BHP Billiton PLC (BLT) - BHP Billiton Plc 2012 AGM Speeches
RNS Number : 5273P
BHP Billiton PLC
25 October 2012
25 October 2012
To: London Stock Exchange cc: New York Stock Exchange
Australian Securities Exchange JSE Limited
For announcement to the market
Please find attached addresses to shareholders to be delivered by the Chairman
and the Chief Executive Officer at BHP Billiton Plc's Annual General Meeting
today in London.
As part of the Dual Listed Company structure of the Group, the business to be
conducted at the Annual General Meetings will be determined by polls. The
poll results will not be known until the conclusion of BHP Billiton Limited's
Annual General Meeting which will be held in Sydney on 29 November 2012. The
results will then be released to the market.
Further information on BHP Billiton can be found at: www.bhpbilliton.com.
Group Company Secretary
BHP Billiton Limited ABN 49 004 028
077 BHP Billiton Plc
Registration number 3196209
Registered in England and Wales
Registered Office: 180 Lonsdale Street Melbourne Victoria
3000 Registered Office: Neathouse Place, London SW1V 1BH
The BHP Billiton Group is headquartered in Australia
BHP Billiton Plc Annual General Meeting
Speeches by Jac Nasser, Chairman, BHP Billiton
Marius Kloppers, Chief Executive Officer, BHP Billiton
25 October 2012
BHP Billiton Plc Annual General Meeting
25 October 2012
Jac Nasser, Chairman, BHP Billiton
Good morning ladies and gentlemen. My name is Jac Nasser. May I draw your
attention to the disclaimer we show every year.
Welcome to the 2012 Annual General Meeting of BHP Billiton Plc. I also extend
a welcome to shareholders who are online.
All your Directors are with us today, including Pat Davies, who joined the
Board in June. Pat was the Chief Executive of Sasol, a global oil, gas and
chemical company. Welcome Pat.
In addition to our Chief Executive Officer, Marius Kloppers, we have our Group
Management Committee with us today. During the year, we appointed two
executives to the team: Graham Kerr and Mike Henry.
At the most senior level, our operational executives run businesses that are
world class in terms of their size, quality and complexity. A key task of the
Board includes people development and succession planning. At BHP Billiton
our focus is to attract top people, continuously assess and develop them and
ensure we retain the best of them. Because of that approach we are fortunate
to have an exceptional team of people at all levels.
Finally, I would like to welcome members of our Forum on Corporate
Responsibility. All Forum members are leaders in their own communities. They
bring a range of views on environmental, indigenous, social and geopolitical
I would especially like to welcome the newest member of our Forum, Professor
Mick Dodson. Mick is a member of the Yawuru people, the traditional
Aboriginal owners of the land and waters in the southern Kimberley in Western
Australia. Mick has been a global advocate of indigenous issues and land
rights. He has been involved in the United Nations Forum on Indigenous
Issues, and in 2009 was named Australian of the Year.
So, let me begin today on the global outlook. Uncertainty and volatility
continue to be the most pressing challenges for the global economy. The free
flow of information, trade and capital means that economic issues once
contained within regional boundaries are now felt across the world. This is
evident in Europe where growth has been negative.
Financial and economic problems continue, and it's difficult to predict how,
and when, they will be resolved. In the United States, while some positive
signs have emerged, consumers there remain cautious, unemployment levels
continue to be high and a sharp improvement in economic growth remains
unlikely. Clearly, as you can see in this slide, most of the developed
economies are in the midst of a slow and uneven recovery, with much work still
The economic outlook for the rest of the world is mixed. China, of course,
remains the main engine of growth. However, even in China, in recent times
the rate of economic growth has been slower. This is primarily driven by the
Chinese Government steering the economy to more sustainable long-term growth.
