25th Oct 2007 10:30
BHP Billiton PLC25 October 2007 25 October 2007 To: Australian Securities Exchange cc: New York Stock Exchange London Securities Exchange Swiss Stock Exchange Deutsche Bank For Announcement to the Market In accordance with Listing Rules 3.13.3 of the Australian Securities Exchange,please find attached addresses to shareholders currently being delivered at BHPBilliton Plc's Annual General Meeting by the Chairman, retired Chief ExecutiveOfficer and the current Chief Executive Officer. As part of the Dual Listed Company structure of the Group, the business to beconducted at the Annual General Meeting will be determined by polls. The pollresults will not be known until the conclusion of BHP Billiton Limited's AnnualGeneral Meeting which will beheld in Adelaide on 28 November 2007. The resultswill then be communicated to the market. Yours sincerely J McAloonGroup Company Secretary BHP Billiton Plc Annual General Meeting Speeches by Don Argus, Chairman, BHP Billliton, Chip Goodyear, retired Chief Executive Officer and Marius Kloppers, Chief Executive Officer, BHP Billiton 25 October 2007 Don Argus, Chairman, BHP Billiton Good morning ladies and gentlemen. Welcome to the 2007 Annual General Meeting ofBHP Billiton Plc. My name is Don Argus and I will Chair today's meeting. Today's meeting is very significant for a number of reasons. We have a new Chief Executive Officer and we mark the retirements of ChipGoodyear and Non-executive Director, David Brink. Chris Lynch, who was anExecutive Director resigned from the Board in June. We've also recorded another stellar performance in terms of financial andoperating outcomes and we continue to move to new horizons with ourenvironmental and community commitments. However, I'm saddened to report that eight people lost their lives while workingfor the Company during the year. Tragedies like these cast a deep shadow over an organisation that prides itselfon improving the safety and wellbeing of our people. We cannot regard ourselves as successful until we eliminate fatalities andserious injuries from our operations. We will be more specific about these significant events as we move through theAgenda. Let me firstly indulge in a little history. We have been espousing the virtuesof our diversified strategic portfolio of assets now for some time - seven yearsin fact. The recent results bear testament to our optimism about the sustainability ofour strategy. I believe they begin to highlight the differences that are openingup in the operational efficiencies and the financial performance of the manyparticipants in the resources industry. We also believe that BHP Billiton is well positioned to continue the solidgrowth it has demonstrated since the merger of BHP and Billiton six years ago. Marius Kloppers, our new Chief Executive, will speak more about those growthopportunities a little later. In welcoming Marius to his new role, let me say that from a Board perspective,it is satisfying our succession planning process has delivered the best possibleperson to succeed Chip. The decision to appoint Marius was made after an intensive global search and itgives us comfort in our succession planning when an internal candidate issuccessful. We as a Board look forward to working with Marius and watching himmake his mark on this outstanding company. Please join me in welcoming Marius asChief Executive Officer of BHP Billiton. I will of course pay tribute to Chip's achievements and his contribution to theGroup a little later. Let me now introduce your Directors. I will start with Marius Kloppers. Next to Marius is Chip Goodyear, who has retired as a Director and leaves theGroup at the end of the year. Next to Chip are Gail de Planque, David Jenkins, Jac Nasser, John Schubert andDavid Crawford. To your left we have David Brink, John Buchanan, Carlos Cordeiroand Paul Anderson. Also to your left is Alex Vanselow, our Chief Financial Officer, and our GroupCompany Secretary Jane McAloon. Also here this morning are Chris Jenkins and Peter Nash, representatives fromthe Group's external auditor, KPMG. This unfortunately is the last Board meeting for David Brink who retires at theconclusion of this meeting. I have read many articles posing the question of what makes an exceptionalDirector. David is a classic case study to answer that question. He is a decent man. He has a very sharp mind, is a very independent thinker,courteous and consensus building, with a good sense of humour. David's contribution has always been measured but to the point and he has beendiligent and constructive. I note that he has little time for selfish agendasand he prefers a collegiate approach to Board participation. On your behalf I would like to publicly thank David for his insights andcontributions to building this company, and wish him and his wife Marilyn andfamily good health and success in the next phase of their lives without theintrusion of the complexities of BHP Billiton. Today we have 22 items of business to cover. As well as those items, we will cover issues shareholders have asked me toaddress at this meeting. As a result of that feedback from shareholders, I will specifically cover ourapproach to climate change as well as energy-related issues. I also want to talk about how we work with communities to manage the impact ofour operations. To give you a better idea of some of the outcomes we are able to achieve inthose communities, I