Wrap Text
2017 Annual General Meeting Speeches
South32 Limited
(Incorporated in Australia under the Corporations Act 2001 (Cth))
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32 ADR:SOUY
ISIN: AU000000S320
2017 Annual General Meeting Speeches
In accordance with ASX Listing Rule 3.13, attached are the addresses to shareholders to be
given by the Chairman and Chief Executive Officer at South32 Limited’s Annual General Meeting
today in Perth.
An audio webcast will be available via a link on our website at:
https://www.south32.net/investors-media/annual-general-meetings
Further information on South32 can be found at www.south32.net.
Nicole Duncan
Chief Legal Officer and Company Secretary
Registered Office: Level 35, 108 St Georges Terrace, Perth Western Australia 6000, Australia
ABN 84 093 732 597 Registered in Australia
SOUTH32 LIMITED
2017 Annual General Meeting
23 November 2017
Speeches by David Crawford AO, Chairman and
Graham Kerr, Chief Executive Officer
David Crawford AO, Chairman
Good morning everyone. My name is David Crawford, and I am the Chairman of South32.
Thank you for joining us today for our Annual General Meeting and welcome to our shareholders
from around the world who have joined us via webcast.
….
I am informed that a quorum is present, so I declare the meeting open.
I will now introduce the Directors.
On my left:
• Dr Xolani Mkhwanazi
• Frank Cooper – Chair of the Risk and Audit Committee
• Karen Wood - welcome to your first meeting. And we look forward to hearing from you
later
• Nicole Duncan - who I introduced earlier
And on my right:
• Keith Rumble – Chair of the Sustainability Committee
• Dr Xiaoling Liu – a special welcome to you at your first meeting and we will also hear
from you a little later
• Futhi Mtoba
• Wayne Osborn – Chair of the Remuneration Committee, and
• Graham Kerr – Chief Executive Officer who is seated next to me.
The Lead Team are in attendance today and are sitting in the front row.
Also in attendance is Denise McComish representing the Company’s auditors KPMG, and Tim
Heughan from Computershare is here to oversee the polling process.
I will begin with a short review of our performance for the 2017 financial year. Our CEO, Graham
Kerr, will expand on some of those themes in his operational report.
We’ll then move to the formal business of the meeting and the resolutions.
And we will provide an opportunity for discussion, and any questions you might have, when we
deal with each of the formal agenda items.
…
The 2017 financial year has been one of success and strong financial results. We continued to
embed our strategy, focusing on long-term success and the sustainability of our business.
For that, we can thank our teams across seven countries – the diverse, talented and dedicated
people who are the basis of everything we achieve at South32.
…
Our greatest priority is the safety of our people, and ensuring we have a culture of care and
accountability that permeates every level of our organisation.
In some respects, we have done well. We reduced our Total Recordable Injury Frequency rate
across all regions in the 2017 financial year.
However, we still have a long way to go.
It deeply saddens me to report a fatality on site this year. A contractor was fatally injured at our
Metalloys Manganese Smelter in South Africa.
Any fatality is unacceptable, and only strengthens our resolve to further embed our culture of
care and accountability. The Board and Management team are committed to continuously
improving our safety performance, so that we can guarantee everyone goes home safe and well.
Graham will share more on what we are doing to achieve this.
…
While we put a great deal of effort and planning into implementing our strategy, we must also
consider the external factors that are beyond our control.
The price of most of our commodities increased during the 2017 financial year. Manganese led
the way, and metallurgical coal, energy coal, zinc, lead and alumina all rose during the year.
Although market conditions remain positive, public policy remains a challenge in several areas.
The proposed new mining charter governing the mining industry in South Africa is of particular
concern. While we are committed to the country’s transformation agenda, the proposed Mining
Charter Three has created uncertainty across the mining sector. The matter is before the courts
and we are monitoring developments closely. The best outcome would be a Charter which all
stakeholders in South Africa can support. While the developments around the mining charter
play out, we will continue to focus on operating our businesses in South Africa sustainably.
…
Before speaking to our financial results, I want to acknowledge the challenges we faced at
Illawarra Metallurgical Coal in New South Wales.
I have met with the regulator to understand her concerns, and we have an action plan in place to
improve performance, and Graham will talk to this in more detail.
…
South32 delivered strong financial results in the 2017 financial year, with a significant increase in
profitability and shareholder returns.
Rising commodity prices underpinned a 20 per cent increase in revenue, to 6.95 billion US
dollars.
At the same time, we reduced controllable costs by 360 million US dollars.
As a result, basic underlying earnings per share rose from 2.6 to 21.6 US cents in the financial
year.
