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BIL
BIBLT
BIL - BHP Billiton Plc - Annual general meeting - Speeches 2008
BHP Billiton Plc
Share code: BIL
ISIN: GB0000566504
23 October 2008
To: London Stock Exchange cc: New York Stock Exchange
Swiss Stock Exchange
Australian Securities Exchange JSE Limited
Deutsche Bank
UBS Zurich
For announcement to market
Please find attached addresses to shareholders currently being delivered at BHP
Billiton Plc`s Annual General Meeting by the Chairman and the Chief Executive
Officer.
As part of the Dual Listed Company structure of the Group, the business to be
conducted at the Annual General Meeting 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 Melbourne on 27 November 2008. The results
will then be communicated to the market.
Yours sincerely
J McAloon
Group Company Secretary
BHP Billiton Plc Annual General Meeting
Speeches by Don Argus, Chairman, BHP Billiton and Marius Kloppers, Chief
Executive Officer, BHP Billiton
23 October 2008
BHP Billiton Plc Annual General Meeting
23 October 2008
Don Argus, Chairman, BHP Billiton
Good morning ladies and gentlemen and welcome to the 2008 annual general meeting
of BHP Billiton Plc.
My name is Don Argus and I will chair today`s meeting.
Thank you for taking the time to join us here this morning.
Before we officially begin the meeting, I need to draw your attention to the
normal disclaimers we have to show you on these occasions, and remind you that
they are important in relation to what we are going to talk about today.
Let me start off by introducing your directors, including our three new board
members.
I want to make the point that given the importance of corporate governance and
the issues facing all companies today, I believe it is critical to have a strong
and diverse board.
Your directors have a breadth and wealth of international and industry
experience. This means they are ideally placed to support the management team
and to hold them to account on your behalf. Your directors are not only diverse
in terms of skills and experience, but also in their nationality.
This diversity is also reflected in our senior management team and in fact,
throughout your company; we have employees from more than 30 countries and we
see global diversity as an essential quality of operating on an international
scale.
You can read full details of each Director`s background and experience in the
Annual Report but let me now formally introduce them.
To your right is our Chief Executive Officer Marius Kloppers. Next to Marius is
John Buchanan, Paul Anderson, Carlos Cordeiro and David Crawford. To your left
we have Jac Nasser, Gail de Planque, David Jenkins and John Schubert.
We also have sitting on the stage today three new directors. They are: Alan
Boeckmann, David Morgan and Keith Rumble.
Alan Boeckmann is the Chairman and Chief Executive Officer of Fluor Corporation,
one of the world`s largest publicly owned engineering, procurement, construction
and maintenance services companies.
He is a Non-executive Director of Archer Daniels Midland, Burlington Northern
Santa Fe Corporation and the National Petroleum Council in the United States.
David Morgan recently retired as Managing Director and Chief Executive Officer
of Westpac Banking Corporation and he has more than 30 years` finance experience
in both the public and private sector.
Prior to Westpac, David was at the International Monetary Fund and Senior Deputy
Secretary of the Australian Federal Treasury.
Keith Rumble was the Chief Executive Officer of SUN Mining and has more than 30
years` experience in the resources industry.
Prior to joining SUN Mining, he was the Chief Executive Officer of Impala
Platinum Holdings Limited in South Africa and President and Chief Executive
Officer of Rio Tinto Iron and Titanium in Canada.
These three appointments are valuable additions to the Board and they bring with
them a wealth of experience in the international finance, mining, engineering,
and oil and gas industries.
As well as Marius, I would like to introduce the other members of our Group
Management Committee.
In the front row is Alberto Calderon, Group Executive and Chief Commercial
Officer; Marcus Randolph, Group Executive and Chief Executive of Ferrous and
Coal; Karen Wood, Group Executive and Chief People Officer and Chairman of the
Global Ethics Panel; and Mike Yeager, Group Executive and Chief Executive of
Petroleum.
Next month Andrew Mackenzie joins our Group Management Committee as the Group
Executive and Chief Executive of the Non-Ferrous businesses.