will screen a video showing you some of our work. But before I do that, I will ask both Chip and Marius to speak to you today. I will ask Chip to discuss our results for 2007 and then ask Marius as theGroup's new Chief Executive to talk about what he sees as the priorities for BHPBilliton. Once they have spoken and I've addressed the issues shareholders have raised, wewill move to the formal items of business and then open the meeting forquestions from the floor. Of course, you will have the opportunity to ask questions on the specific itemsof business as the meeting considers each of these. After the meeting, the Directors and the senior management team would like youto join us outside for some light refreshments. As usual we will talk in US dollars because that is the currency we report in. Now, turning to our results for 2007. Our profit this year was $13.7 billion. 2002 was the first time we reported following the merger of BHP and Billiton.This slide compares the 2002 results to this year's results. You can see that the past five years has been a period of remarkable growth. Atthe same time, we have built a very strong financial position. In 2002 BHP Billiton's market capitalisation was around $30 billion. Today it isaround $220 billion. The issue for any public company is to balance returns to shareholders againstthe need to invest for the future. This is particularly important in a resources company where future earnings aredependent on heavy capital investment. The investment is often made three tofour years before the product is available for sale. On this next slide you can see how our growth in cash flow since 2002 has beenmirrored by both our reinvestment for future growth, and in returns toshareholders. Returns to shareholders take the form of dividends as well as on and off marketshare buy-backs. Share buy-backs are not only an efficient means of returning funds toshareholders they also influence the market value of our shares. This slide shows total shareholder returns since 2001, at the time of the BHPBilliton merger. This shows that an investor in BHP Billiton Plc who held 1,000 shares with avalue of around GBP3,479 at that time would now have an investment valued ataround GBP18,620. In addition, a shareholder would have also received cash dividends of just overGBP1,000 in that same period. This year your Directors decided to re-base the final dividend. As you know, wehave a progressive dividend policy which has seen 11 consecutive increases inthe dividend. In rebasing the dividend we haven't changed that progressive dividend policy. Rather, we've re-set it at a new level so that dividend increases in the futurewill come off a higher base. This reflects the Board's confidence in the Group's ability to continueproducing a strong and growing cash flow over the medium term. We are confident that we can maintain our progressive dividend policy whilecontinuing to invest in our unparalleled growth pipeline. I want to make two other points about our results this year. The first is that at a time of unprecedented demand for our products, we havebeen able to both meet that demand and keep our costs under control. The second point I want to make is that no matter how good our assets are - andwe have an unrivalled set of assets - they don't manage themselves. That brings me to Chip's legacy as the Chief Executive of this Group. Chip was thrust into the Chief Executive's role in January 2003. The Board saw that he quickly realised people were the intellectual assets thatmake things happen. Working with a talented group of people, Chip produced not only a remarkablefinancial outcome, but also a company that is acclaimed for its work in theenvironmental area, its community engagement and as a preferred internationalemployer. Why is this so? Chip follows good leadership principles. He has vision, he generates trust, he understands the power of diversity and thepoison of prejudice. In a world where smart solutions will always outpaceoutdated work practices, he has encouraged creativity and flexibility. Chip, history will treat you well and on behalf of all shareholders, thank youfor your achievements and contribution. Thank you also to Elizabeth, Charlie and Adelaide for their support which was sovital in enabling you to perform at the level you have. On behalf of us all, well done. Now we can't let Chip sign-off just yet as I am sure you will want to hear howhe saw the 2007 results and then Marius will discuss his vision for the future. Chip Goodyear, retired Chief Executive Officer, BHP Billiton Thank-you Don. Don asked that I take a few minutes to review our results for 2007. As usual, I'll begin with safety. Despite a promising result in a number ofareas, including a 17 per cent decrease in our injury frequency rate, we hadeight fatalities in our business in 2007. Obviously there's a devastating human impact associated with these deaths, butit reinforces an important message; safety performance is an accurate barometerof business performance. You see, we often found that where there were safetyissues in a business, those businesses had the most difficulty in meeting theiroperating objectives. Illustrating again the alignment between good health,safety, environment and community and good business performance. In the 2008 year, this company will be focusing on the implementation of theFatal Risk Control Protocols and continuing