It is also due to the cyclical and structural challenges being faced in both
the domestic Chinese economy and global markets. This in turn has raised
questions about China's future demand for natural resources. Let me say that
while we don't expect the growth levels of the past decade, we do believe that
further urbanisation and industrialisation in China will continue to support
growth in demand for commodities.
Over the next 15 years more than 250 million people will move to cities in
China while, at the same time, the middle class will grow and the general
economic well-being of people in China will improve. It is important to note
that while China is the second largest economy in the world, it is ranked
ninety-third in terms of income per person.
There may be short-term uncertainty, but as economic development continues and
incomes rise, people naturally seek to improve their living standards. They
want better quality goods and services including food, consumer and household
products, and this in turn increases demand for natural resources. These
improvements in living standards will, over time, change the demand mix for
commodities in our portfolio. The world has seen this pattern many times
before as major economies move through various stages of economic development.
BHP Billiton in context
These global shifts in demand represent opportunities for your company. One
of the strengths of BHP Billiton has been its ability to innovate and adapt to
changes in demand for over 100 years.
Natural resources are both a long-term and a cyclical business. The time
horizon for investments is not measured in months or even years, but in
decades. It's why our strategy is based on owning and operating low-cost,
long-life assets across commodities and countries. Our strategy allows us to
adapt and innovate to meet major changes in global demand and for over a
century it has delivered long-term value for our shareholders.
From the early 20^th century, BHP's iron ore, coal and steel underpinned the
development of infrastructure such as bridges, buildings and railways, while
Billiton's minerals and aluminium helped build the cars and consumer goods
that industrialised economies needed as national incomes rose. BHP was an iron
and steel making company for most of its history. As demand for modern
telecommunications, industrial machinery and energy grew, we looked for new
opportunities in new countries and new commodities. We found these with
copper, oil and gas, and in new regions like Chile, the Pilbara and Bass
Strait in Australia.
BHP Billiton's copper business is a good example of how we play a crucial role
in the development of emerging economies. That's because copper is critical
to power supply, telecommunications and electronic devices. Copper demand is
directly linked to economic development. For example, six years ago China
consumed about 25 per cent of global copper; today it consumes more than 40
per cent, and the long run supply and demand dynamics for copper continue to
Our petroleum business is another example. It is a major part of BHP Billiton
and includes operations in the Gulf of Mexico and our onshore oil, liquids and
gas assets. We believe these assets, particularly our lower carbon fuel
sources, will continue to play a meaningful role as the world makes its future
On the other hand, our focus on potash reflects the growing demand for food
driven by urbanisation and increasing world population. Potash is a key
nutrient that helps make agriculture more productive. While potash is a new
sector for us, like oil, gas and copper once were, it is mined using
traditional methods; BHP Billiton's core expertise. While we are not
producing potash just yet, over time we expect to play an important role in
helping farmers increase food production.
We are proud that we have been able to adapt to the world's changing demands
for over a century and continue to deliver long-term returns for our
So, with that, let me turn to our financial results. BHP Billiton is in a
strong financial position. This is despite the challenges of higher capital
and operating costs, stronger producer currencies and more regulation, as well
as volatility in commodity prices.
Within this difficult environment, our profit and net operating cash flows are
the second highest in our history, while our full year dividend is the
highest. We reported a profit of US$15.4 billion after exceptional items and
a net operating cash flow of over US$24 billion. Our balance sheet is strong
and we retain a solid A credit rating.
We declared a full-year dividend of US$6 billion or 112 US cents per share, an
increase of 11 per cent, extending the unbroken record of a progressive
dividend over the past 10 years. We also achieved a total shareholder return
of 700 per cent compared to a FTSE100 return of 84 per cent over the last
decade. This means that if you invested £1,000 ten years ago and you
reinvested all your dividends, today it would be worth £7,000.
However, within an overall good performance we've had a significant write down
that affected our results.
So what is a write down and why did we report one? A write down or impairment
is essentially a reduction in the value of a company's asset at a point in
time, and is shown as an exceptional item. As part of our financial reporting
process we assess the value of all of our assets and make revisions as
required. Let me say that writing down the value of any asset is very
disappointing for the Board, management and shareholders.
