Annual Industry Seminar 29 November 2012 Hilton On The Park East Melbourne
The Outlook For The Below Ground Industries: 2013 & Beyond Phil Ruthven, Chairman
WHERE KNOWLEDGE IS POWER
Topics 1.
The Economic Scene
2.
Key Industries for DBYD
3.
Business Success
1. The Economic Scene
World GDP Growth Real growth (PPP), 1950-2013(F) 12
Purchasing Power Parity (PPP) terms
2009 2010 2011 2012 2013
10 8 6
-0.7% * 4.1% 3.7% 3.0% (F) 3.2% (F)
1950-1969 growth in US$ market terms
2
0 -2 *
-4
The world decline in 2009 was -2.0% when measured in $US market price terms
-6 -8
-10
IMF/OECD/Economist//IBISWorld: 10/10/12
2030
2025
2020
2015
2010
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
1945
-12
1940
Per cent
4
World’s 30 Largest Economies Argentina Netherlands Saudi Arabia Thailand S. Africa Egypt Pakistan Colombia Malaysia Nigeria
0.9% 0.9% 0.9% 0.8% 0.7% 0.6% 0.6% 0.6% 0.6% 0.5%
2012 (E) Purchasing Power Parity (PPP) terms
Rest of World (200 nations)
15.1%
18.8%
USA
2.2%
11th – 20th Nations 14.9%
Japan 3.8%
Mexico S. Korea Canada Spain Indonesia Turkey
2.1% 2.0% 1.7% 1.7% 1.5% 1.3%
Australia
1.2% 17th
Iran Taiwan Poland
1.2% 1.1% 1.0%
5.5%
World’s 228 nations
US$ 82.8 trillion IMF/IBISWorld 23/08/12
Economic Growth: 2013(F) 20 Largest Economies (ppp ranking) China India Indonesia Brazil Turkey Russia S Korea Mexico World Australia Taiwan Iran Poland Canada USA UK Japan Germany France Italy Spain
8.6 6.5 6.3 4.2 3.8 3.7 3.7 3.7 3.2 2.8 2.7 2.4
World Growth 2013(F), 3.2%
2.1 2.1 1.9 1.1 0.9 0.8 0.2 -0.9 -1.6
-2
-1
0
1
2
3
4
5
6
7
8
9
Economist/IBISWorld 09/11/12
10
The World’s Economic Regions In 2012 Share of World GDP (ppp basis)
Eastern Europe
W&C Europe
North America
4.0%
20.7%
Indian
22.5%
ME 5.5%
S-C
7.0%
Africa C&S
4.0%
Asia Pacific 29.7%
America 6.6%
2012 World GDP, $US 82.8 trillion IMF/IBISWorld 29/09/12
Asia, the place to be Australia has integrated its economy and society into Asia at large and China in particular. Asia is a mega-region consisting of the Asia Pacific and Indian sub-continent. It is the most powerful region (36% of world GDP) and the fastest growing (6-7% pa, almost double the global average).
Over 75% of our export of goods & services now go to Asia, less than 7% of our GDP is exposed to troubled nations, and two-thirds of our inbound tourists and immigrants come from Asia. And Asia dominates steel production (⅔), and manufacturing at large, which use our minerals.
Australian Index of Consumer Sentiment 2 months progressive to October 2012
135 130 125 120 115 110 105 100 95 90 85 80 75 70 65 60
Happy 65% of last 40 years 73% of last 20 years
Year commencing June
Source: Westpac-Melbourne Institute (IAESR), IBIS estimates 10/10/12
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
Recession Level
Australia’s Economic Growth Annual real GDP growth (%) progressed in quarters to
June 2012
(and forecast to September 2018)
9 Average long business cycle is 34 quarters (81/2 years)
8 7 6
Forecast
5
4 3 2 1 0 -1 -2
36 qtrs.
34 qtrs
34 qtrs
33 qtrs
38 qtrs
33 qtrs?
36 qtrs ?
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
-3
Years, ended June
Source: IBISWorld: 05/09/12
The Market Economy F2012 Capital Expenditure 28.0%
Govt. GBEs
CapEx GG
Company CapEx 2
Consumption Expenditure 72.0%
Household Consumption
1 Mainly on behalf of household 2 Incl. inventory change
Gross National Expenditure (GNE) $1468 billion (current prices) Source: ABS/IBISWorld 05/09/12
Consumption Expenditure Growth 4 qtr moving average to
Recessions do not occur from collapsing consumption expenditure (mainly households), but from capital expenditure which does go severely negative every 8.5 years.
