| Fri 25 Nov 2005, 7:33 | | BHP Billiton Ltd - AGM 2005 Speeches |
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BHP Billiton Ltd - AGM 2005 Speeches
BHP Billiton Plc
Share Code: BIL
ISIN: GB0000566504
Don Argus, Chairman, BHP Billiton
Good morning.
My name is Don Argus, and I will Chair today"s meeting. Welcome to the 2005
Annual General Meeting of BHP Billiton Limited.
I want to say what a pleasure it is for your directors to be here in Perth.
Western Australia is a critical part of BHP Billiton"s geography and an
important part of the history of the original BHP.
55 years ago we opened an iron ore mine at Cockatoo Island in Yampi Sound.
Today, BHP Billiton"s iron ore and nickel businesses are headquartered here and
in the past four years alone, we have approved the investment of more than US$4
billion in our iron ore, nickel, oil and gas, and alumina operations throughout
the State.
Together, our Western Australian operations provide more than 5000 direct jobs
and many more jobs for contractors, and generate around A$360 million in State
royalties and taxes each year.
Importantly, more than 28,000 Western Australians are shareholders in BHP
Billiton and I"m glad so many of you could take the time to join us here today.
The Board has a commitment to give shareholders in major capital cities of
Australia the opportunity to attend annual general meetings where possible.
Given both the importance of Western Australia to BHP Billiton and the number of
shareholders here, Perth was a logical choice for this year"s meeting.
Moving on to the business of the meeting, I propose to take the Notice as read.
If you need a copy of the Notice, please ask one of the attendants. Minutes of
our last meeting are available for inspection in the registration area outside.
All of your directors, other than our newest director, The Honourable Gail de
Planque, are here today. On my left is Chip Goodyear, our Chief Executive
Officer and an Executive Director. The other non-executive directors are seated
in the auditorium. I"ll ask them to stand as I introduce them. We have: David
Brink; John Buchanan; Michael Chaney; Carlos Cordeiro; David Crawford; David
Jenkins; Lord Renwick; and John Schubert. You can read full details of their
backgrounds and qualifications in the Annual Report.
Next to Chip on my left is Chris Lynch, our Chief Financial Officer, and on my
right is our Company Secretary, Karen Wood. Next to Karen is Executive
Director, Mike Salamon.
Unfortunately Dr de Planque could not be with us today and sends her apologies.
Gail is a nuclear physicist and world authority in the field of nuclear energy
and regulation, and we are delighted to have her join the Board.
On your behalf I would like to welcome another recently appointed Director,
Carlos Cordeiro to his first Annual General Meeting. Carlos brings to the Board
more than 20 years" experience in providing financial and strategic advice to
corporations, financial institutions and governments around the world.
On the other hand, this is the last meeting for Michael Chaney and Lord Renwick.
Not only have Michael and Robin made a strong contribution to the development of
a high-performing company, both played key roles in the integration of BHP and
Billiton following the merger.
There is never a right time for hard-working, quality directors to leave a board
and, on behalf of all shareholders, I thank them both for their commitment and
contribution to the development of this group. Their wise counsel will be
missed.
Also here this morning are Peter Nash and Michael Andrew, representatives from
the Group"s external auditors, KPMG.
Let me now run through today"s agenda. It"s a full agenda, with 21 items of
business. I will talk briefly about the financial results for the 2005 year, a
year in which BHP Billiton delivered another record result. I"ll discuss the
company"s broader performance and how we continue to add value for shareholders.
And I"ll talk about how we see the year ahead.
Chip will then talk to you about the operational performance of the company.
Then I will discuss some of the questions that shareholders have sent to us,
open the meeting for your questions from the floor and, after that, move to the
formal items of business.
At the end of the meeting, the directors and the management team would like you
to join us in the foyer outside for some light refreshments.
Last year, after a record profit, I asked Chip, on your behalf, "can you sustain
this level of performance?"