Andrew was most recently Chief Executive Diamonds and Industrial Minerals at Rio
Tinto and prior to this, he spent 22 years in senior executive positions at BP.
He will be an excellent addition to our Group Management Committee.
Of course the other members of the GMC are Marius Kloppers and Alex Vanselow who
is sitting to your left. Alex is the Chief Financial Officer and Chairman of
the Investment Review Committee and Financial Risk Management Committee.
Finally to my right is our Group Company Secretary, Jane McAloon.
Also here this morning are Peter Nash and Simon Figgis, representatives from the
Group`s external auditor, KPMG.
Simon replaces Chris Jenkins as the external auditor from KPMG who has retired
by rotation. I would like to take this opportunity to thank Chris for his
dedication over the past years.
We have 34 items of business to cover today.
As well as those items, I will cover the issues shareholders have asked me to
address.
As usual at our meetings, we will talk in US dollars unless otherwise stated,
because that is the currency in which we report.
I don`t intend to spend a lot of time this morning speaking to you about our
strong 2008 results as I have covered the highlights in my letter to you on
September 8, but a few comments are appropriate.
By any standard, your company`s financial performance in 2008 was outstanding
and we are in a strong financial position.
Let me share a quick snap-shot with you:
* our attributable profit was up 12 per cent to a record $15.4 billion;
* despite unexpected disruptions and accelerated cost inflation EBIT increased
by 21 per cent and our underlying EBIT margin is exceptional at about 48 per
cent;
* our Return on Capital employed was 38 per cent. Return on capital employed
is an important measure to assess the efficiency of a company`s capital
investment. I think you will agree that this is a remarkable achievement
given our unprecedented level of capital investment.
During the year we reduced net debt by over 15 per cent or US$1.5 billion.
This brought our gearing down from 25 per cent to under 18 per cent.
I will talk in a minute about the impact of the macroeconomic environment on
BHP Billiton, but I want to note at this stage that our consistent strategy
has led to industry leading margins and a balance sheet of unparalleled
strength.
These attributes not only give us a competitive advantage, but will also
be a unique strength as opportunities arise in a cash-constrained environment.
More about this in a minute.
Turning to our dividend. Once again, the Board has decided to rebase it.
The final dividend of 41 cents a share reflects the Company`s healthy balance
sheet and the Board`s confidence in our ability to generate strong future
cash flow. This is the thirteenth consecutive increase in the dividend.
We have also rebased the dividend for the second year running. In 2007 our
total dividend for the year was 47 cents a share. This year it is 70 cents
a share. That is an increase of nearly 50 per cent and 150 per cent over
the last three years. Since the 2002 interim result, we have increased the
dividend by more than 530 per cent.
There are very few companies in the world that are growing their dividends
as fast as this.
Let me now touch for a moment on the current financial crisis.
As with most stocks, over the past few weeks, the BHP Billiton share price
has been significantly impacted by the turmoil in world financial markets
and the weakening of the global economy. We must assume this volatility
and uncertainty will continue for some time.
What I would again like to impress upon you is that our uniquely
diversified portfolio of high quality and low cost assets, and our strong
balance sheet, place us in a very competitive position in this environment.
Our portfolio provides us with a stable cash flow allowing us to reinvest
throughout the cycle where others might not be able to do so.
In fact we believe our balance sheet places us in a unique position in the
resources sector to take full advantage of not only the recovery when it
occurs, but also in capitalising on opportunities that will no doubt arise
in this cash strapped external environment.
Marius will talk about production and business issues but before he does,
let me add to my comments by looking at future demand for resources.
There is no doubt that China has been an important driver of growth in
resources demand, underpinned by its unprecedented urbanisation push.
Urban population has increased by 300 million people since 1990.
Macroeconomic indicators now show that Chinese growth has softened
recently, albeit from very high levels. We believe that softening is
due to both domestic and global factors.
With receding inflationary pressures, large financial reserves and a deep
desire to grow, the Chinese economy should show some resilience and we note
the International Monetary Fund growth forecast of around 9 per cent for 2009.
Despite this short-term uncertainty, we remain convinced that the ongoing
industrialisation and urbanisation of China and other developing economies
is still at a relatively early stage and will continue to drive strong
long-term demand for our products.