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6
June 2012
Source: ABS: 5206-05 05/09/12
Capital Expenditure Growth 4 qtr moving average to
18 16 14 12 10 8 6 4 2 0 -2 -4 -6 -8 -10 -12
June 2012
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Recessions occur when GFCE falls more than 8%
Years, ended June Source: ABS5206-06 05/09/12
Productivity 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0
June 2012
New Age average 1.7% per annum
Smoothed via 3-year moving average
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
%
GDP per hours worked (3-year moving average) to
Source: ABS Cat NO 5206.0
IBISWorld 06/09/12
Australian Industries Productivity 5 year growth to F2012, % p.a (IGP / hour worked) Telecom/Media
5.3
Agriculture
4.0
Construction
2.3
Retail Trade
2.0
Prof & Tech Serv
1.9
Wholesale Trade
1.7
Health
1.6
Manufacturing
1.5
Finance & Ins
1.1
Arts & Recn
0.3 0.1
Transport Long term average is 1.7% pa, but 0.0% last 5 years
All Industries Education
0.0 0.0
Rental & Real Est
-0.1
Public Admin
-0.1
Other Services
-0.5
Admin & Support
-1.8 -3.1
Hospitality Utilities Mining Percent Growth
-8.5
-13.4
-14 -13 -12 -11 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1
0
1
2
3
4
5
6
Source: ABS 5204.25 10/09/12
Australia’s Industry Mix Shares of GDP in constant F2010 price terms Year to June 2012
Hospitality
Pers. & Other Serv. Cult & Rec. Serv. Agriculture
Mining
0.8% 2.3%
Utilities 2.1%
7.5%
7.8% Construction
Govt. Adm. 5.0% 2.3%
Finance & Insurance 3.1%
Admin. & Support Services
Rental, Hiring & Real Estate
Info Media & Communications
GDP $1363 billion (constant F2010 prices)
Sectors Primary Secondary Tertiary Quaternary Quinary
Note 1: includes stat. discrepancy (0.1%) ABS 5206-26 IBISWorld 06/08/12
Australian Industries Growth 12-months Growth to June 2012 (IGP @ F2010 prices), % p.a Health Agriculture Construction Prof & Tech Services Mining Finance & Ins Transport & Postal Public Admin & Safety Arts & Recreation Pers. & Other Services GDP Hospitality Dwelling O'Ship Retail Trade Education Rental, Real Est & Hiring Ind Taxes - subs. Info Media & Telecom Manufacturing Utilities Admin & Supp Serv Percent
6.4 5.8 4.6 4.5 4.5 4.4 3.6 3.6 3.5 3.2 3.4 2.7 2.7 2.6 2.6 2.5 0.9 -0.3
-0.9 -1.6 -2.0
-3
-2
-1
0
1
2
3
4
5
6
7
8
Source: IBISWorld 06/09/12
2. Key Industries for Dial Before You Dig
Construction
Australian Construction 260 240 220 200 180 160 140 120 100 80 60 40 20 0
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
Excludes special trades services, c.$60 billion
1980
$ billion (current prices)
Work Done to F2012, $ billion (current prices)
Year, ended June IBISWorld
The Australian Construction Industry By Activity F2012
Buildings 16.7% 60.0%
Dwellings
23.3%
Engineering Construction
Work Done
$197.1 billion (excludes special trades services, c.$60 billion)
Australia’s Construction Industry By State, year to June 2012 Residential
Building
(% of total Basis)
Engineering
100% 90%
22.8%
22.1%
80%
19.0%
NSW
10.2%
Victoria
29.1%
Qld
34.3%
WA
70%
25.3% 60%
34.8%
50%
21.2%
40% 30%
17.6%
20%
13.4%
10%
5.5%
17.5% 6.5%
4.2%
0%
$46 billion
$33 billion
$118 billion
SA Tas ACT NT
Source: AB 8752-13b & 8762-07
Australian Residential Construction
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 1980
$ billion (current prices)
Work Done to 2012, $ billion (current prices)
Year, ended December IBISWorld
Dwelling Completions: Australia Number of Completions: 1960-2012
240000 220000
Virtually no increase in over 2 decades, hence shortage
200000
180000 160000 140000
120000 100000
New House Size 1984-85 162 sq.m. 2004-05 228 sq.m
80000
60000 40000 20000
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
0
Year, ended June Source: ABS: 8752-07 25/11/12
Housing Construction By Type F2012
28.7% 55.6%
Work Done
$45.9 billion
Houses
Australian Building Construction (Non Residential) Work Done to 2012, $ billion (current prices) 60 Real Growth to F2017 forecast to be 3.3% pa
50
45 40 35
30 25 20 15 10
5 2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
0 1980
$ billion (current prices)
55
Year, ended December IBISWorld
Building Construction Non-residential By type of building F2012
Includes Wholesale premises
Other Ind 1.7%
Hotels 3.4%
16.3%
Shops
15.9% 2.9%
Education
Transport & Other Commercial
Work Completed
$33.2 billion Source: ABS 8752-36c
Australian Engineering Construction Work Done to F2012, $ billion (current prices) 160