Not only has the performance been sustained, Chip"s team turned in a new record
profit. The Group performed financially and, importantly, we continued to build
for the future, both through new projects and strategic acquisitions. WMC
Resources adds a further suite of long-life assets in nickel and copper, as well
as expanding our energy portfolio to include uranium. For this reason, I
believe 2005 has been a hallmark year in the history of BHP Billiton.
We have dramatically improved safety while, at the same time, delivering our
best ever financial results, creating value for shareholders, and delivering on
our commitment to the broader community and environment. I would like to pay
tribute to all our employees and contractors who have so significantly
contributed to this outstanding performance.
At the outset, let me remind you that all the dollars we will talk about are US
dollars unless otherwise stated. As you know, we operate and report in US
dollars so Chip and I will remain consistent with that today.
BHP Billiton in 2005 is a very different resources company. It is very
different to the BHP and Billiton companies that came together four years ago.
Through the work of Chip and his team, BHP Billiton is the world"s largest
diversified resources company, with a market capitalisation of around $93
billion, and the only one with a full suite of energy products. I"ll return to
that theme later.
A critical area that Chip and his team are focussed on is safety. I am very
pleased to be able to report to you that our safety performance has dramatically
improved at a time when we set new production records across the company.
However, we still suffered three fatalities during the year and we have had one
further fatality in the current financial year. The only acceptable bottom line
for the Board and the management team is no accidents and no fatalities, and I
can assure you that everyone in this company of 37,000 employees and around
60,000 contractors is working hard to achieve that goal.
Turning to the results. On any measure our 2005 results were outstanding:
the injury frequency rate dropped by 21 per cent;
revenue was up 28 per cent to $31.8 billion;
attributable profit of $6.5 billion was up 86 per cent on 2004"s then record
profit;
available cash flow increased by 70 per cent to $8.6 billion;
we returned around $1.7 billion in dividends to our shareholders;
we acquired and have successfully integrated WMC Resources;
we completed a $1.78 billion share buy-back;
and we completed eight major growth projects with ten more currently under
development.
And we did all this while maintaining our Moody"s single A credit rating and
Standard and Poor"s A+ stable rating.
One of our critical jobs as a Board is to ensure that every dollar invested by
the company on your behalf is used to create long-term value for all
shareholders.
During the year we successfully completed both stages of a $2 billion capital
management program. The program enabled eligible shareholders to participate in
an off-market share buyback and enabled us to increase the total year"s
dividend. I will talk more about our dividend policy later.
I said earlier that BHP Billiton is a very different resources company. One of
the ways we are different is our focus on sustainable, value-creating growth. A
simple demonstration of this is the value of a shareholding in BHP Billiton
today. If you had invested $1,000 in BHP in 1998, it would be worth $4200
today, a compound annual growth rate of nearly 23 per cent.
The acquisition of WMC Resources was integral to our strategy of creating
sustainable long term value. For instance, WMC expanded our presence in energy.
Access to reliable, reasonably priced energy is the foundation for the
development of emerging economies and for improving their living standards.
WMC"s assets have strengthened our ability to participate in the energy sector
and, therefore, in the development of those economies.
With the rapid urbanisation of many regions of the world, energy demand is
likely to increase faster than population growth over the next decades. At the
same time, the proportion of the world"s population supplied by electricity will
grow faster still.
The key question is where that energy is going to come from. Today, worldwide,
79 per cent comes from fossil fuels, seven per cent from nuclear fission, 11 per
cent from bio mass and waste, two per cent from hydro, and one per cent from
renewable sources. There is no prospect that we can do without any of these
energy sources.
So, meeting the world"s future energy needs will require a mix of fuels,
including fossil fuels, uranium and renewable energy sources.
We believe that uranium has an important role to play in meeting the world"s
growing energy needs. Along with clean coal technologies, renewables and other
energy-efficient programs, uranium also has the potential to help address issues
of global climate change.
With our existing thermal coal and oil and gas assets, plus the acquisition of
the Olympic Dam copper and uranium operations from WMC, we are well-positioned
to participate in the increase in demand for energy around the world.