Over the next 20 years, we believe Chinese cities will grow by another
350 million people.
We note that the China National Bureau of Statistics has just released the
latest gross domestic product data which shows that third quarter growth
came in at 9 per cent year on year.
Before I pass over to Marius to talk to you about business performance,
including safety, let me make a few points.
I highlighted previously our strong financial results and importantly, the
strength of our balance sheet. These outcomes don`t happen by themselves.
Marius has now been our CEO for over a year and the transition has been
completed effectively and professionally. Marius has assumed his leadership
role seamlessly and he and his team are to be complimented for their efforts
and achievements.
Once you have heard from Marius, I will address the issues shareholders
have raised. We will then move to the formal items of business and then
open this meeting for questions from the floor.
Of course, you will have the opportunity to ask questions on the specific
items of business as the meeting considers each of these.
After the meeting, the Directors and the senior management team would like
you to join us outside for some light refreshments.
Marius Kloppers, Chief Executive Officer, BHP Billiton
Thank you Chairman and good morning ladies and gentlemen.
This is my second address to you as Chief Executive. I am delighted to be
able to say that each and every shareholder can look back on the 2008
financial year with a strong sense of pride in what your Company has
achieved on your behalf.
Our strategy of owning and operating large, long-life, low-cost,
world-class assets diversified by geography, commodity and market
continues to prove successful. As Don outlined, our longstanding focus
on strong balance sheet capability and financial stability stand us in
good stead in the current volatile environment, not only in our base
business but also in being able to take advantage of opportunities that
may arise as others falter.
Let me explain this strategy in a little more detail.
* We focus on assets which are large, low-cost, expandable and consistently
profitable. This means that they can deliver more value for longer. They
are robust in a down-cycle. But the real value of these assets is that
they can be expanded as needed to meet increased customer demand over the
long term.
* We focus on upstream and export-oriented raw material businesses.
Upstream means operations involved in finding and extracting resources
rather than in processing them.
* Since our assets are depleting every day as we produce, we focus on
having a deep inventory of growth opportunities.
* We want to reduce risk by not having all our eggs in the one basket,
so we focus on diversification. We are diversified by commodity, by
geography and by customer.
* We focus on an overriding commitment to ethics, safety, environment and
community engagement. We aim to be an employer of choice and a preferred
* partner for our suppliers and customers.
This strategy, combined with the enormous efforts of our people and a
favourable commodity price environment, helped us to deliver the outstanding
financial results that Don has just referred to.
We have delivered stronger annual production in 13 of our commodities,
with record production in seven of those. We posted these results
despite an environment of industry-wide supply disruptions and input cost
pressures. I will detail some of the production highlights in just a minute.
I would like to take this opportunity to directly address the issue of
safety in our business. I explained last year that safety is our number one
priority and that we will not have fully succeeded as a business until we
reach our target of Zero Harm. That means a target of being able to announce
that, during the year, we have not lost a single colleague to a work-related
tragedy.
While last year our total recordable injury frequency rate was the lowest
recorded, the reality is that in the same period 11 of our colleagues died
at work. In addition, during this year, we have lost four colleagues.
This is not acceptable and I am absolutely determined that we get this right.
We always aim to run our business as efficiently and profitably as possible.
However, safety comes ahead of volume and cost. Safety is the most important
measure by which all our senior executives and the businesses are judged. As
Chief Executive, the buck stops with me.
My predecessor always said, "good safety and good business go hand in hand".
I believe that those words remain a constant reminder that only by going
about our activities with more planning and better control, and in a more
disciplined manner, will we achieve both better business as well as safety
results.
I know you will support our efforts to achieve our goal of Zero Harm.
Let me now mention a few of our production and financial highlights from
the past year.
Our Manganese business was an outstanding performer, increasing underlying
EBIT by almost 550 per cent to US$1.64 billion on the back of higher sales,
increased production and substantially higher prices. We hear a lot about
iron ore when people talk about steel. The other two components of steel
making raw materials, manganese and metallurgical coal, are less often
mentioned but they too are very attractive products to have in our portfolio.
