Ansell Limited (ANN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is John Bevan. I'm your Chair of Ansell Limited. It's my great pleasure to welcome you today to the 2022 Annual General Meeting. I'd like to begin with acknowledging the traditional owners and custodians of the land on which we meet, the Wurundjeri people of the Kulin Nation. I pay my respects to their elders, both past and present. Before I open the meeting, I'd like to take you through the procedural aspects of the meeting. Today's meeting has been held in person as well as virtually via the Lumi platform, where shareholders, proxy holders and guests can watch a live webcast of the meeting, and shareholders and proxies can ask questions and submit votes online. A significant number of shareholders have already voted, appointed proxies and submitted questions ahead of this meeting, and I thank them for doing so. Every effort has been made to ensure the meeting runs smoothly. A full recording of this meeting will be provided on our website. Now I'll start today by walking through you a few procedural guidelines for questions and voting submission for those in person and online. It's my duty as Chairman to ensure that shareholders have the opportunity to ask questions and to discuss the items of business during the meeting. I ask that all questions and comments be concise, be confide the matters relevant to shareholders as a whole and be informative and respectful. While time constraints may prevent us from answering all questions, we will do our best to address all of your questions during the meeting. I will first respond to those questions received ahead of the meeting. I will then take questions from those physically present here followed by audio and written questions from participants who have joining online. Depending on the questions asked, I will decide as to whether I will answer them or ask a member of management or the auditor to respond. Online attendees can submit questions at any time, and you do not need to wait for a relevant item of business to ask your question. We encourage you to start asking questions now. To ask a written question online, select the messaging tab at the top of the Lumi platform. At the top of that tab, there is a section for you to type your question. Please also note which resolution your question relates to in this section. Once you finish typing, please hit the arrow symbol to send. Please note that while you can submit written questions from now on, they will not be addressed until the relevant time of the meeting. Questions may be moderated or if we receive multiple questions on the one topic combine together. For those shareholders attending online who wish to ask a verbal question, an audio questions facility is available during this meeting. Click on the request to speak button at the bottom of the broadcast window. The audio questions interface will now display and you'll be prompted to confirm your names and enter the topic of your question. Submit your question and follow the instructions to allow access to your microphone and connect to the queue. Today, Michael Evans is at the back of the room, is our Head of Investor Relations, will be helping to moderate any questions via the Lumi platform. For those attending today's meeting in person, we have -- you have a question you wish to make or comment when I call for questions during each relevant item of business, please make your way to the nearest microphone. Then when it is your turn, please give your name to the attendant who will introduce you. Only shareholders and validly appointed proxies, corporate representatives who were given a voting handset or blue nonvoting card upon entry are entitled to ask questions. It would be appreciated if you could ask one question at a time and then allow others to ask a question, taking your turn in the queue at the particular microphone. Please note, the speaker function on the handsets have not yet been activated. There is an attendant at each microphone, and I will ask them to stand and identify themselves so you can see where they are. Voting today will be conducted by way of a poll on all items of business. Voting for all resolutions will open shortly, and the poll will remain open during the meeting so that you can vote on all items at any time. Now for those who are attending the meeting online who are eligible to vote, when open, voting will be accessible by selecting the voting tab at the top of the screen. To vote, simply select the direction in which you would like to cast your vote. The selected option will change color. There is no submit or send button. Your selection is automatically recorded. You can, however, change your mind or cancel your vote at any time before the poll is closed. For those attending the meeting here in person, you will use the handsets to place your votes. When voting opens, use the scroll wheel to highlight the resolution you wish to vote on, then press the green button -- green square. Once you have read the resolution, press the green square to see the voting options. Please press 1 to vote for, 2 to vote against and 3 to abstain. Press the green square to move on to the next resolution and -- or the red triangle to return to the full list of resolutions. If you are having issues with your handset during the meeting, please just raise your hand and an attendant will come and assist you. I will now move to the formal proceedings of the meeting. The company Secretary has confirmed that a quorum is present, and I declare the Annual General Meeting open. Voting is now on for all items of business. Please submit your votes at any time, and I'll give you a warning before I move to close voting. The notice of meeting was released on the 27th of September 2022, and with your approval, I'll take that notice as read. This is a shareholders meeting and only shareholders, their attorneys, proxies and authorized company representatives are entitled to vote and ask questions at the meeting. If you are attending as a proxy and have been instructed how to vote, I ask you to ensure that any vote that you cast is in accordance with those instructions. We have appointed