So, the new BHP Billiton is positioned for continued sustainable growth in a
rapidly changing world. In the four years since the merger, the value of the
Group has increased from 28 billion dollars to around 93 billion dollars. That
is a direct reflection of the increase in the value of your investment in the
company.
This slide shows BHP Billiton"s market capitalisation relative to the rest of
the industry in 2001 and where it sits today. While the current economic
climate is good for the resources industry generally, BHP Billiton has
significantly out-performed the sector.
Not only is the financial performance world class but this is a company that is
becoming world class in every aspect of its business. In our commitment to the
environment, to safety, to the communities where we operate, and to corporate
governance, BHP Billiton in 2005 is an organisation that shareholders, employees
and communities can be proud of.
On behalf of the board, and Chip and his management team, I can assure you that
we will continue to strive for excellence in all aspects of our business.
While you will have received copies of our Annual Report there are some other
reports and documents I believe are equally important. Outside in the foyer we
have copies of our Sustainability report. We used to call this report our
Health, Safety, Environment and Community report but we believe Sustainability
better reflects its purpose.
The full version of this report is available on our website. The report
outlines our key policy positions and the management standards we have put in
place to ensure we do what we say. It covers a range of areas from community
relationships to the environmental challenges and ethical issues we face.
I am also very pleased to be able to take the opportunity to launch our new
community programs report. This document, titled "Yesterday, Today, Tomorrow"
is also available in the foyer or from our website. It shows some of the
community support programs we have in place around the world. As you know, we
have a stated commitment to spend one per cent of our pre-tax profit on
community programs.
Finally, I would like to welcome some of the winners of our Health, Safety,
Environment and Community Awards. These awards recognise the employees from
around the world who have done the most outstanding work in their local
communities.
I will ask them to stand up so that you can recognise them. We have: Michael
Jose from Australia; Monica Arrieta from Columbia; Ed Pincerato from Australia;
Humera Malik from Pakistan; Venecia Van Loggerenberg from South Africa;
Steynberg Van Rensburg from South Africa; Yogen Chetty, also from South Africa;
and Eliseu Canuma from Mozambique.
Please join me in congratulating them on their excellent achievements. I"m sure
they will be happy to talk to you about their work over a cup of tea after the
meeting.
Now let me give you a view on how we see the year ahead. When we announced our
results in August, some commentators were disappointed that our outlook
statement seemed a little subdued. That was despite our comments that we
expected commodity prices to remain high by recent historical standards.
We have not retreated from our projected capital spend of around $6 billion on
projects and exploration this year. We remain optimistic about the growth
prospects of China, India and Russia. The United States continues to grow, and
Japan and Latin American countries are beginning to exceed growth expectations.
That said, we are working in an environment where geopolitical unrest will
continue to cast a shadow over the world.
We take a pragmatic view on the value drivers of the Group and we still expect
commodity prices to remain high by historical standards, although it is not
unreasonable to expect that prices will ease from their highs as new supply
comes on stream to meet strong demand.
Our strategy continues to be to build a diversified geographic and product
platform to enable BHP Billiton to deliver sustainable value regardless of
economic conditions and at any stage of the cycle.
Our pipeline of major projects - those that are currently either in development
or in what we call `feasibility" stage, demonstrates this strategy.
Each of these projects goes through our robust evaluation process to determine
that they will be low-cost, long-life assets that deliver value, regardless of
global economic conditions.
I will now ask Chip to talk to you about the performance of the operations
during the year and how he sees our growth prospects.
After Chip"s presentation, I"ll take questions from shareholders before we
proceed with the formal items of business.
Chip Goodyear, Chief Executive Officer, BHP Billiton
Thank you Don.
Good morning ladies and gentlemen.
You"ve heard this morning about our financial results for the "05 financial year
and the strong total return to shareholders over the last several years.
I"d like to look at some of the highlights of the year from an operational
perspective, to help explain how the efforts of everyone working at BHP Billiton
are directly contributing to our current performance.