Our Petroleum business delivered US$5.5 billion of EBIT, as well as the
highest margins in our portfolio. Our margins generally are a source of
satisfaction. What they show is that, even at a time of constraints and
high input costs, we can capture the benefits of higher prices.
From a macro economic perspective, we have seen new challenges emerge
during the last year. Despite operating within generally turbulent economic
conditions, the future for our business remains positive. While we fully
expect some reverberations from global economic shocks in the short and
medium term, we remain focused on meeting growing customer demand in the
long-term.
We will build on our strong track record of project delivery to continue
to capitalise on the opportunities the market provides us. This was
certainly a focus in 2008. Our Western Australia Iron Ore business, for
example, posted its eighth consecutive annual production record as we
expand the business to produce 300 million tonnes per annum (mtpa) by 2015.
The record production growth in our Petroleum business followed the
commissioning of three new major projects during the year. We have already
flagged that we expect Petroleum volume growth of around 10 per cent a year.
2008 saw the start up of 10 major projects across our portfolio, proving our
commitment to continually develop opportunities that will drive the Company`s
future success. Moreover, the Board approved a further seven development
projects. This takes the total number of projects in either feasibility
or execution to 28, diversified across geographies and commodities and
representing almost US$25 billion in capital expenditure.
Because this is a long-term industry, we are constantly renewing our
project pipeline for future growth. Beyond those projects that make up the
US$25 billion of current investment, we have medium and long-term growth
options in our development pipeline totalling some US$90 billion in investment
options - options that are skewed towards lower risk, lower cost, quicker to
execute brown-field expansions. We continue to replenish our future options
for long-term shareholder returns.
Perhaps I should pause here and say a few words about capital discipline.
Our prudent management of our balance sheet and strong financial position
comes from a strongly ingrained capital discipline.
The combination of balance sheet strength and capital discipline, combined
with a strong slate of growth projects, puts us in a unique position in our
industry.
Of course, that same balance sheet - as Don commented - puts us in a
unique position to capitalise on opportunities that may arise in the broader
industry.
There is no doubt that on our own we are extremely well positioned. We
believe, however, that our proposed combination with Rio Tinto provides
even greater benefits now.
BHP Billiton and Rio Tinto are uniquely complementary in the commodities
we produce, in our geographic locations, our cultures and customer bases.
A combination of these two companies would unlock synergies and provide
greater value than either of the two companies can provide alone. These
synergies only exist when the companies are put together. These synergies
are particularly valuable in today`s economic environment.
BHP Billiton does not need Rio Tinto to have a great future, but we believe
the two companies combined will be better placed to meet the world`s future
needs for our products, at lower capital and operating costs, and from a
position of combined strength.
Ladies and gentlemen, we have a very strong business and I am supported
by a very strong management team.
We recognise the global short-term challenges we are currently facing,
but we do not fear them. Indeed, our positioning gives us the ability to
benefit from uncertainty.
We are confident in our strategy and the make-up of our business, as well
as in the fundamental long-term outlook for our industry and our ability to
benefit from it.
I look forward to addressing you again in 12 months.
Thank you for your time. I will now hand back to the Chairman.
Don Argus, Chairman, BHP Billiton
Thank you Marius.
Let me just reinforce what Marius had to say about safety.
We are in total agreement that the management team has an obligation to
deliver Zero Harm and we strongly support management in putting safety first,
not compromised by production, cost or profits.
Now, let me move on to discuss those topics raised by shareholders.
The first one relates to reducing carbon emissions.
Our objective is to contribute to meeting the growing global demand for
resources while helping to address the challenges of safety, climate change
and the environment generally.
We follow closely the developments in the public policy debates that relate
to BHP Billiton businesses.
We are active participants in the European emissions trading regime and
continue to engage with governments in other jurisdictions, such as Australia,
on the development of new emissions regulations.
We are also acutely aware of the need to reduce the carbon intensity of
our business at an operational level.
But it is clear there is no single policy or technology that can stabilise
greenhouse gas concentrations in the atmosphere.