to push down the frequency ofinjuries across our business. Obviously these are essential on our journey to Zero Harm. Moving on to our financial results. Great financial outcomes have their foundation in strong operating performanceand 2007 was no different. An important element of our strategy is to ensure we operate our businessesreliably and consistently. In 2007 producing record results in eight of our commodities and 17 of ourassets and we were able to do this while we controlled our costs. When you combine these strong operating results with strong markets, the resultis strong financial performance, once again illustrating the impact whenpreparation meets opportunity. Our underlying earnings before interest and tax were up 31 per cent on theprevious year to $20.1 billion and attributable profit before exceptional itemswas $13.7 billion, up 35 per cent. Despite the cost pressures in our industry that you are all hearing about, wecontinue to see an excellent flow through of revenue to the bottom line withapproximately 78 per cent of the price increases we are getting for ourcommodities flowing through to the EBIT line. For the third half year period in a row we have seen a decrease in the rate ofcost increases. I would like to focus on two numbers that particularly demonstrate the Company'ssuccess. These statistics are EBIT margin and our return on capital employed. Both setrecords again in 2007 and it is the sixth consecutive year that both statisticshave set records. This is an outstanding achievement in our industry, or in any industry, and itis a truly spectacular outcome. We have seen strong growth in the volume of product from our operations over thelast six years, with volumes in 2007, fifty five percent higher than productionlevels six years ago. In 2007 our new copper project in northern Chile, Spence, started producing, andEscondida Sulphide, an expansion of the Escondida copper operation in northernChile continued ramping up production. 2008 will be another year of strong volume growth with twelve new projectsscheduled to commence production and we will see that volume growth across ourPetroleum, Stainless Steel Materials, Iron Ore and Base Metals businesses. We continued to look for new options to grow and last year we acquired aninterest in the Genghis Khan oil field in the Gulf of Mexico. We also acquiredan alumina project in Guinea, in Africa. Guinea holds approximately one-third ofthe world's bauxite and our project is one of the most advanced of its kind. During the year we continued to approve major new projects in line with thedemand we are seeing from the market. We currently have 33 projects in eitherthe final feasibility stage or already in execution. They represent an expectedcapital investment of $21 billion. Now let me take you through the 2007 earnings from each of our nine CustomerSector Groups. Seven of these achieved record earnings. Petroleum's underlying EBIT increased one point five per cent to just over $3billion. Mike Yeager and his team did an excellent job by maintaining a flatproduction level from 2006 despite no new major project start-ups during theyear. We expect strong production growth in the 2008 year with five new projectsscheduled to start producing. Aluminium delivered record EBIT of $1.9 billion, which was up 56 per cent. Weachieved record production of both alumina and aluminium, and completed ourWorsley refinery expansion in Western Australia. Base Metals underlying EBIT rose 28 per cent to a record $6.9 billion. Weachieved record production of copper, and as I mentioned earlier, Spence andSulphide Leach in northern Chile both contributed to the record copperproduction. Diamonds and Specialty Products' EBIT was $261 million. Our Ekati diamond minein northern Canada is processing continually lower margin material. However this will gradually be offset as the Koala Underground development atEkati starts producing in this financial year. Stainless Steel Materials' EBIT was up 310 per cent to $3.7 billion, which wasan all-time production record for nickel, driven by record nickel prices andhigher volumes from our Yabulu refinery in Queensland, Australia. The Ravensthorpe nickel project in Western Australia is progressing well andremains on track to deliver its first production to Yabulu this calendar year. Iron Ore delivered another record production and financial result. Higher pricesand record sales volumes drove an eight per cent increase in underlying EBIT to$2.7 billion. Western Australia iron ore recorded its highest ever productionand we are currently completing construction of our Rapid Growth Project 3 thatwill add more volume in 2008. Higher sales, record ore production and excellent cost containment droveManganese' underlying EBIT up 92 per cent to $253 million. The Metallurgical Coal underlying EBIT was $1.25 billion. This was a decrease of31.9 per cent over last year, which was mainly attributable to lower prices forcoking coal. However, we also had higher sales volumes at both Queensland Coal and IllawarraCoal in Australia. We also achieved record production and moved a record amount of material throughour Hay Point Coal terminal in Queensland. Underlying EBIT for Energy Coal increased by 48 per cent to $484 million. Exportprices were strong and we increased production over the previous year. I have touched on some of our growth opportunities in the near future but willpass