First, in the area of safety, we achieved a 21 per cent underlying improvement
in our Classified Injury Frequency Rate. The CIFR, as it is known, is an
important measure as it records every injury where the individual is unable to
return to their normal work. And this covers our direct employees and
contractors. We have now gone to a metric of measuring Total Recordable
Injuries, which is an even broader measure of safety performance.
It is the very nature of accidents or incidents, particularly in our industry,
that the same occurrence can result in anything from no injury to a fatality,
depending on the precise circumstances. So it is vital that we eradicate the
behaviours and activities that lead to any of these injuries - not just to
fatalities - hence our focus on this measure.
We did have three fatalities during FY05 and, while that"s an improvement on the
17 in the previous year, it is still three too many and we must continue to
focus on making progress toward our Zero Harm target.
Our people have produced some great results in the environment and community
areas over the last several years and we were honoured to receive the `Company
of the Year" award from the Business in the Community organisation in the UK in
July. We are the first company in the extractive industries to win the award
and it was a great reflection of the work of our people around the world over
the years.
We are all hearing about the strength of demand for commodities globally and the
high prices that are being achieved in the current environment. It might seem
inevitable that a company like BHP Billiton, with such a diverse spread of
products, is going to achieve record profits in this high-demand environment.
But it is important to remember that years like this happen when preparation
meets opportunity.
Indeed, every one of our seven Customer Sector Groups produced higher earnings
before interest and taxes in 2005, compared to the corresponding period.
In the Petroleum CSG, EBIT increased by 32 per cent; in the Aluminium CSG, EBIT
was up by 26 per cent; Base Metals was up by an extraordinary 88 per cent; and
Carbon Steel Materials, which of course comprises iron ore and coking coal, was
up by 148 per cent.
Diamonds and Speciality Products" EBIT was up by eight per cent; Energy Coal
increased by 163 per cent and Stainless Steel Materials increased EBIT by 33 per
cent.
These increases are not simply a result of high prices. To appreciate what
differentiates BHP Billiton from others, it is important to understand what the
company has done to actively capture the benefits of the high demand and price
climate.
During the year we achieved record volumes in eleven commodities. Those
commodities were: natural gas; aluminium; alumina; copper; silver; lead; iron
ore; coking coal; manganese ore; manganese alloy; and nickel. It is great to
hit production records in high price environments.
If we look at volume growth over the last four years, we have seen more than 50
per cent growth in nickel and silver production, more than 40 per cent growth in
iron ore, manganese ore and alumina and more than 30 per cent growth in copper,
aluminium and natural gas.
The increases in our volumes are the result of two important actions over the
last several years. First, there are the improvements made at individual
operations through what we call `business excellence" initiatives. Let me give
you a few examples of these.
The manganese we produce from our Gemco operation on Groote Eylandt in the
Northern Territory is an important component of steel-making. A team of our
people got together with the aim of increasing the rate at which ore could be
fed to the concentrator where the ore is processed.
First of all, the team identified and analysed the reasons why the concentrator
had unscheduled stoppages and variable feed rate. Then they generated more than
130 viable solutions and began implementing them.
The result during the `05 financial year was increased production of manganese
from Gemco that translated into a $10.6 million increase in earnings.
At our Tintaya copper operation in Peru, a team of our people looked at how they
could increase the amount of ore being processed through the oxide plant. They
identified several causes of stoppages and put in place solutions as simple as
protecting one of the conveyors from rain. The increase in the amount of ore
crushed through the measures they implemented resulted in an increase to
earnings of $3.4 million.
Projects like this are being conducted across all our operations. They rely on
the energy, enthusiasm and determination of our people to constantly improve our
operations and find better ways of doing things at the grass roots level. These
sorts of improvements can"t be made by the company"s executives or corporate
functions; they depend on all our people working together to come up with
creative solutions to challenging problems. And they result in increased
profits for the company and greater returns to you, the shareholders.
The second reason for the increase in volumes of our commodities during the year
is the expansion in capacity that we are creating through our growth projects.
