Arrium (ARI) 2015 AGM Report

Company/ASX Code : A.C.N 004 410 833 Limited (ARI)
Venue :
2pm City Recital Hall, 2 Angel Place Sydney, New South Wales
Monitor : Mr Geoffrey Orrock
AGM Details / NoM : Tuesday 17th November, 2015
# of Attendees : 150 shareholders and visitors
# Holdings represented by ASA : 346
Value of Proxies : $240,000
# Shares Represented by ASA : 3.2 million
Market Capitalisation : $250 million

Que sera, sera

At a well-attended meeting, both the Chairman and MD were measured in their addresses and focussed on what the company was doing to respond to the continuing fall in the iron ore benchmark price, eg efficiency drive, cost cutting, and selective mining. A notable absentee was shareholder value.

There were more questions than answers as new Chairman Jerry Maycock carefully confined his responses to current actions, avoiding reviewing previous decisions or speculating about the future.

Mr Maycock confirmed there had been interest in the mining consumables business but would not be drawn on the Board’s thinking on a sale price. Asked what would be left if a mining consumables business sale occurred he said that the other businesses were potentially profitable.

He was several times asked when the company’s situation would improve and in reply, re-iterated the actions being taken, adding that the Board understood well the company faced a huge challenge and was managing the business aspects it could control aggressively.

As has been the case for the last several years, ASA focussed on Board renewal and executive largesse.

We told the Board that the decision to splash $1 billion of debt on a disastrous mining expansion had clearly not been properly stress tested at the bottom of the price cycle and we asked whether the long term directors should be held responsible and if so why were they still drawing $200,000 pa. We also commented that parts of the Arrium business have not been profitable since the GFC, yet there has been little evidence of efficiency, cost cutting or right sizing the businesses until now. The Chairman told the meeting the Board and management took collective responsibility for the situation the company finds itself in and while he would not answer for lack of action in the past he assured shareholders there was no equivocation now. To our suggestion that the company could surely not be worse off without the directors who had been directly involved in the decision to expand mining Mr Maycock said the Board renewal process was already proceeding at a reasonably intensive rate.

We also told the meeting that our practice for the last two years had been to vote against re-election of directors who had been appointed prior to the mining expansion decision and we would continue to do so. While we welcomed the appointment of two new directors, and Mr Smorgon’s decision to leave, we also said that we encourage the other 3 directors to go of their own accord.

We asked the Board would they review Board and management fees and incentive. Mr Maycock replied that competent directors and executives were needed at this time and he thought the fee and pay structure was appropriate.

The remuneration resolution attracted only 37% support, a massive message to the Board and management which we think signals big changes are needed if a Board spill is to be avoided next year.

Both new directors received support of 99%, but Mr Davis was re-elected with a majority below 70%, indicating a significant degree of agreement with our views.

ASA voted in accordance with our published voting intentions.