to Marius to outline how we see the company's prospects over the longerterm. Before I do that I would like to take the opportunity to thank our employees andcontractors for their hard work and their contribution to our success. Peopleare a critical element of success to any organisation, even to an asset-basedcompany like BHP Billiton. No company can be successful without talented and dedicated people and I havebeen fortunate to work with some of the best people from all over the world. I would also like to thank you and all of our shareholders for your support overthe years. Finally, it is a great pleasure to turn the leadership of the company over toMarius. Marius has worked for us for 14 years and been involved in many aspectsof our business. He knows our people, our strategy and our opportunities. Mariuswill be an outstanding Chief Executive Officer of BHP Billiton. As a final word, I wish the members of the BHP Billiton family all the best forthe years to come. Now let me welcome Marius to address you. Marius Kloppers, Chief Executive Officer, BHP Billiton Thank-you Chip and good morning. Before I outline some of the future opportunities for this company and give youa sense of the direction we will be taking, I would like to note how great it isto be taking over from Chip at this time and how fortunate I am. Chip has discussed the growth in volumes of our commodities that BHP Billitonhas achieved over the past six or so years. That growth has largely beenachieved through the completion of 33 organic growth projects in that period, ata cost of about $23 billion. And of course we made the WMC acquisition andseveral other small acquisitions. Looking forward, as Chip has commented, this current financial year will be veryexciting in terms of the number of growth projects coming on-line. We areexpecting a nine per cent further growth in volumes from 2007 to 2008. You will be familiar with the project pipeline that we have shown you in thepast to indicate the number of growth opportunities we have over future years.As Chip has mentioned, we have got here 33 projects, representing about $21billion in future investment. The size of each bubble relates to the size of theproject and the colour relates to the commodity we are investing in. I would like to introduce you to a new way of looking at our pipeline in orderto show you some of the longer term growth that we have got in our portfolio. BHP Billiton has an unparalleled set of growth options. What we have done here is take the funnel of growth projects and divided thatinto three sections. On the right we have got projects that we have alreadyapproved and that are being developed. The 19 projects in this section represent$14.3 billion of expenditure. In the middle section, we have got projects in their final stage of evaluation -what we call feasibility - before being approved. There are currently 14projects at this stage, representing another $6.6 billion of investment. Then on the left-hand side, we are showing what we call future options. Thesefuture options are a selection of the projects that we are looking at and thatwe have control over. Not all these options will manifest in exactly the waythat we are viewing them today, but together they represent more than $50billion dollars of investment, based on what we know today. Based on these sets of options that we own, we expect to be able to maintain orexceed the growth rates we have shown in the last six years. It is worth noting that many of these growth options are low risk, fastexpansions of existing operations - operations like the Western Australia ironore assets, our metallurgical coal assets, the petroleum operations in the Gulfof Mexico, Escondida in Chile, Olympic Dam in South Australia, Cerro Matoso inColombia, Worsley in Western Australia and other major assets around the globe. Again, no other company has got this growth pipeline and no other company hasgot this pre-eminent resource position. Before I hand back to Don, and as your new Chief Executive, I would like to talkabout what I see as the priorities for the business. Importantly, do not expect there to be any change to our strategy. Our strategyis to operate upstream, long life, low cost, expandable, high margin, exportoriented assets, diversified by commodity and geography. This strategy has served us extremely well over the last six years and I believeit is an appropriate foundation for us going forward. As we have said many times, the world is experiencing a step-change in thedemand for commodities. Our focus then is to maximise the benefit we get fromthe opportunity presented by this on-going and long-term increase in demand. This means we need to run all our assets at their full potential and do sosafely and in line with our environmental responsibilities. If we continue to dothis well, we will continue to generate the cash that underpins all our otherplans and that allows us to invest throughout the economic cycle. Our second priority is to accelerate those options in the portfolio that I haveshown you and, in particular, focus on the larger opportunities. So, put simply, we will have the same strategy but with even more focus and morespeed, so that you, our shareholders reap the rewards of this new marketenvironment. Thank-you. Don Argus, Chairman, BHP Billiton Thank you Chip and Marius. Before we turn to some issues shareholders have raised, let me make a