So why did we decide to write down our US Fayetteville natural gas asset? The
main reason was a significant drop in gas prices as a result of an unusually
warm winter in the US and increased natural gas supply, which together caused
an imbalance in the gas market. In turn, this affected the value of the
Fayetteville asset and accordingly we wrote down its value by US$1.84 billion
after tax. As a result, both Marius and Mike Yeager, our Petroleum Chief
Executive, advised the Remuneration Committee that they did not wish to be
considered for a bonus this year, and the Committee and the Board agreed.
That being said, we remain of the view that the investment in US onshore
natural gas and liquids is the right decision for BHP Billiton shareholders,
and it is why we acquired the Petrohawk gas and liquids business. The onshore
natural gas and liquids that we acquired with Petrohawk and Fayetteville
complement our existing oil and gas business.
Onshore natural gas and liquids form a critical part of the US Government's
commitment to be energy independent. While the US still imports 45 per cent
of its oil, the energy market in the US is quickly being transformed by
innovations in technology and commercialisation of onshore natural gas and
As a result of our energy strategy, your company is well positioned to benefit
from these significant changes.
Health and Safety
Let me now turn to the critical issue of the health and safety of our people.
It is core to every aspect of our business. Their skill, energy and
commitment are the foundation of everything we do; that is why we put health
and safety first.
I am deeply sorry to report that three of our people lost their lives at work
this year, and more recently a colleague was fatally injured at a copper mine
in the United States. Let me be very clear, any injury or loss of life is
completely unacceptable. On behalf of the Board and management I offer our
sincere condolences to their families and friends.
Alongside our commitment to health, safety and the environment, our ability to
make a difference in the communities in which we operate is critical to our
ongoing success. While we don't get everything right, we strive to listen to
people's aspirations and concerns, respect their rights and work with them to
implement community projects. When we do that well, our stakeholders value
their relationship with us, and everyone benefits.
For example, we have helped to improve maternal and infant life expectancy
through the prevention of malaria and HIV. We have also helped many children
start, and complete, a formal education.
For the last 10 years we have invested one per cent of our pre-tax profits in
community programs. Last year we invested over US$200 million including a
US$65 million contribution to our UK-based charitable trust. More than 6,000
BHP Billiton people participated in our Matched Giving Program volunteering
their time and donating money to more than 1,400 not-for-profit organisations.
Each employee's individual contribution is matched by the company.
I think all shareholders can take pride in the time and contribution that so
many of our people give to the communities where they work.
Of course, in addition to our community programs, we paid US$12 billion to
governments around the world in taxes and royalties.
Now let me spend a few minutes on executive compensation. We understand
community concerns about pay levels and we support the actions of both the UK
and Australian Governments to introduce more transparency and shareholder
involvement in executive pay. Shareholders have the right to understand how
compensation is structured.
Your Board and Remuneration Committee spend considerable time balancing the
need to attract and retain key executives while ensuring the alignment of
interests with shareholders. What our shareholders tell us about our pay
policy and practices is very important to us. We know that there are many
views. However, over the last few years our pay practices have been strongly
supported by shareholders, with more than 96 per cent voting in favour.
Our executive compensation is a combination of fixed and genuinely at risk
pay, which is both short and long term in nature. First, we link pay to the
well-being of the company in the shorter term. This means that we take into
account both the financial and non-financial effect senior executives have on
BHP Billiton and our stakeholders. These factors include health, safety,
environment and community relationships, as well as business performance and
But we also look at the longer term. We were one of the first companies to
put in place an incentive plan that measures performance at the end of a five
year time frame, and we remain only one of two companies in the FTSE100 to do
this. We believe that by measuring performance over five years our plan
better aligns executive and shareholders' interests.
