BHP Billiton S Africa : Australian Shareholders’ Association national conference

Australian Shareholders' Association national conference
CFO Peter Beaven
Melbourne
20 May 2019

It is my pleasure to welcome everyone to the Australian Shareholders' Association's national conference. It's great to see so many of you here today.

First, I would like to acknowledge that we are meeting on the land of the Wurundjeri people of the Kulin nation. They have had a spiritual, physical, and economic connection to the lands and waterways of this country for generations past. And they will do so for generations in the future. I would like to show my respect to Elders past and present, and to the young leaders who hold the hopes and ambitions for tomorrow.

BHP is a proud sponsor of the 2019 Australian Shareholders' Association national conference.

We have a long-standing relationship with the ASA, the country's largest, independent investor representative group. We value organisations like yours because you give shareholders a voice through your advocacy work. You also raise awareness of shareholder rights through your education programs.

The association's growth has been impressive - from 14 members when it was founded in 1960 to around 12,000 active investors today. During those early years, companies were less inclined to engage with small investors. But as the association's influence grew over the years, more and more ASX200 companies made a concerted effort to embrace and listen to their retail shareholders.

Retail shareholders comprise 40 per cent of our Limited register. This has been very stable over many years. We estimate that 30-40 per cent of all Australians have exposure to BHP either directly or via their super funds.

We are aligned on many levels. We both want the company to be profitable. Yet we both understand that our contribution is more than just financial. We know that we must create social value as well as shareholder value. One cannot exist without the other.

We also share a long-term perspective on our investments. Our thinking must encompass very long timeframes given maximising the value of our resources bases takes decades.
Many retail investors also take a long-term view. Some have even held shares in our business since the Australian Shareholders' Association was founded nearly 60 years ago.

Back then, BHP was about to collaborate with Esso to search for oil beneath Bass Strait.

Eight years after the ASA was conceived, we established our first iron ore mine at Mt Whaleback in the heart of Western Australia's Pilbara region. That outback iron ore, coal, oil, gas, nickel and copper that has helped build critical infrastructure in the decades to come was made possible with the support of our retail shareholders. Their faith in our ability to turn their investments into competitive returns helped lay the groundwork for our future success.

Our history is rich with shareholder engagement. Just a few blocks from here, our leaders first met with shareholders at our inaugural ordinary general meeting in 1885. Although our reach has since expanded across the globe, the spirit of engaging with our shareholders is something we never forget.

We always listen to our retail shareholders to understand what's on your mind. That's why last year we introduced a dividend reinvestment plan so shareholders can convert their dividends into shares and boost their stake in the company. That's why we decided to pay half the proceeds from the sale of Shale as a fully franked dividend. And that's why we regularly hold 'BHP Live' online events, which is a forum in which we invite you to share your thoughts and questions. I look forward to the next one in September.

That's what today's event is all about. The insights, debate and discussion from an impressive line-up of speakers and the enduring connections you will hopefully create over the next two days. The theme of this conference is 'investing in the age of uncertainty'. It's about the challenges we all face to make the most of our investments and remain competitive amid the rapid pace of change in a globalised economy.

We live in an uncertain world. And that's why no matter how big or small your portfolio, diversification is critical to building resilience during times of prosperity and uncertainty. Delegates at this conference have adopted this approach. Again, this is aligned with our view at BHP. We also make sure both our portfolio and options are diversified in terms of commodities, geographies, and markets. This gives us more stability amid the ups and downs of the resources cycles, and places us on a strong footing for whatever the future may hold. This, combined with our tireless effort to grow the business, has generated strong results.

We have returned almost A$35 billion to shareholders since 2016. That includes a record A$18 billion - or approximately A$3.50 per share - in the past six months in the form of ordinary dividends, special dividends and share buy-backs. All fully franked for Australian shareholders. Over this time, we have also strengthened our balance sheet through a US$16 billion reduction in net debt, and reinvested US$20 billion into high-return projects.

As we look forward, we have identified significant opportunities to create even more shareholder value. Our transformation agenda will extract even more value from our existing assets. To unlock this, we have re-engineered the company so our people have more say, new capabilities and tools, and greater access to technology and innovation. These allow us to maximise the value of our existing footprint to reduce costs, lift efficiency and increase sustainability.

One of the ways we demonstrate our contribution is through our transparent disclosure of details of our tax and royalty payments. BHP has a long-standing commitment to transparency. We believe it builds trust and understanding, and holds us and others to account. In financial year 2018 our tax, royalty and other payments to governments totalled around A$10 billion. Of this, almost A$8 billion was paid in Australia. During the last decade, we have paid over A$100 billion globally in taxes, royalties and other payments, including A$68 billion in Australia.

To put this contribution in perspective it costs about A$23 billion to fund Medicare in Australia each year. So over the past 10 years BHP's taxes and royalty payments have effectively funded about three years of Medicare for the entire nation of Australia. We pay our fair share and this helps governments fund essential services and communities to plan for the future.

BHP must also plan for a future in which renewable energy, electrification and decarbonisation will transform the global landscape. The world will require a lot more copper. Renewable infrastructure will require more steel. And the batteries for electric vehicles require more nickel. We are confident our core commodities - iron ore, coal, oil, copper, nickel and potentially potash - will meet this demand.

The challenge is to deliver resources safely, sustainably and efficiently. To do this we have learnt to grow our business in a capital efficient environment and use a strict capital allocation framework to make sure every dollar is invested wisely. Our balance sheet is strong, and we have disciplined investment plans to build value and generate solid returns for our shareholders. These elements combined set up BHP and our shareholders for a great future.

Rest assured we will continue our strong track record and work hard to justify the ongoing support you have shown us. I want to thank you again for your loyalty and support and I hope the conference is an enlightening experience for you all.