generalcomment on sustainability. To us sustainability is about development which meets the needs of the presentwithout compromising the ability of future generations to meet their own needs. If you then link sound sustainability performance with long term businessviability, you have a basic building block of BHP Billiton's strategicdirection. At BHP Billiton we provide the vital materials that enable continued economicgrowth. Those materials are critical to the lives of billions of people in developingcountries. At the same time, many people and many communities depend on us for much oftheir income. We recognise that the community benefits of our business could be undermined ifwe fail to effectively manage the environmental and social aspects of ouroperations. To mitigate this risk we ensure that all our operations meet the same highstandards wherever we operate. That means before we commence project development, we complete detailedenvironmental and social impact statements, including extensive communityengagement. With that short preamble, I will now deal with the first matter raised byshareholders, that is, climate change. Let me be unequivocal. We understand that climate change is a major global challenge and we arecommitted to playing our part. In June this year we formalised a policy statement which outlined the actions weare taking on climate change. For more than ten years we have actively worked to manage our greenhouse gasemissions. In 1995 we established our first set of five year targets. During that period we achieved a 12 per cent improvement against a target of 10per cent. In 2002, we set a new target for a further five per cent improvement. Onceagain, we exceeded that, achieving a six per cent reduction in our emissionsintensity by June this year. In setting new targets to take us forward, we recognise that our main objectiveis to reduce the greenhouse gas emissions generated from the process ofextracting and refining our products. We have set ourselves a target of a six per cent reduction in greenhouse gasemissions per unit of production and a 13 per cent reduction in energy use perunit of production by 2012. While we are only in control of the early part of the life of our commodities,our policy is to work with the other participants involved in the life-cycle ofour products to further reduce the impact on the environment. All participants in the process will have to make their own decisions about howthey can contribute to reducing greenhouse gases, as we do. They will also have to make trade-offs and find the right balance to satisfythemselves that they are doing what they can to reduce greenhouse gas emissionswithout compromising economic growth and development. As Chip and Marius have pointed out, our Company is in a long-term growthpattern as it strives to meet the increasing demand from the world's economies,many of which are developing and growing at record pace. I found it interesting to read that the International Energy Agency recentlyreleased a report which concluded that pressure must now be exerted oncompanies, governments and households to force greater energy efficiency. As our operations expand and we develop and acquire new assets, our total levelof greenhouse gas emissions is likely to increase. That said, it is still our objective to be the most efficient in our industry interms of greenhouse gas emissions per tonne of product produced. The other way we can make a difference is to help fund the research into, anddevelopment of, low emissions technology. Between 2008 and 2012 we will provide up to $300 million to support this areaand other energy efficiency initiatives, including research into, anddevelopment of, clean coal technologies. We will work with government and non-government partners to increase the valueof this investment. This 300 million dollar investment is on top of the $290million we spend each year on environmental programs. Coal as you are aware is a big contributor to greenhouse gas emissions. That said, there is no question that coal will continue to be one of the world'smain sources of energy over future decades because coal is a cheaper source ofelectricity generation. It is also attractive from the point of view of energy security. It isrelatively abundant and many countries have their own supplies. This slide shows the projected global growth in use of individual energy sourcesfrom 2004 to 2030. You can see that the use of coal is expected to increase despite an increase inthe use of all other energy sources. A key solution in relation to coal therefore lies in technology and developingways to reduce or capture its greenhouse gas emissions. It is imperative that governments around the world form partnerships withbusiness and communities to take active measures to support the development ofthese technologies. At last year's meeting, I also made the point that all forms of energy, fromfossil fuels to solar, oil and nuclear, have advantages and disadvantages. Nothing has changed. It is up to governments and their citizens to find the trade-offs they areprepared to make when they decide on the energy sources they will use. The debate over nuclear energy and its role in mitigating the impact of fossilfuel energy on climate change continues. We welcome that debate and as some of you will have seen reported in the media,a small number of our shareholders have expressed the view that we should