In order to provide energy security and environmental sustainability,
countries need diverse and flexible energy portfolios, with increasing
emphasis on fuels and technologies that reduce carbon emissions. And, of
course, energy efficiency also has a critical role to play.
Because of the quality of our reserves and the efficiency of our processing
facilities and infrastructure, we have the potential to continue to deliver
energy solutions to the world at lower carbon intensity than some of our
competitors.
Of course, determining the best way to address carbon emissions cannot be
done in isolation from the challenge of energy security.
Energy demand is expected to continue to grow globally, largely because of
the urbanisation and industrialisation of China, India and the rest of the
developing world.
The crucial decision for developing economies, as for the rest of the world,
is around the energy and technology mix they pursue in meeting their future
energy needs while progressively reducing carbon emissions.
Looking to the future, renewables will play a very important role here in the
UK and globally, but as you can see from this chart, both coal and nuclear will
also be key parts of the solution, along with natural gas and LNG.
Let me touch briefly upon two of these: coal and nuclear.
Coal currently accounts for around 40 per cent of the world`s electricity
generation. With plentiful additional reserves around the globe, governments in
both developed and developing countries, continue to value coal as a secure and
economical energy source.
As we discussed last year, we are working with our industry partners to
actively support the development of technologies that will minimise carbon
emissions from coal-powered generation.
Now let me turn to the role of nuclear energy.
The last year has seen a growing global consensus over the positive role
that nuclear can play in helping reduce greenhouse emissions and maintaining
security of supply.
This view has also been supported by the International Energy Agency, which
has said that nuclear energy should constitute an important portion of the
global energy mix because of its low carbon dioxide emissions and its
contribution to energy security.
As you can see from this slide, the future growth of nuclear is both global
and significant. Here in the UK, the British Government has announced its
support for a fleet of nuclear power stations, and suggested that every new
plant would save the same amount of carbon emissions as generated by one
million households.
The reality is that nuclear energy is the only electricity source that can
generate base-load electricity reliably, efficiently and with extremely low
life cycle greenhouse gas emissions.
The projected growth of nuclear energy is also positive for BHP Billiton.
Our Olympic Dam operation in Australia is the world`s largest known uranium
reserve and we are extremely well positioned to contribute to meeting future
global nuclear energy demand.
Beyond these global issues, BHP Billiton is also aware of the impact our
business has on local communities.
We have one clear goal in this area, that is to have a positive impact
wherever we operate.
Through the taxes and royalties we pay, our employment and training programs,
and through our infrastructure and social investment, we believe that
communities benefit from our presence.
Each year we also invest one per cent of our pre-tax profits, on a
three-year rolling average, in community-based projects.
This year we increased our direct community investment by over 25 per cent
to US$141 million.
As a company, we are investing significant money and time to improve access
to quality education and to address serious health issues, such as malaria
and HIV/AIDS.
Publications detailing our work with communities are available today and I
know that our management team will be happy to discuss our community work with
you after the meeting.
The final major subject raised by shareholders is the proposed acquisition
of Rio Tinto.
The first point to make here is that, while some commentators have described
this proposal in terms of a battle, the reality is somewhat different.
From our perspective, this is about maximising value, for both sets of
shareholders, for customers and all our stakeholders.
We are focused on large, long-life, low-cost, expandable and export-oriented
assets diversified by commodity and geography and that are consistently
profitable through the commodity cycle.
We believe that BHP Billiton and Rio Tinto are similar companies, with exposure
to similar commodities and assets and the value to be extracted is because of
this similarity.
We believe this value is unique, and is only available to both sets of
shareholders through a combination of BHP Billiton and Rio Tinto. No
individual company can deliver this value creation alone.
So what does a combined BHP Billiton and Rio Tinto mean for shareholders?
We believe the new combined company would have several key features:
* the ability to lower costs by optimising the use of assets and infrastructure,
particularly those located close to each other;
* a more diversified asset portfolio creating lower risk for shareholders in
the current uncertain economic environment;
* the ability to deliver volume to customers on an accelerated basis to
meet their demand for resources;
* a management team drawn from the best of both BHP Billiton and Rio Tinto
that will have exceptional experience and depth;
* a commitment to continue with our progressive dividend policy; and
* importantly, strong cash flows and a strong balance sheet that will allow
re-investment throughout the economic cycle.