Since June 2001, we completed 24 major projects, bringing on new capacity across
a range of commodities and ensuring we had additional product available to meet
the growing demand for natural resources.
Demand continues to be strong and we expect demand growth to continue as China
undergoes its large-scale urbanisation and countries like India follow the same
trend of a burgeoning middle-class.
During the "05 financial year we approved another four projects - two in
Petroleum and one each in copper and iron ore - and we continue to give the go
ahead to new projects, such as the expansion of our Western Australian iron ore
operations and development of the Stybarrow oil field off the north west
Australian coast, which we announced just yesterday.
Our current project pipeline includes 26 projects in either development or
feasibility and represents $11.9 billion of capital expenditure. And there are
many more projects that sit behind this pipeline, in earlier stages of
assessment, that, ultimately, we can bring on line if we believe market demand
warrants those investments. In addition, we expect our exploration and
technology activities to continue to identify opportunities.
I would like to emphasise the quality of each of these projects. Despite the
sheer quantity of projects being assessed and developed, we remain absolutely
focused on our strategy of developing tier one, or long-life, low-cost assets.
With our solid track record of project delivery, many of our projects will be
amongst the best in the industry, whether from a capital or operating cost
perspective.
Also central to our strategy is our focus on financial and capital discipline
and we will not compromise this to rush through any of our projects. We remain
clearly focused in this area at a time when there is not only increased pressure
to deliver growth, but also significantly increasing pressure on costs and
schedules brought about by the tight market situation.
Increased costs will impact some of our projects - that is a fact of life in our
industry at the moment - but we are diligently managing these cost pressures;
our rigorous project approval processes will stand us in good stead.
Again, we are fortunate to have excellent teams of people who have extensive
experience in project development, working around the world as they complete one
project and move on to the next.
As you know, we completed the acquisition of WMC Resources during the year.
WMC"s assets have assisted to position BHP Billiton as one of the industry
leaders in nickel through the addition of their extensive Western Australian
assets to our existing Queensland and Colombian nickel operations and our growth
projects in Western Australia. We have a positive view of the nickel outlook
and are excited about being able to develop these assets further.
Likewise, through the acquisition of Olympic Dam in South Australia, we have
been able to augment our copper position and gain prime opportunities for
expansion in future years.
We have effectively completed the WMC integration process, with those assets now
part of our existing Customer Sector Groups and many of the WMC people now part
of the BHP Billiton family.
I"d like to take this opportunity to thank all our people at BHP Billiton. It
is a very exciting but demanding time in our industry. To achieve the sort of
results we are discussing here today requires enormous effort by all of our
people to ensure we do make the most of the opportunities presented to us.
I"ll now hand back to Don.
Don Argus, Chairman, BHP Billiton
Thanks Chip.
This year we again invited shareholders to send in questions ahead of the
meeting to give us some guidance on the issues you would like to see covered and
I want to thank those shareholders who responded.
I will now address the issues that were raised most frequently.
Turning first to dividends. We have received queries around why our final
dividend for the year of 14.5 cents wasn"t higher, given the strong financial
results and record profit.
Dividends are one of the two components of your investment. The other component
is increases in the share price.
We have always said, and continue to hold the view, that our top priority for
cash flow is to finance value-driven growth opportunities. It is the company"s
investment in the growth projects that Chip and I have discussed today, that is
driving both the Group"s market capitalisation and the increasing dividend pay-
outs.
As long as we continue to see opportunities for adding value, we will reinvest
in the business.
Our next priority is to maintain our capital structure in line with our A credit
rating.
Next, we commit to returning cash to shareholders, either through our
progressive dividend policy or by other means - and you are aware of the $1.78
billion share buy-back we successfully completed last year.
In the 2005 financial year, BHP Billiton returned nearly $1.7 billions in
dividends alone. The final dividend for the year of 14.5 cents was 53 per cent
higher than the final dividend declared the year before. And it represented the
seventh consecutive increase in our dividend payments.