Joe Tombino as Manager of Computershare Investor Services Proprietary Limited, assisting by members of his staff as the returning officer for the meeting. Joining me today in Melbourne are: Nigel Garrard; Leslie Desjardins; Managing Director and Chief Executive Officer, Neil Salmon; Company Secretary, Catherine Stribley. And joining us by video link today are our other Board members: William Reilly, Christine Yan, Morten Falkenberg and Christina Stercken. Zubair Javeed, our Chief Financial Officer is in front of me here. And he's in attendance today, along -- sitting next to Ms. Penny Stragalinos, who is the KPMG audit engagement partner on the Ansell account for the fiscal year 2022. And is present today and available to answer any questions during the meeting regarding either the conduct of the audit or the content and preparation of the audit report. Now for my address. I'd like to make some general remarks on the company's recent performance, the business conditions we face and to briefly cover some issues specific to our industry and our operating jurisdictions. It's fair to say that the pandemic brought the global PPE industry into the forefront of public attention everywhere. In turn, it branded Ansell as a major PPE player. Prior to the pandemic, the PPE industry was relatively invisible, but Ansell is now strongly identified with clear global PPE sector. We are seen to occupy a leading position in this sector in recognition of our extensive portfolio, our geographic reach and our unique suite of marketing, manufacturing and technical capabilities. This global recognition as a major PPE player is timely and positive for our company. We will put to the test by unprecedented events over the last couple of years, and we effectively responded to deliver critical products to our customers. As experienced by many companies in numerous sectors, the pandemic has generated market uncertainties, which are not dissipating at the same speed with which they were generated. This was a factor which led us to revise our outlook earlier in this calendar year. Our experience over the years since has told us that significant uncertainties to linger. The forces unleashed by the pandemic have mostly moved through, but our markets, supply chains are yet to settle to a new normal. While these times are challenging, they also present enormous opportunity. This year, the company has largely seen through its Asian capacity expansions with a view to consolidating our sector leadership. In addition, we have taken significant steps towards leadership in social and environmental performance. But I caution that neither Ansell nor the PPE sector or even the international economy have returned to anything like business as usual. And we continue to place priority on organizational agility and speed of responsiveness to change. Now I'd briefly like to turn to -- more detail on 2 themes that are fundamental to the future of our business and upgrade interest to shareholders. Firstly, our commitment to environmental leadership. During the year, Ansell committed to achieve net-zero by 2040 for its own operations and a midterm target of 42% reduction in Scope 1 and Scope 2 emissions by 2030. Our focus is on long-term decarbonization within our operations. And this is in line with the ambition of the Paris Agreement to limit global warming to 1.5 degrees Celsius. We also have a broader ambition to produce end-to-end value chain emissions or Scope 3 as they call, but further engagement with our supply chain is needed before we can define what this commitment looks like. Secondly, I want to reiterate our position on human rights and modern slavery risks. Ansell is committed to respecting human rights and identifying, remediating and preventing modern slavery. The location of some of Ansell's own operations... Thank you, Neil. Apparently, the online operation of this AGM is struggling a little bit from a technical issue. So this is the challenges of hybrid AGM. So thank you all the people in the room for being here. But just recognizing those online are struggling. And if I can hear us all of these features are, in fact, on our website. So I think that will be returned to normal in a minute or 2. Okay. Ladies and gentlemen, I'll now move on to the formal items of business set out in the notice of meeting. As has been mentioned earlier, the poll is open on all items. And the results of the proxy votes already received for each resolution will be displayed after any questions in respect to the resolution have been dealt with. The final results of each resolution will not be displayed at the meeting, but will be lodged with the ASX following the meeting. Before we go to the first item, I'd like to take the opportunity to comment on a question we have received from proxy advisers and the Australian Shareholders' Association regarding audit tenure. KPMG have been the external auditor for Ansell for over 18 years. In this period, the company has had 6 audit party -- partner rotations. Each new audit partner was selected by the Audit and Compliance Committee after an extensive interview process and the appointment confirmed by the Board. The Audit and Compliance Committee annually reviews the performance of the external auditor. The assessment includes review of auditor performance in terms of professional expertise, objectivity, business understanding, scope, quality, value for money, tenure and most importantly, their independence. The Audit and Compliance Committee also assesses the external auditor against the ASIC information sheet 196 to assure order quality. Furthermore, our internal policy includes a strict protocol on the limitation of KPMG's nonaudit services. The Board and the Audit and Compliance Committee considers the question of tenure and longevity in the role regularly. Given the complex business challenges that Ansell has faced, since emerging from the Pacific Dunlop Group and the quality of the [ KPMG ] reflect the markets in which Ansell operate in because -- as you know, 96% of the sales of Ansell are actually outside of Australia. The second question related to -- sorry, I mixed the second part of the question.