This is reflected in an increase in Underlying EBITDA, to just over 2.4 billion US dollars. Our net
cash position increased to over 1.6 billion US dollars at year end.
The return on invested capital for the year was 11.4 per cent – up from 1.7 per cent the previous
year.
…
The strong improvement in financial performance, and the disciplined application of our capital
management framework, allowed us to substantially increase returns to shareholders.
At the end of October this year, as part of our 750 million US dollar capital management
programme, we have purchased shares on market to the value of 282 million US dollars. Shares
were purchased at an average price of 2.77 Australian dollars per share.
In addition, we paid 526 million US dollars in dividends.
These results reflect the contribution made by our teams around the world.
…
As part of our culture of care and accountability, we pay particular attention to creating working
environments that are diverse and inclusive. This brings a vibrancy and energy to our operations.
In 2015, your Board approved a set of gender and ethnicity targets. I’m pleased to say that we
are making progress in meeting those objectives.
In the 2017 financial year, 1.8 million US dollars went towards closing the gender pay gap.
We have improved the representation of women in our workforce, and in our leadership.
We still have some work to do if we are to increase the representation of Black People. However,
in our South African workforce, particularly at the management level, we have initiatives in place
to achieve this.
…
This year we have not increased Fixed Remuneration for any of our Non-Executive Directors or
Key Management Personnel.
Our Short-Term Incentive is focussed on rewarding the key management personnel for
outcomes they can influence. This year the outcomes are generally lower than last year,
primarily due to lower than expected production volumes.
…
South32 recognises that acting on climate change is consistent with our goal of creating value for
shareholders.
Our business is vulnerable to changes in demand for commodities as the world responds to
climate change. Our climate change strategy focuses on finding and developing climate change
opportunities through the commodities we supply, building climate resilience and reducing
emissions. We are making good progress in all of these areas.
We support a smooth transition in which emissions fall to the levels needed to limit warming to
less than two degrees.
This year we completed a detailed assessment of the resilience of our portfolio under different
climate change scenarios. Pleasingly, our commodity exposure, the position of our operations
within their industries and our strong balance sheet, creates financial resilience.
Looking back across the 2017 financial year, we made significant progress. We have strong
foundations to create further value in 2018. We will maintain our financial discipline and remain
focused on optimising our portfolio. In doing so, we will deliver sector leading returns for
shareholders. We will continue to look for opportunities outside our existing portfolio to compete
for capital.
…
On behalf of the Board, Graham and his management team, it is my pleasure to thank all of our
people for their efforts during the past year. And to you, our shareholders, thank you for your
continued support.
I will now hand over to Graham.
Graham Kerr, Chief Executive Officer
Thank you David, and welcome shareholders.
I will begin by reiterating David’s comments about our culture of care and accountability and the
absolute importance we place on creating a safe and healthy workplace.
The fatality at our Metalloys Manganese Smelter in South Africa in November last year is a stark
reminder to all of us that we need to do more to ensure our people go home safe and well at the
end of their shift.
If we’re to establish our desired culture of care and accountability, we need to have well
designed work, a way to continuously improve, and an inclusive workplace, where everyone
plays a part in making the business safer.
We’ve taken a number of steps to achieve this.
For example, at our operations in Africa we’ve held a series of catalyst workshops across our
leadership group to drive behavioural change. We’ve also undertaken a detailed capability
review of our senior leaders. We continue to invest the time and resources to drive the necessary
behavioural change required to create a culture of care and accountability.
At our operations in Australia, we’re in the process of undertaking the same capability review and
implementing a series of initiatives to ensure our leaders and teams are fully involved in making
our operations a safe place for our people.
…
Technology and innovation can change the way we do so much in our business, and we’ve
already introduced a range of technologies which are helping us to improve safety and
productivity. For example, we now use drones to conduct inspections and maintenance in difficult
to access or dangerous areas.
And this year we added the role of Chief Technology Officer to our Lead Team to help us build
momentum and identify new ways to improve safety and productivity.
…
Although not without challenges, this year we have had some real highlights across the business
as we continued to optimize our operations. For seven out of ten of our operations we performed
in line with guidance. The three where we didn’t, I will address shortly.
Every part of our aluminium business was strong.
Our bauxite mines, alumina refineries and smelters in Australia, South Africa and Brazil – earned
over 2.8 billion US dollars of the Group’s revenue. This contributed 35 percent to the overall
Group underlying EBITDA.
A particular highlight was our Mozal Aluminium smelter in Mozambique which produced a record
271 kilotons of aluminium.
Manganese was another bright spot as we used the flexibility built into our South African
operations to take advantage of higher prices and offset cost pressures.
As the market tightened, we increased volumes by 19 per cent and used our stockpiles to
counter the impact of a stronger rand, inflation and higher price-linked royalties.