Let me conclude by saying that I believe, as shareholders, you have every
reason to feel proud of your company. We are playing a critical role in the
development of the global economy at an extraordinary time in world history.
We are all part of an industry and a company that is vital to improving the
lives of hundreds of millions of people; we supply the resources that actually
make a difference.
A natural resources business is by its very nature, a long-term business.
Today's BHP Billiton is the result of generations of far-sighted people. It
is also the result of today's leaders and employees.
On your behalf I want to thank all of our people at over 100 operations led by
a world class management team under Marius Kloppers. I would also like to
thank you, as shareholders, for your commitment to BHP Billiton. We will
continue to govern the company in your interests.
Marius Kloppers, Chief Executive Officer, BHP Billiton
Thank you Jac and good morning everyone.
This morning I would like to talk about three broad themes:
· the performance of your company in the 2012 financial year;
· the market conditions we are facing, including the economic outlook; and
· how BHP Billiton is placed to meet the conditions currently facing the
industry and what we are doing in response.
But first, let me start as I always do with safety, our overriding core
value. Our Charter is at the heart of everything we do. It clearly
emphasises the importance of putting health and safety first, the need to be
environmentally responsible and the role that we play in supporting the
communities in which we operate.
While we saw a six per cent reduction in our total recordable injury frequency
rate to the lowest level on record, tragically we had three fatalities in the
2012 financial year and another fatality in September of this year. This is
devastating for the family, friends and colleagues of these workers, and it is
a very sobering and salient reminder that we must make elimination of fatal
risks our first priority each and every day. No fatality is ever acceptable
and on behalf of everyone at BHP Billiton I would like to offer my sincere
Turning to our performance, I am pleased to say that your company achieved a
very robust set of financial results despite significant volatility and
uncertainty in the external environment during the 2012 financial year.
We delivered Attributable profit of US$15.4 billion, underlying EBITDA of
US$33.7 billion and underlying EBIT of US$27.2 billion. This was all achieved
during a time of falling commodity prices and rising costs, as well as
temporary, one-off impacts that significantly affected three of our largest
and highest margin businesses: Escondida in Chile, our Petroleum operations in
the Gulf of Mexico, and Queensland Coal. Our result was not only robust in an
absolute sense, but also relative to our peers.
We were especially pleased to report very strong net operating cash flow of
US$24.4 billion, which represented only a modest reduction of one per cent in
the June 2012 half year when compared with the first half. So we are
continuing to generate strong results that enable us to keep investing in the
business throughout the cycle. These financial results can only be achieved
through disciplined management and excellent operational performance.
Our overall strong performance is testament to the reliability of our
operations, our highly skilled operators and the successful ramp-up of
expanded capacity. We achieved annual production records at 10 of our
operations, including a twelfth consecutive production record at Western
Australia Iron Ore. I make specific mention of Iron Ore purely because it
demonstrates the value of our strategy of investing throughout the cycle: we
chose to invest US$4.8 billion in our Iron Ore business at the depth of the
global financial crisis and we are now seeing the benefits of that decision.
This commitment of continued investment throughout the cycle is one of the key
elements of our broader strategy that sets us apart from our peers. In fact,
we now have a total of 19 predominantly brownfield projects that are on-budget
and on-schedule, with the majority delivering first production before the end
of the 2015 financial year. With this extensive pipeline of projects
currently in execution, and capital and exploration expenditure of US$22
billion for the Group in the 2013 financial year, we are fully committed and
no major project approvals are anticipated over this timeframe.
The completion of these projects and the release of latent capacity in
Escondida, Queensland Coal and the Gulf of Mexico as they recover from those
temporary production issues, will underpin a compound annual volume growth
rate of around 10 per cent this year and next.