Your Board firmly believes that our progressive dividend policy is the right
one. You can be assured that the Board will continue to carefully assess the
company"s position and, if we believe we cannot better invest our cash in value-
driven growth, we will consider how best to return cash to shareholders.
A number of shareholders also asked about a dividend reinvestment plan.
I understand how attractive DRPs can be to some shareholders, however they are
not an efficient way for BHP Billiton to raise capital.
In the future we may look to raise capital through a DRP but we do not require
additional capital at the moment. In fact, we have been returning capital to
shareholders through the share buy-back.
The next subject that was raised by a number of shareholders is uranium. BHP
Billiton acquired WMC Resources in August 2005. That gives BHP Billiton access
to around one third of the world"s economically recoverable uranium resources
and we currently supply eight per cent of the world market for uranium.
Nuclear power capacity world-wide is increasing steadily with over 30 reactors
under construction in eleven countries. Most reactors on order or planned are
in the Asian region. In addition, significant capacity is being created by
upgrading the performance of existing plants.
It is not unreasonable to expect the operating lives of upgraded plants to
extend out from 40 years to 60 years. We also expect that the gap between
primary supply and demand for uranium in commercial power generation, is likely
to persist for many years.
As you will have seen in media reports, there is increasing recognition of the
role that uranium can play in helping to meet the world"s energy demands, while
also addressing the issue of climate change.
We recognise that in entering the uranium business, we will be dealing with a
commodity about which the community has some specific concerns. Our willingness
to participate in this sector is based on the following three facts:
First, the nuclear power industry is one of the most highly regulated industries
in the world with stringent licensing requirements for the construction,
operation and decommissioning of all facilities involved in the nuclear fuel
cycle.
Secondly, Australian mines can only supply uranium to those states that have
signed the Treaty for non-proliferation of nuclear weapons and where safeguard
standards are ratified in accordance with the Treaty.
Thirdly, the Australian Government has extended the Treaty requirements through
bi-lateral agreements with customer countries that reinforce the safeguard
requirements of the International Atomic Energy Agency.
Issues that emerged from the questions submitted are the handling and storage of
waste and the potential for radio-active material to be diverted to countries
that have not signed the Treaty. As I have mentioned, the safeguards on the use
of uranium are robust.
As a miner of uranium we do not have direct responsibility for the storage of
waste, however, as a responsible member of the industry, we are of course
concerned with the handling processes from an industry perspective.
We will work with others involved in the life cycle of the nuclear power
industry to optimise the effectiveness of management procedures and safeguards.
Another issue that shareholders have expressed interest in is the Federal
Government"s proposed Industrial Relations legislation.
We are a global company with operations and projects throughout the world. The
success of each one of these operations and projects depends largely on our
relationship with our workforce.
That means we take the initiative at each individual business to put in place
the best process to ensure we attract and retain the highest quality people.
We are proud of our relationship with our employees in Western Australia and
throughout the world. We believe that we would not have performed so
successfully over the last few years if it wasn"t for our employees and their
efforts.
BHP Billiton has participated in the Government"s consultation process around
the proposed industrial relations reforms, and we support any reforms that make
Australia more competitive internationally and enhance productivity.
The fifth issue raised by a significant number of shareholders was executive
remuneration. As I did last year, I would like to take you through how BHP
Billiton remunerates its executives by addressing the key questions we think
shareholders should be asking. This is the fourth year that we have put the
Remuneration Report to a vote.
Some of you will have seen these questions last year. They are:
Is the remuneration package made up of fixed and at-risk components?
What is the split between the fixed and at-risk components?
How is the fixed amount set?
What performance conditions attach to the at-risk component?
Are the performance conditions robust and will they create long-term value?
How has the company performed against the performance conditions? and finally
What payments would be made when a contract comes to an end?
I will use the CEO"s package as an example.
In 2005 Chip earned $4.9 million. This was made up of fixed and at-risk
components. 41 per cent was fixed as his base salary. 59 per cent was at-risk.
In other words, over half of Chip"s pay was assessed and paid as a result of how
the company performed.