…
Meanwhile, as we mentioned we faced challenges at some of our operations.
At the Appin metallurgical coal mine in Illawarra in New South Wales we had an unacceptable
year as we experienced a series of outages, which affected our production.
We have recently commenced a measured ramp-up of longwall mining activity at Appin that will
allow us to reset the operation’s culture, re-establish minimum performance criteria and increase
productivity towards a more acceptable level.
At Cannington in North West Queensland, lead, zinc and silver production were all down as ore
grades declined, consistent with the mine plan, and run-of-mine stocks were depleted following
an underground fire.
Following the decommissioning of the original underground crusher in September this year, we
successfully replaced shaft haulage with additional trucking capacity. We expect processing
rates to increase once we commission the new underground crusher in the March 2018 quarter.
South Africa Energy Coal recorded an overall drop in saleable production caused by heavy rain
and associated delays in the development of the Wolvekrans Middelburg Complex. However, by
the June quarter of the 2017 financial year we saw an 11 per cent improvement in production as
we continued to open up new mining areas.
…
This year we also made significant progress as we sought to further unlock the potential of our
operations.
For example, we finalised an agreement with Alcoa to access the West Marradong mining area
at Worsley Alumina in Western Australia. This will allow us to defer spending capital on new
mining hubs into the future.
We delivered the first higher-grade ore from La Esmeralda deposit at Cerro Matoso in Colombia.
We started exploration at the Southern Areas of our Northern Territory GEMCO manganese
mine.
And in South Africa we have made good progress towards approving a project to extend the life
of the Klipspruit colliery.
…
We are also focused on identifying growth opportunities that increase the competition for capital
within the Group. We have been working with credible partners that provide access to greenfield
exploration opportunities in which we can use our technical abilities while minimising operating
risk.
We’ve reached agreements with:
AusQuest on base metals prospects in Peru and Australia.
Trilogy Metals to extend a high-grade copper resource at the Bornite deposit in Alaska.
And Arizona Mining on the Hermosa zinc, lead and silver project in Arizona.
…
Elsewhere in the business, our recruitment process increasingly reflects the importance we place
on creating a diverse, inclusive and effective work force.
Lead team appointments include new faces in marketing and sustainability, strengthening our
capacity in areas of growing importance.
It remains a priority for us to create a workforce that is as diverse as the communities where we
operate.
As David mentioned, we are improving workforce diversity with more women appointed to our
regional and operational lead teams.
We are committed to providing an inclusive and supportive workplace for our people. We have
commenced the introduction of a new family care policy, increasing paid parental leave for the
primary carer to 26 weeks’ full pay. On top of this, we will pay a lump sum superannuation
payment on return to work, and offer flexible working conditions.
It is important to me that we have a workplace where people feel safe asking for help when they
need it. In line with this, we’ve implemented a new policy focused on supporting staff who are
victims of domestic violence and offer a range of support options including paid leave, temporary
accommodation and payment towards legal advice.
We’ve also implemented a new harassment policy, reinforcing our zero-tolerance approach to all
forms of intimidation, harassment and discrimination.
…
In South Africa, we’re engaging with all areas of our business to support our transformation
strategy. In January this year, we awarded a three-year core mining contract to a Broad-Based
Black Economic Empowerment company, Modi Mining, at our Wolvekrans Middleburg Complex.
The award of this contract is particularly significant as it is our first core mining contract awarded
to a 100 per cent black owned company and marks a major step forward in our plans to deliver a
more inclusive supplier landscape.
…
In the past year, we’ve made good progress towards an inclusive and diverse workplace and will
continue to work hard in these areas.
…
Looking to the year ahead, we will continue to optimize our portfolio to deliver value to our
shareholders. We will seek more exposure to base metals and we’ve made a good start through
our exploration partnerships.
Across the industry, we expect rising raw material input costs. Should these external pressures
persist across the remainder of the year, we will not be immune to additional cost inflation.
…
To sum up, our financial results for the 2017 financial year, together with the strides we’ve made
towards our sustainability, diversity and safety targets give me confidence for the year ahead. I
look forward to updating you on our progress.
…
Thank you, I will now hand you back to our Chairman.
The Chairman then conducted the formal items of business.
David Crawford AO, Chairman
Closing remarks
Ladies and gentlemen, thank you for your attendance and attention.
This brings us to the end of the 2017 Annual General Meeting. On behalf of the Board, I would
like to thank you for joining us today. We look forward to your continued support in the coming
year.
For those of you here in Perth, please join me and my fellow Directors and executive
management for light refreshments.
I now declare this meeting CLOSED.
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24 November 2017
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