Your Chairman has provided a comprehensive view of the economic conditions
over the past year and our future outlook, so I need only make a couple of
We believe the volatility we experienced during the last financial year will
continue in the short term, as concerns surrounding the stability of the
Eurozone and the concerns on China's growth continue to weigh on market
In relation to China, let me make the point that China's slowdown is
directionally in line with what was expected and what the Chinese Government
had indicated would occur. It is aligned with the path taken by other major
economies as they have developed, and is what we believe is required to
support sustainable growth in China over the longer term.
China's GDP growth is expected to be in the range of seven to eight per cent
in the coming years. While this is lower than the double digit growth rates
seen over the past decade, it is coming off a much larger base and will still
underpin strong underlying growth in commodities demand. China's unique and
substantial industrialisation and urbanisation continues to give us confidence
in the long-term outlook.
Over the last year, we also saw continued volatility in prices for most
commodities. We have now had a decade of unsustainably high prices in some
commodities such as iron ore and metallurgical coal, as growth in demand from
China and other developing nations outweighed the pace of new low-cost supply
additions. At the same time, we have experienced very significant cost
escalation in the industry, compounded by a strengthening in the currencies of
key producing countries. In the face of higher prices, we have also seen a
trend towards some governments seeking to increase royalties and taxes, which
placed further pressure on costs.
While the higher price environment in the preceding decade increased available
margins, the incentive to build new production across the industry was
unprecedented. As a result, the shortage of low-cost supply is now well
advanced towards being filled and we are now witnessing a rebalancing of
demand and low-cost supply, and a progressive recalibration of prices towards
more sustainable levels. Prices for those commodities that experienced the
greatest supply-demand shortage, and therefore the greatest price increases,
are expected to see 'mean reversion' in the period ahead.
Therefore, we do not anticipate a repeat of the record prices experienced over
the past decade. The industry's ability to meet incremental demand with
low-cost supply has improved and, in this regard, the opportunities that lie
ahead will be volumetric as opposed to price based. What I mean by this is,
those who sit at the low end of the cost curve, who are able to expand
production in a timely and disciplined fashion, and who can invest in the
right portfolio of commodities can indeed do very well in this environment.
How BHP Billiton is positioned to meet the challenges and opportunities
This leads me to the BHP Billiton strategy of owning and operating large,
long-life, low-cost, expandable, upstream assets diversified by commodity,
geography and market. This strategy has been largely unchanged for more than
Our diversification strategy reduces our exposure to any one commodity or
currency - the value of this has been demonstrated time and again, most
recently over the past year where your company has outperformed its peers
across a number of dimensions. Combined with disciplined financial
management, it is this diversification strategy that helps deliver resilient
cash flows, allowing us to invest in our business throughout the commodity
We have a uniquely diversified portfolio. No other peer company has the mix
of minerals and oil and gas within their portfolios as we do, and the value of
this level of diversification is particularly evident during times of
significant market volatility. For example, over the last financial year when
global economic volatility was significant, we had a robust underlying EBIT
margin of 39 per cent. Illustrating the value of diversification: while
market commentators and many of our competitors were more materially impacted
by the decline in iron ore prices during that period, stronger prices for
crude oil, liquefied natural gas and thermal coal delivered a substantial
boost to our profits.
The diversification of our portfolio also means we are poised to capture the
opportunities presented by markets in all stages of their demand cycle. To
highlight this point, China's growth over the past decade has been based on
the need for new cities, buildings, roads, housing and so on to support the
industrialisation and urbanisation. As has been witnessed in other major
economies as they have developed, this build out of the capital stock in China
will begin to plateau in due course. China's future needs will change and the
focus will gradually switch to the next level of consumer goods, such as white
goods, heating and air-conditioning, cars, stoves, and other similar goods.
This progressive transition from an investment-led to a more consumption-led
economy in China, and other developing economies, will naturally result in an
eventual moderation of demand for commodities such as iron ore and coal, and
an increase in demand for commodities such as copper and the suite of energy
As the middle class continues to increase as a proportion of the total
population, better diets will also likely lead to a demand increase for
fertiliser products such as potash. So it is important to understand that the
market will still offer substantial opportunities for those companies that can
supply the right commodities competitively. In fact, we expect commodity
demand to grow by 50 to 80 per cent in the next 15 years, and BHP Billiton is
in the enviable position of having the commodities in our portfolio to meet
the demands of every stage of the industrialisation cycle.