leavethe Olympic Dam uranium in the ground. I would make these comments in relation to this issue. First, it is often proposed that the benefits of using nuclear power areoutweighed by the lifecyle emissions of mining, converting and enriching uraniumto produce fuel rods and emissions associated with constructing the powerstations. While there certainly are emissions associated with these aspects of thelifecycle of a nuclear power station, they are insignificant with respect to thesavings in emissions by using nuclear power. To illustrate this point we can see on this graph the direct and indirectemissions that are associated with a range of different power stations. Direct emissions shown in green are associated with the burning of fossil fuelsin coal, oil and gas fired power stations. The indirect emissions shown in whiteare the lifecycle emissions associated with mining and producing fuels andbuilding power stations. As you can see, nuclear power stations have no direct emissions of carbondioxide and the indirect emissions from the mining, production of the fuel rodsand other parts of the lifecycle are also relatively low and in the same orderas the renewables. There is no doubt that the energy debate will continue and we look forward tobeing part of that. Let me now talk about how we work with communities. As well as the moral and ethical issues involved, it makes sound commercialsense that the communities with which we work, value our citizenship and benefitfrom our success. Marius talked about our growth opportunities. Many of these are undevelopedresources in remote regions throughout the world. The governments and communities of many of these regions recognise that resourcedevelopment can dramatically improve their economic and social growth. But they also realise that they need to make the right choice of industrypartner. The best way we can demonstrate why BHP Billiton should be the partner of choiceis to point to our track record in the communities where we operate. We have set ourselves a target of spending at least one per cent of our pre-taxprofit, on a three year rolling average, on community programs. In the 2007 financial year, we exceeded our target by spending $103 million onhealth, education, welfare and other community programs worldwide. By linking our commitment to our pre-tax profit, we have ensured thatcommunities have shared in our success during this period of rising commodityprices. I want to now play a video to give you a glimpse of the way we work with thecommunities in which we operate or have a presence. Video was played Now, if you would like further information on the way we work with our hostcommunities, please pick up a copy of our latest community report "Yesterday,Today, Tomorrow" from the foyer. Before I move to the formal items of business let me give you an idea of thebroad economic outlook and how we see likely demand for our products in thefuture. Overall, despite the challenges being faced by the global economy, particularlyin the US credit markets, demand for our products remains strong. We expect the growth in China's economy that has become such a feature of thepast few years to continue. Chinese growth is resource intensive and, as Marius mentioned, it represents astep-change in resource demand. While we've been talking about China for several years now, India has somefundamental drivers that are quite similar. We see India as being 10 to 15 years behind China from a development point ofview but, as you can see from this slide, they have begun that journey. This growth is happening after a long period of under-investment by our industryand it is creating shortages in just about all the commodities that we produce. As producers around the world try to meet growing demand, pressure on costcontinues and therefore the cost of supplying our products increase. Combined with higher energy prices and the lower relative value of the USdollar, this is likely to have a flow on effect to commodity prices generally. So, in the short term at least, we expect commodity prices to stay high andvolatile. You've seen our growth pipeline and the many options we have to meet thisongoing strong global demand. We look forward to continuing to build on theseexciting opportunities. 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 2007 financialyear are an indication of the strength of the BHP Billiton Group. BHP Billiton is in excellent financial shape. We have very strong cash flows and margins, outstanding leadership, a committedworkforce and an impressive pipeline of growth projects. Your Board andmanagement are focussed on ensuring that shareholders, our employees and thecommunities in which we operate share in our success. BHP Billiton Limited will hold its Annual General Meeting on 28th of November.The results of both meetings will be notified to the stock exchanges after thattime. - Ends - BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209Registered in Australia Registered in England and WalesRegistered Office: Level 27, 180 Lonsdale Street Melbourne Registered Office: Neathouse Place London Victoria 3000 SW1V 1BH United KingdomTelephone +61 1300 554 757 Facsimile +61 3 9609 3015 Telephone +44 20 7802 4000 Facsimile +44 20 7802 4111 The BHP Billiton Group is headquartered in Australia This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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