TIDMBHP
RNS Number : 2278Q
BHP Group PLC
17 October 2019
17 October 2019
To: Australian Securities Exchange cc: New York Stock Exchange
London Stock Exchange JSE Limited
BHP GROUP PLC ANNUAL GENERAL MEETING SPEECHES
Please find attached addresses to shareholders to be delivered
by the Chairman and the Chief Executive Officer at BHP Group Plc's
Annual General Meeting today in London.
The meeting will be webcast at
https://edge.media-server.com/mmc/p/xj8zupub
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 Group Limited's Annual General Meeting which will
be held in Sydney, Australia on 7 November 2019. The results will
then be released to the market.
Further information on BHP can be found at bhp.com.
Rachel Agnew
Company Secretary
BHP Group Limited ABN 49 004 BHP Group plc Registration
028 077 number 3196209
LEI WZE1WSENV6JSZFK0JC28 LEI 549300C116EOWV835768
Registered in Australia Registered in England and Wales
Registered Office: Level 18, Registered Office: Nova South,
171 Collins Street 160 Victoria Street
Melbourne Victoria 3000 Australia London SW1E 5LB United Kingdom
Tel +61 1300 55 4757 Fax +61 Tel +44 20 7802 4000 Fax +44
3 9609 3015 20 7802 4111
Members of the BHP Group which is headquartered in Australia
BHP Group Plc Annual General Meeting
Speeches by Ken MacKenzie, Chairman
and
Andrew Mackenzie, Chief Executive Officer
17 October 2019
BHP Group Plc Annual General Meeting
17 October 2019
Ken MacKenzie, Chairman
Introduction
Good morning ladies and gentlemen. I would like to welcome you
to the BHP Group Plc Annual General Meeting. It is always a
pleasure to be here in London to engage with our shareholders.
I am joined on stage today by your CEO Andrew Mackenzie, and all
of your Directors. I would like to give a special welcome to our
new Board members, Ian Cockerill and Susan Kilsby, who joined us in
April. I will talk more about Ian and Susan a little later.
September marked two years since I became Chairman of BHP. In
that time, my first impressions of this Company and its people have
only been reinforced. I remain impressed by the quality and scale
of BHP's assets, the contribution we make to the communities in
which we operate, and the role we play in global economic
development.
The expertise and discipline of the people at BHP is highlighted
to me each time I visit a site or office. They are committed to
making a real difference, to their teams, to the communities where
they work, and to BHP.
I am also proud of our management team. Because of their
efforts, BHP is:
- simpler - with a portfolio focused on high quality assets in the right commodities;
- stronger - with a robust balance sheet, which gives us more financial flexibility;
- more efficient - through a relentless focus on productivity; and
- more disciplined - with a rigorous and transparent capital allocation process.
Their commitment to our strategy has delivered significant value
and returns. This, coupled with stronger commodity prices, allowed
us to declare a record final dividend of 78 cents per share - or
US$3.9 billion in total. That is on top of the US$17 billion we
returned to shareholders last financial year.
While we remain cautious in the short-term, we are positive
about the long-term outlook. We are confident that our portfolio is
well positioned to seize the opportunities that will come from
population growth and better living standards, and trends such as
electrification and decarbonisation. These are all likely to
increase demand for our products well into the future.
In light of this global backdrop, BHP is well placed to create
value for shareholders and we will do this by focusing on the five
priority areas we introduced two years ago: safety, portfolio,
capital discipline, capability and culture, and social value.
Safety
The safety of our people remains our first priority. Tragically,
in December, our colleague Allan Houston died in an incident at
BMA's Saraji Mine in Queensland. I offer my condolences to Allan's
family, friends and colleagues. For the first time in 15 years, we
were not able to determine the definitive cause. However, our
investigation identified a number of improvement areas and work is
underway to implement these.
Last financial year, our Total Recordable Injury Frequency rose
slightly to 4.7 per million hours worked. However, we reduced the
rate of events with the potential to cause a fatality by 18%, which
is a critical indicator of future safety performance. We are
encouraged by this, but we know there is still much more work to
do.
The collapse of the Brumadinho tailings dam, owned by Brazilian
company Vale, was a tragic event for the industry this year.
Unfortunately, we know too well the toll these events take on
communities.
Earlier this year, we responded to a shareholder request for
information on our own tailings storage facilities and we held
investor briefings in Sydney and London to talk openly about how we
manage our facilities. We remain committed to play our part in
ensuring that a tragedy like this never happens again. Tailings
dams and their management remain a key priority for the Board.
Andrew will outline our efforts in more detail shortly.
Portfolio
The second priority area relates to BHP's portfolio. We are in a
strong position today.
