current financial assets 4,230

Increase in deferred tax liability 1,267

Increase in equity (reserves) 2,956

For more information contact:

Delphine Cassidy

Head of Investor Relations

Ph: +61 3 9209 2404

Email: [email protected]

www.awb.com.au