The fixed amount is set by reference to the market, that is, what do we have to
pay to attract and retain a highly talented CEO in Australia.
From time to time the Remuneration Committee checks that our pay level is in
accordance with the prevailing market rate. The Committee did this again last
year. It is also typical for pay for all workers to be reviewed each year
against cost of living changes.
The increase in the cost of living varies across the regions of the world where
we operate, and for last year it ranged from two to seven per cent. The
increase in Chip"s base salary, which reflected the cost of living changes in
the region applicable to him, was five per cent.
The at risk remuneration is different and will vary depending on the performance
of the group. So how is the at risk amount determined? The 59 per cent that
was paid for performance was assessed by reference to short and long term
incentives.
The short term performance conditions included: our performance on health,
safety and the environment; how much shareholder value was created; and how much
net present value was added.
The Board signs off on these performance conditions at the beginning of every
year and then on how the executives have performed at the end of the year.
The next question is: will the conditions create long-term value? This can be
best illustrated by looking at the long term incentives.
This year we are asking you to approve the grant of 600,000 performance shares
to Chip. The performance conditions run over five years, so for Chip to receive
those shares in 2010, the total shareholder return (that is the total of the
amount by which the share price has increased and the dividends that have been
paid) must exceed the TSR of the companies in our comparator group by a
compounded annual rate of 5.5 per cent.
You can see from this slide what would have to happen to your share price and
dividends over the next five years for Chip to receive all those shares. The
cumulative amount equates to exceeding the average total shareholder return of
the comparator group over a period of five years by 30 per cent.
Keep in mind that the Board has limited the total number of Performance Shares
that can be granted to a value that is no more than two times the executive"s
annual base salary.
You can see how the company has been performing against these conditions from
these slides. First, you can see from the orange line how we have performed
against our comparator group and the market over the last year. And second, how
we have performed over the last five years.
It is reassuring that a majority of our shareholders think that we have the
right incentives to attract, retain and motivate quality executives around the
world.
The final question to ask is what arrangements are in place to minimise the
amount that is paid when a contract comes to an end. Our policy is to make sure
we can terminate contracts on 12 months" notice and that we don"t have to pay
more than 12 months" salary.
While we still have one or two old executive contracts that require us to pay
more than 12 months" salary, Chip"s contract can be terminated by giving 12
months" notice which would require a payment of one year"s base salary, plus the
amount paid instead of superannuation, which was $630,000 based on his salary at
30 June 2005. The shares Chip would be entitled to retain if his contract comes
to an end are detailed in the Annual Report.
I"ve outlined the process BHP Billiton has adopted to set executive
remuneration, a process that is well described in the Annual Report. But the
real issue in understanding our remuneration policy is this: BHP Billiton is a
complex company of 37,000 employees mining, processing and marketing products
ranging from iron ore to diamonds at around 100 operations in 25 countries.
We are the world"s largest diversified resources company and the 33rd largest
company in the world, according to FT Global 500 ranking in September this year.
That means we face competition for talent not only from other resource
companies, but from other similar sized companies around the world.
The senior executive team is responsible for making judgements about highly
complex, long life projects where the pay-off is often not seen for 10 to 15
years and the asset"s life may be up to 40 years.
Finally, it is hard to put a precise value on executive remuneration but what
all of us know is that good executives create real value and bad ones destroy
value, and cause enormous long term damage to the companies they run.
Ladies and gentlemen, the issues I have covered were those raised most
frequently by shareholders ahead of the meeting.
The Chairman then conducts the formal items of business.
In closing the meeting, let me say again that the results for the 2005 financial
year are an indication of the strength of the BHP Billiton Group.
BHP Billiton is in strong financial shape. We have strong cash flows and
margins, professional and capable leadership, a committed workforce and an
impressive pipeline of growth projects. All of us are focussed on ensuring that
shareholders, our employees and the community share in our success.
- Ends -
Date: 25/11/2005 07:33:20 AM Produced by the JSE SENS Department