However, as prices for some commodities mean revert in real terms we must
ensure that our costs remain very competitive, as the importance of
maintaining our position at the lower end of the cost curve is even more
In this context, in the last financial year we took decisive and proactive
action to ensure our businesses remain at the lower end of the cost curve.
This includes the closure of several higher cost operations and the
commencement of a significant and targeted cost reduction program across the
Group. This program will substantially reduce operating costs and
non-essential expenditure, which is critical in the current environment.
However, the reality is that we cannot do this heavy lifting on
competitiveness alone. The cost environment within which we operate is
heavily influenced by government policy and regulation. It is important for
Governments to provide stable, predictable policy regimes in our key operating
jurisdictions that support our own efforts to reduce costs. We accept that it
is our role to carry the bulk of this task. We must manage what we can
effectively so that we can continue to contribute substantially to the
economies in which we operate. Governments must also play their part in
ensuring that those elements of the cost environment they control provide a
competitive framework within which future investment is encouraged. This
extends to royalties, taxes, regulatory burdens and productivity-related
policies. Collaboration between industry and government is critical to
restoring cost competitiveness in our sector.
In summary, despite the last financial year being sometimes challenging for
the industry, with substantial volatility and uncertainty in the external
environment, BHP Billiton delivered a very robust set of financial and
Our unchanged strategy and disciplined financial and operational management
not only benefits us in the present but also means we are uniquely positioned
to capture the opportunities that will exist in the future.
We have an unrivalled portfolio of high quality, long-term development
options. This includes 19 major growth projects currently in execution that
are largely low-risk, brownfield expansions, in the same assets that have
generated industry leading returns over more than a decade. On average, the
projects in execution are expected to deliver a 15 per cent rate of return on
investment. As our expenditure on these projects reduce over time and our
level of flexibility increases, we will continue to allocate future capital to
those projects that have the most attractive risk/return metrics. We are
committed to our long-held strategy of investing through the cycle.
Our strategy has been the hallmark of our success. We have delivered strong
total shareholder returns of more than 600 per cent over the decade to the end
of the 2012 financial year. This is approximately double that of our core
peer group. We have grown the dividend and returned approximately US$54
billion to shareholders over that timeframe, equivalent to about 50 per cent
of our underlying earnings.
Our portfolio is perfectly suited to the economic conditions that lie ahead,
and it is for this reason we are even better placed to outperform our peers
over the next decade, and well into the future.
Equally important is the support we receive from the communities in which we
operate. BHP Billiton aims to have positive relationships with all its
communities, as well as leaving a positive legacy wherever we operate. It is
part of this commitment that drives our voluntary community investments, which
I am proud to say in the 2012 financial year totalled US$214 million. As a
large organisation that leaves an indelible footprint wherever we operate, we
believe we have an economic and social responsibility to make positive
contributions to the communities, regions and countries where we work.
In concluding, I would like to thank you, our owners. We value your continued
support and always welcome your contributions.
Finally, I would like to finish by thanking our more than 46,000 employees and
78,000 contractors around the world who are at the very heart of our success.
The Chairman then conducted the formal items of business.
In closing, let me again thank you for your support and commitment.
We value your comments and ideas and will continue to strive for ongoing
improvement on your behalf.
BHP Billiton Limited will hold its AGM on the 29^th of November in Sydney,
Australia and the results of both meetings will be notified to stock exchanges
and posted on our website.
Thank you for coming along today and I hope you have time to join us for
This information is provided by RNS
The company news service from the London Stock Exchange
MSCMABLTMBATMAT -0- Oct/25/2012 09:57 GMT
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