120 100 80 60
40 20 2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
0 1980
$ billion (current prices)
140
Year, ended June IBISWorld
Engineering Construction By Type Of Work (Done) Oil & Gas Coal Bauxite/ Alum. Other Minerals
Year to June 2012 Roads Bridges Railways Harbours Pipelines
Other Recreation 1.1%
Other Heavy 0.9%
4
2.6%
29.9%
Mining & Other
15.8% 0.9% 7.6% 3.5% 2.1%
Transport
42.7% 19.5%
Utilities 4.2%
$ 118 billion Source: DX8762-11
Engineering Construction By Type Of Work Work Yet to be Done As at June 2012 Oil & Gas Coal Bauxite/ Alum. Other Minerals
Roads Bridges Railways Harbours Pipelines
Recreation Other 0.3% 0.3%
Other Heavy Ind 0.6%
21.9%
Mining & Other
67.5%
7.1% 0.4% 6.6% 4.3% 3.5%
Transport 9.3%
Utilities
Electricity 4.1% Water 3.4% Sewerage 1.8%
$ 140 billion Source: DX8762-11
Utilities
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
Value Added $ billion (2009-10 prices)
Australian Utilities
Value Added to 2012, $ billion (2009-10 prices)
45
40
35
30
25
20
15
10
5
0
Year, ended December IBISWorld
Electricity, Gas, Water and Waste Services Shares of industry revenue F2012(E)
8% Gas Supply
19% 10%
Revenue $A 116 billion IBISWorld 20/01/12
Telecommunications
Australian Telecom & Media
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
65 60 55 50 45 40 35 30 25 20 15 10 5 0 1980
Value Added $ billion (2009-10 prices)
Value Added to 2012, $ billion (2009-10 prices)
Year, ended December IBISWorld
Telecom Industry F2012
Growing 0.6% pa to F2016
Satellite /Relay
Resellers 6.9%
1.8%
46.6%
Wired
Wireless Growing 4.6% pa to F2016
29.6%
Declining by 4.7% pa to F2016
$ 40.8 billion Revenue Source:IBISWorld 09/10/12
Broadband Usage Average (GB/month)
10
Year, ended June
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
1 2000
Monthly avrerage usage (Gb)
100
Source: IBESd 18/10/11
Broadband Connections By Channel % of total basis 2006 100% 90%
2.0
2007 6.0
11.0
2009
12.0
36.5
41.0
10.5
55.0
13.0
54.5
40%
(mobile & fixed)
Cable/Fibre/ Satellite
51.0 45.0
30%
41.5
47.0 25.0
DSL
22.0
12.0
0%
Wireless
11.5
40.0
50%
10%
2011
25.5
60%
20%
2010
11.5
14.0
80% 70%
2008
8.0
4.5
Dial-up Source: ABS
3. Business Success
Australian Profitability By Major Industries Return on Shareholder Funds (after tax),
Cult & Recn Serv Mining Communications Retail Trade Hospitality W'Sale Trade Prop & Bus Serv Average Finance & Ins Utilities Construction Manufacturing Personal & Other Transport & Storage Education Health & Community Agric, Forestry, Fishing Government Admin. Percent
Top 1170 businesses
26.2
31 68
22.7
16
22.0
60
20.8 19.3
8 162
16.3
141
13.4
1170
13.4
Includes multinational importers/marketers
12.8
127 49
11.3
32
11.1
217
10.5
6.7
18 62
5 years to F2012
5.5
42 4.8
Includes private and government enterprises
52
(14) 1.5 (71) 1 0.4 0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
Source: IBISWorld 13/11/12
Australian Profitability By Major Industries Best 100 5 years to F2012
Return on Shareholder Funds (after tax), 1 company
Cult & Recn Serv
82.4
Mining
9 companies
Finance & Insurance
6 companies
Transport & Storage
3 companies
56.9
1 company
56.3
Other Top 100 Average
100 companies
Agriculture
1 company
71.8 60.9
56.2 52.6
Prop & Prof Serv
9 companies
51.7
W'Sale Trade
24 companies
51.1
Manufacturing
29 companies
Education
1 company
Personal & Other Serv
1 company
Construction
45.1 These excellent results span most industries!
39.2 34.7
9 companies
33.9
Retail Trade
4 comp
26.4
40.7
Health
2 comp
25.7
40.7
ROSF Percent
0
10
Are there really “good” and “bad” industries or just good and poorly-run businesses.
20
30
40
Includes GBE & private enterprises 50
60
70
80
90
100
110
Source: IBISWorld 13/11/12
What the Best Enterprises Are Doing 1. They stick to one business at a time and do not diversify 2. They aim to dominate some segment (s) of their market 3. They are forever innovative, valuing the business’ IP. 4. They outsource non-core activities to enable growth.
5. They don’t own “hard” assets. 6. They have good and professional financial management. 7. They plan from the outside-in not the inside-out 8. They anticipate any new industry lifecycle changes. 9. They follow world best practice for their own type of business. 10. They develop strategic alliances. 11. They develop unique organisational cultures. 12. They value leadership first and management second.
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