Through a series of well-timed divestments and the demerger of
South32, we have simplified our portfolio to five core commodities,
in 13 assets, with the majority of our earnings generated in
low-risk OECD countries.
These assets are low cost, produce high quality products and
have strong development potential. We also have a set of attractive
options within our portfolio across a range of commodities and
geographies.
We are confident our portfolio is true to our strategy. We are
in the right commodities and have the best assets to deliver value
to shareholders in the short, medium and long term.
Capital discipline
The third priority is capital discipline. In recent years, we
have made significant progress on strengthening our Capital
Allocation Framework. The Framework helps us to direct capital
between investments, the balance sheet and cash returns to
shareholders, like dividends.
Guidance for capital expenditure remains below US$8 billion for
the 2020 and 2021 financial years. We finished the year with net
debt of US$9.2 billion, which sits comfortably at the low end of
our targeted range.
In October last year, we completed the sale of our Onshore
Petroleum assets. Net proceeds of US$10.4 billion were quickly
returned to shareholders through a combination of an off-market
buy-back in December 2018, and a special dividend in January
2019.
With the approval of the Ruby oil and gas development in
Trinidad and Tobago, we now have six major projects under
development in iron ore, copper, oil and potash. All of these are
on schedule and on budget.
Capability and Culture
We have also worked hard to strengthen our culture and our
capabilities.
In 2019, we continued our transformation focus on
simplification, workforce capability and technology. Our
transformation efforts will make BHP safer and our operations more
efficient and predictable. They will also develop our people so
that they are equipped for the rapid pace of change that lies
ahead.
An example of this is our maintenance team at the Daunia mine in
Queensland. Last year, they reduced the average monthly scheduled
downtime of their haul trucks from four hours to just 80 minutes.
When applied across the entire fleet, this saves around 23 days
each year.
This example of continuous improvement, when replicated by all
our teams, across all of our assets, will be a powerful value
creation tool. Transformation, coupled with a lean and agile
management culture, has the potential to unlock billions of dollars
of value in the next decade.
This year we also expanded our Board capability.
As I mentioned, we welcomed two new directors - Ian Cockerill
and Susan Kilsby. Ian has extensive mining experience in executive,
strategic, operational and technical roles. He also has
considerable public company board experience.
At the same time we appointed Susan Kilsby, who has extensive
experience in finance and strategy, having held several roles in
global investment banking. Susan also has considerable public
company board experience and, until recently, was the Chairman of
Shire plc.
Both Ian and Susan are welcome additions and complement the
existing mix of skills, experience, diversity and tenure on the
Board.
Carolyn Hewson, a Board member for over nine years, is retiring
as planned. On behalf of shareholders, I want to thank Carolyn for
her dedicated service and leadership. She has made a valuable
contribution to BHP during her time on the Board and we wish her
the very best for the future.
Social value
Our fifth priority is social value. Social value is our
contribution to society, to our people, partners, economy,
environment and local communities. It is not something we do in
addition to our core business. Rather, it is an essential
precondition to adding shareholder value.
The long-term interests of BHP are best served by considering
much more broadly our range of key stakeholders than we have in the
past. If we don't have the trust and support of our stakeholders,
we won't succeed.
Part of the trust that builds social value comes from
transparency. That is why we're proud to share that in FY2019, our
total direct economic contribution was $46.2 billion. This includes
payments to suppliers, wages and employee benefits, dividends to
shareholders, and taxes and royalties to government.
To maximise our impact, we consider social value throughout the
value chain, from our local operational footprint to our impact on
society more broadly. We continue to focus on local businesses
through initiatives such as the Local Buy program to support the
communities where we operate.
And we take a global perspective on issues that impact our
business. This year, we announced measures to address global
warming, including a five-year $400 million Climate Investment
Program. This approach is fully supported by the Board and Andrew
will elaborate on these measures shortly.
Conclusion
In conclusion, we have made good progress on all five priority
areas in FY2019. Our unwavering discipline and commitment have
delivered strong results and record dividends to shareholders.
We have a clear strategy in place to maximise the value of our
assets and a transformation program to drive continuous improvement
and build the capability we need for the future. Our approach to
Social Value is essential and directly linked to our business
case.
I am confident BHP can continue to create value for our
shareholders in the short, medium and long term. Thank you again
for joining us today. It is now my pleasure to invite Andrew
Mackenzie to the podium.
Andrew Mackenzie, Chief Executive Officer
Welcome
Thank you Ken. Welcome to today's meeting. It's always a great
opportunity to speak with our shareholders here in London.
