Public

Bluescope Steel (BSL) 2015 AGM Report

Company/ASX Code : BlueScope Steel Limited (BSL)
Venue :
2pm Wesley Conference Centre,
220 Pitt Street
Sydney, New South Wales
Monitor : Mr Rod McKenzie
AGM Details / NoM : Thursday 19th November, 2015
# of Attendees : 120 shareholders and visitors
# Holdings represented by ASA : 354
Value of Proxies : $2.9 million
# Shares Represented by ASA : 660,000
Market Capitalisation : $2.5 billion

An Australian manufacturing success story

The Chairman had previously announced his intention to retire at the end of this AGM. He gave an upbeat presentation on the performance of the company over the past 12 months and reflected on some of the difficulties in running the business since the spin-out from BHP, the business uncertainty through the global financial crisis and the ongoing challenges associated with falling steel prices and the effect that has had on smaller producers. FY15 was a year of solid performance following the write downs and restructuring undertaken in FY14. EBIT rose to $301.8m. NPAT was $136.3m. As at 30 June 2015, net debt was $275m - gearing was 5.5%. FY15 saw the return of dividends. Total dividends paid for the year was 6c per share.

Significant progress has been made in terms of cost savings at the Port Kembla steel operations. The restructuring of the business couple with cooperation from unions and deferral of NSW government payroll taxes has considerably improved profitability of that operation. The company is aiming to save around $200m over the next 18 months. Similar cost savings measures are underway at the New Zealand steel making operations. A total of $50m of savings are targeted at that operation.

The company has also made significant progress in terms of safety. The unrelenting focus on zero harm is working right across the BlueScope operations. BlueScope employees have maintained an LTIFR performance of below 1 for longer than 10 years - a very impressive record.

The MD&CEO Paul O'Malley spoke on operational matters and gave a brief update on trading conditions for the first part of FY16. The company has recently moved to full ownership of the North Star BlueScope Steel business in the USA. This is expected to make a strong contribution to the bottom line in FY16.

Penny Bingham-Hall, Chairman of the Remuneration Committee, spoke on the remuneration issues and outlined the proposed changes to the STI and LTI. The FY16 & FY17 STI and LTI awards will be entirely in equity. STIs are based on 50% financial and 50% strategic initiatives LTIs are based on Relative TSR and CAGR of EPS.

Incoming Chairman John Bevan thanked Graeme Kraehe for his service to the company. He had proved to be nimble and agile when necessary in the fast changing business world that BlueScope operates in. This has resulted in the significant turn-around for the company.

The ASA congratulated the Chairman on the impressive effort made by the company over the past few years. We also congratulated the company on the impressive safety record.

Questions from the floor covered issues such as the large number of small shareholding and innovation to incorporate photo voltaic technology into roofing material.

The Chairman stated that BlueScope has offered facilities whereby small holders can either top-up or sell out at reduced brokerage and will look at this issue again, and that ongoing technology studies are underway in collaboration with various universities.

Resolutions

Resolutions covering the Remuneration Report, re-election of directors Daniel Grollo and Ken Dean, issue of share rights to Paul O'Malley and in relation to termination benefits were all passed with 95% or more in favour.

Whilst the issue of remuneration and the issuance of share rights were not questioned on the floor, discussions after the meeting with Penny Bingham-Hall provided some insight into the method of calculation of the quantum and pricing of rights. Further discussion on this subject will be held with the company in the New Year.

Note that the ASA voted against these resolutions as the actual hurdle rate was not declared. Further, it was felt that the share price for the equity awards was calculated at the bottom of the share price cycle and this resulted in a greater number of shares to be issued than if the awards were made based on the pricing structure for this year and then a separate pricing structure for next year.

This company is monitored by Mr Rod McKenzie. Mr Geoff Orrock attended the AGM on behalf of the ASA.