This is why we believe the two companies combined will be better placed to meet
the world`s future demand for resources.
Therefore, the decision for Rio Tinto shareholders isn`t whether Rio Tinto has a
better future than BHP Billiton, but whether Rio Tinto, on a stand alone basis,
has a better future than a combined BHP Billiton and Rio Tinto.
Finally, let me turn to the timetable for the offer.
As I indicated to you in my letter in September, we continue to engage with the
regulators in the various jurisdictions where we operate, and we continue to
work towards completing the regulatory review process for the offer by early
2009.
Following satisfaction of the pre-conditions, we will send formal offer
documents and acceptance forms to Rio Tinto shareholders. We will also convene
an Extraordinary General Meeting at which BHP Billiton`s shareholders will have
the opportunity to approve the offer for Rio Tinto.
The Chairman then conducted the formal items of business.
Don Argus, Chairman, BHP Billiton
In closing the meeting, let me say again that the results for the 2008
financial year are an indication of the strength of the BHP Billiton Group.
BHP Billiton Limited will hold its Annual General Meeting on 27 November
2008. The results of both meetings will be notified to the stock exchanges
after that time.
Information Relating to the US Offer for Rio Tinto plc
In connection with the offer and sale of securities BHP Billiton would issue
to Rio Tinto plc US shareholders and Rio Tinto plc ADS holders, BHP Billiton
has filed with the US Securities and Exchange Commission ("SEC") a Registration
Statement on Form F-4 (the "Registration Statement"), which contains a
preliminary prospectus (the "Prospectus"), and will file additional relevant
materials with the SEC. This communication is not a substitute for the
Registration Statement or the Prospectus that BHP Billiton has filed, or any
amendments or supplements to those documents BHP Billiton may file, with the
SEC.
US INVESTORS AND US HOLDERS OF RIO TINTO PLC SECURITIES AND ALL HOLDERS OF RIO
TINTO PLC ADSs ARE URGED TO READ THE REGISTRATION STATEMENT, THE PROSPECTUS
AND ANY OTHER DOCUMENTS MADE AVAILABLE TO THEM AND/OR FILED WITH THE SEC
REGARDING THE POTENTIAL TRANSACTION, AS WELL AS ANY AMENDMENTS AND SUPPLEMENTS
TO THOSE DOCUMENTS, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION.
Investors and security holders are able to obtain a free copy of the
Registration Statement and the Prospectus as well as other relevant documents
filed with the SEC at the SEC`s website (http://www.sec.gov). Copies of such
documents may also be obtained from BHP Billiton without charge.
Information for US Holders of Rio Tinto Limited Shares
BHP Billiton Limited is not required to, and does not plan to, prepare and
file with the SEC a registration statement in respect of the Rio Tinto Limited
Offer. Accordingly, Rio Tinto Limited shareholders should carefully consider
the following:
The Rio Tinto Limited Offer will be an exchange offer made for the securities
of a foreign company. Such offer is subject to disclosure requirements of a
foreign country that are different from those of the United States. Financial
statements included in the document will be prepared in accordance with foreign
accounting standards that may not be comparable to the financial statements of
United States companies.
Information Relating to the US Offer for Rio Tinto plc and the Rio Tinto
Limited Offer for Rio Tinto shareholders located in the US
It may be difficult for you to enforce your rights and any claim you may
have arising under the US federal securities laws, since the issuers are
located in a foreign country, and some or all of their officers and directors
may be residents of foreign countries. You may not be able to sue a foreign
company or its officers or directors in a foreign court for violations of the
US securities laws. It may be difficult to compel a foreign company and
its affiliates to subject themselves to a US court`s judgment.
You should be aware that BHP Billiton may purchase securities of either
Rio Tinto plc or Rio Tinto Limited otherwise than under the exchange offer,
such as in open market or privately negotiated purchases.
Date: 23/10/2008 12:00:10 Produced by the JSE SENS Department.
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