As Ken highlighted, in the 2019 financial year we announced a
strong set of results, built on simplification, capital discipline,
and culture. This combination places us in great shape to weather
any external volatility and seize the many opportunities we have
created to grow value and returns for our shareholders.
Safety
As always I will begin with safety. The health, wellbeing, and
safety of our people and the world, is, and always will be, our
first priority. It is with great sadness that last December our
colleague Allan Houston died at BMA's Saraji Mine in
Queensland.
Allan's death impacts us all and is a stark reminder of why
safety will, and must, remain at the forefront of what we do and
why we have shared the improvements identified in the fatality
investigation widely both internally and externally.
We believe that a zero fatality workplace is possible and we
will do all we can to achieve that outcome. In the 2019 financial
year we made strong progress against our four safety
priorities.
- One, we launched the contractor management framework to give
all contractors the same access to safety tools and processes as
our employees.
- Two, our leaders spent more time in the field coaching as part
of the Field Leadership program which institutionalises these
practices.
- Three, we launched a new software solution tailored to our
requirements by our Technology team. This is a common platform to
gather and analyse safety data across the company, accessible and
user friendly to employees and contractors, which builds on our
leadership position in enterprise-wide systems.
- Lastly, we did more work to create a culture of chronic
unease. This delivers a heightened safety awareness which urges us
all to question assumptions around safety and make sure all issues
are addressed quickly.
In June, in addition to our safety priorities, we established a
Tailings Taskforce. Immediate focus areas include actions to reduce
the consequences and likelihood of dam failure. We have removed
significant numbers of people who worked in closest proximity to
dams. And we have built new standalone structures or buttressed
existing structures, and conducted more rigorous drills, to protect
those whose duties require them to remain in the general vicinity.
And we have applied technology to eliminate tailings
altogether.
Our work in tailings has further expression through our
engagement in industry associations like the ICMM and MCA.
At a time of increased focus on local solidarity, protection,
and intervention, in response to increased insecurity and global
changes, it's our participation in industry associations which can
contribute to the more global solutions also required for a more
progressive world.
For example, I lead a task force across the mining industry, and
its supply chains, to make our vehicles greener and safer. This
typifies the vast bulk of the work of all the trade associations we
join and we work tirelessly to make sure this kind of work is their
major and predominant role.
Mining trade associations, especially, deserve our full
engagement. The move to renewables demands a multi-fold increase in
the production of metals in the decades ahead, which makes mining
one of the most vital components of our low carbon future.
Purpose
Our approach to social value builds trust with society, inspires
our workforce and unlocks more of their discretionary effort. It
secures greater access to both low-cost capital and the best
talent. When we create more social, as well as financial value, we
deliver even better outcomes for shareholders.
So we have changed our company purpose to reflect the
aspirations of all who work with and count on BHP - our
shareholders, our workforce, communities, customers, suppliers and
debt-holders. Our purpose is now to bring people and resources
together to build a better world.
An example of our purpose in action is how we work with our
communities on issues such as dust, and the wellbeing of Indigenous
Peoples whose land is adjacent to, or includes, our mines. Our
investment and focus on these important matters builds trust with
the rest of society and our value chain and secures our role as a
preferred business partner.
Our gender balance goal coupled to our strong anti-harassment
measures is another example. As we and many others elsewhere have
found, sites and teams with greater diversity and inclusion are
both safer and more profitable. Our commitment to gender balance is
why I signed the CEO Statement of Support for the United Nations
Women's Empowerment Principles. The Principles guide actions that
the business sector can take in the workplace, marketplace, and
community, to empower women for the benefit of every company and
the World.
At both a local and global level our new purpose captures our
intent and signals our determination to make contributions
throughout society. This will help us deliver even greater value
and returns to shareholders in the short, long, and very long
term.
Sustainability
The environmental challenges we face today are complex, and
demand concerted and collective action. We accept our
responsibility to take action on global warming and reduce our
greenhouse gas emissions. Our operational emissions came in at 33%
better than our FY2017 target baseline and we are on track to cap
2022 emissions at or below 2017 levels.
We have committed to a new climate portfolio analysis in 2020.
This will outline our plans to mitigate and adapt to global warming
and will include a 'well-below 2 degrees' scenario.
We launched a five-year, US$400 million Climate Investment
Program to assist delivery of our public targets for our
operational emissions (scope 1 and 2), and to work with others
across our supply chain to address scope 3 emissions that come from
the transport, processing, and use of our products.
Our Scope 3 goals, to be presented in 2020, will be designed to
measure our impact and align with the goals of the Paris Agreement.
Unlike the control that we can exercise in our operational
environments, we can't mandate that our customers reduce their
emissions. But we can collaborate with them and suppliers, and
other partners, to drive actions that reduce greenhouse gas
emissions from the major uses of our products throughout our value
chain.
This work will include partnerships for the development of
carbon capture utilisation and storage in industrial applications
such as steel. Another example could be the identification of a
battery technology with the potential to not only lower the cost of
power storage for renewables, but also to create greater demand for
our commodities.
Our goals will be built around these types of activities and
focused on outcomes that make a material difference. Finally, we
also plan to strengthen the link between emissions performance and
executive remuneration, to further reinforce the importance of
sustainability to our leadership.
In the 2019 financial year we also made good progress to reduce
loss of wildlife and species and impacts to water resources. We
launched a Water Stewardship Position Statement which outlines our
vision for a water-secure world by 2030. We will improve water
conservation within our business and collaborate with others to
strengthen water governance beyond our operations.
We have invested in and worked with Chilean power companies to
secure exclusively-renewable power to create and pump, at low cost,
desalinated water which is now the predominant water used at our
mines in the country. This led to the transition from coal-fired to
renewable power without significant transitory use of natural gas,
higher energy prices, or issues with reliability.
As part of global decarbonisation similar moves from coal, more
or less directly, to renewables may be required over the coming
decades in other countries - particularly those without access to
cheap gas.
Financial performance and portfolio
Our 2019 financial year performance was strong. We delivered
record cash returns to shareholders. Higher prices and a solid
underlying performance contributed to EBITDA of US$23 billion at a
margin of 53% and strong operating cash flows. After disciplined
investment we converted this into free cash flow of US$10 billion.
Over the year our return on capital employed, excluding shale was
18%.
Across our major assets over the past five years, BHP's volumes
were up 10%, and unit costs down by over 20%. In that same period
our WAIO business has increased production by 20% and reduced costs
by 50%. We are now the lowest cost iron ore producer.
We enter the 2020 financial year with a positive outlook for our
business. We have a simplified portfolio of world-class assets and
a strong balance sheet. Our six major projects are on track and on
budget in iron ore, copper, oil and potash (and like our
operations, our project management benchmarks are world-class).
We have exploration licences in the world's top basins with
options for future development that have enjoyed recent competitive
discoveries. And finally, a greater focus on the capability of our
workforce.
Transformation
We have invested in our people, our Centres of Excellence, and
in innovation to create a culture and workforce that is more
empowered than ever and ready for the future. We have decided to
convert more of our contractor workforce to full time employment so
they are more fully enrolled in our culture, our approach to
safety, and more productive ways of working.
This gives them greater security of work and pay, increases
access to training, apprenticeships and ultimately more career
opportunities. We have also introduced a new approach to risk
management, which simplifies the assessment of risk and causes
everyone from the front line, to the Board, to adopt a more optimal
level of risk for the returns we seek.
Ken mentioned a great example of reduced maintenance hours in
Daunia that saved 23 days per year. Tangible examples like this are
now prevalent across the company. Using the principles of the BHP
Operating System at Peak Downs in Queensland, the Mobile
Maintenance Team has reduced the time it takes to complete an
engine module change in a haul truck from nine days to less than
two.
Our transformation work has already driven greater operational
and capital productivity and will do so well into the next decade.
Since 2015 we have sustainably reduced functional overheads by more
than US$1.5 billion. The continuation of our Transformation
programs which includes World Class Functions will remove an
additional US$500 million.
We expect to continue this trend through further evolution of
our workplace culture and technology. This, along with our push for
gender balance, has driven new ways of working that make optimal
use of office space and increase the global connectivity,
motivation, and productivity of all our people.
Future demand/ trade tensions
While our foundations are strong we remain conscious of the
geopolitical landscape. Current trade tensions are weighing on
consumer confidence and have the potential to impact demand for our
key commodities.
With our strong balance sheet, low cost operations, and
successful Capital Allocation Framework we are confident that we
are well positioned to weather any future volatility.
Longer term our view remains positive. Industrialisation and
urbanisation, along with decarbonisation and electrification, will
generate demand for energy, metals, and fertilisers for decades to
come. We are confident we have the right assets, in the right
commodities, to meet this demand.
Conclusion
We have made significant progress this financial year and we
have strong momentum. However there is more we can do to maximise
value for shareholders, and match our risk appetite to the returns
we seek.
Our Transformation program will standardise the way we work and
deliver more stable, competitive, and predictable operations.
Together with our culture, purpose and commitment to social
value, transformation will also lift our workforce's capability and
creativity and rally our efforts toward a common goal.
This, combined with our strong set of development options across
a range of commodities with attractive fundamentals gives us
confidence we have the settings right to grow value and returns,
next year and well into the future.
Thank you.
The Chairman then conducted the formal items of business.
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END
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