We see the same point really, it's a maximum number of rights [indiscernible]

Which is calculated by his particular contract structure in terms of the maximum that can be actually awarded based on the performance of the company at the time, is issued on based on his salary today in a particular [ walk ] period to actually calculate the number of shares.

Another point [indiscernible] that the financial measures were not mentioned in the [indiscernible] and the CEOs saying decline to take any short-term incentives for individual objectives, which we have [indiscernible] for. However, the [ maintenance ] for the long-term incentive for the years '20 to '22 [ were ] and 51% were wasted. In view of the significant drop in share price at Ansell Limited, perhaps the Board should apply discretion to [indiscernible] in the future occasions.

Michael, the 3-year period you're talking about covers the pandemic period, and they met the objective of growing the business through that period on average through there, they are the rules of the scheme, and we actually felt that they deserved that particular LTIP to be -- to [indiscernible] Okay. Thank you. As there are no more questions from the floor, Michael, are there any questions on the online portal?

Mr. Chairman, there are no further questions at this time.

All right. And as there are no further questions and there is no formal requirement for vote on this matter, I will move to the next item being the election of directors. The first director seeking reelection is Leslie Desjardins. Leslie resides in the United States of America and joined the Board as a Nonexecutive Director in November 2015. She retires in accordance with the Rule of 33(c) of the company's constitution. And being eligible, she offers herself for reelection. Leslie's experience and Board committee memberships are detailed in the notice of meeting. The Board considers Leslie to be an independent director. Leslie, would you like to say a few words.

Thank you for that introduction, Chairman, and good morning members. My name is Leslie Desjardins, and I stand today for reelection. I thought it would be helpful to talk a little bit about my skills and experience as they relate to the company, the Board and shareholders. My executive work experiences with General Motors and Amcor. These 2 companies gave me significant financial governance and manufacturing operating experience in Canada, the United States and Australia. And like Ansell, both GM and Amcor transact in many countries around the world with all of the global complexities of multinational entities such as matrix organizations, global manufacturing footprint and from a financial and risk perspective, exposures to multicurrencies and taxes. My work experiences in Australia as Chief Financial Officer for GM-Holden and subsequently Amcor, gave me exposure and a strong understanding of Australian regulatory bodies, listing rules, the banking community here and accounting firms, all of which are critically important to Ansell's shareholders to ensure strong corporate governance. Throughout my career, I've had assignments of all [ assets ] of finance, including internal control, financial performance, accounting, treasury, tax, M&A and debt and equity funding. The skills learned in these assignments are relevant and valuable to my role as Ansell's Chair of the Audit and Compliance Committee. And while it is clear that directors must have the skills and experience, it's also equally important to have the energy and drive for the task at hand. So just a few comments about my personal motivation to continue my service with the Ansell Board. First, it's what the company does every day for its customers around the world and that is our purpose and our mission of Ansell Protects. Every day, industrial and health care professionals rely on Ansell products to protect them against workplace risks so that people can return home to their families without injury. Second, the company has a financially strong and stable balance sheet. It's investment-grade rating, with a healthy balance sheet that positions it well for growth. And I think most impressive is the strength and resilience of its cash flows that are remarkably steady even during global economic malaise. And lastly, I really enjoy working in a business that is diverse in many aspects, as this is important for the workplace culture and also translates to a company's financial performance. And I find that it is the organizational culture that determines really how decisions get made. And at Ansell, I find Ansell has a values-based culture, and this is indeed how decisions get made. That means that Ansell's culture is marked first by doing what's right, what's right for all of our stakeholders, our investors, our customers, our employees, the communities that we operate in and, of course, the environment. In summary, I'm proud to serve as a director on the Ansell Board to work alongside my Board colleagues and also the management team, and I look forward to contributing more to the company's future. Thank you.

Thank you, Leslie. I now move that Leslie be reelected as a Director of the company. I will now take questions from the floor for those attending in person. If you have a question, could you please make your way to the microphone. Okay. Michael, are there any questions on the online portal?

Mr. Chairman, there are no questions at this time.

Okay. So as there are no more questions, I will move on to the proxy results. Proxy results in respect to the election of Leslie as a director are now displayed on the screen. The next director seeking reelection is Christine Yan. Christine resides in the United States of America and joined the Board as a Nonexecutive Director in April 2019. She retires in accordance with Rule 33(b) of the company's constitution. And being eligible, she offers herself for reelection. Christine's experience and Board committee memberships are detailed in the notice of meeting. The Board considers Christine to be an independent director. Christine, would you like to say a few words.

Thank you, Mr. Chairman. Dear shareholders, it's an honor to be standing for reelection after serving my first term, during a very unusual time for the company and for the world overall. During the last few years on this Board, I have the opportunity to not only work with Ansell's senior management, but also its next level talent. And I have visited a number of Ansell's operating sites across the world. As I learned more about the business and its people, I continue to be very impressed by the company's culture, its value, its purpose and its dedicated and capable talent. The Ansell team have worked with agility and tirelessness during the pandemic to supply the world with much-needed PPE. We have invested to expand internal capacity, manage supply chain challenges, while at the same time, creating a better world by innovating sustainable new products, committing to net-zero target, reducing weights to landfill and water usage. My experience running global businesses serving multiple market verticals at Stanley Black & Decker continue to be very relevant in helping Ansell grow as a global company. And my corporate governance experience serving our U.S.-listed company boards, provide insight and best practices on our latest government trends -- government's trends. I really enjoyed sharing my experiences, both in the boardroom and separate sessions with management such as discussing ways and ideas to accelerate e-commerce growth and how we grow faster in emerging markets. Neil Salmon, our new CEO, and his leadership team are world-class talent, dedicated to taking the company to the next level. Ansell's Board is highly engaged and takes its governance responsibilities very seriously. I very much enjoy working with my esteemed colleagues and I'm committed to doing my best to continue to contribute to the long-term sustainable value generation for our stakeholders. Thank you very much.

Thank you, Christine. I now move to Christine be reelected as a Director of the company. I'll now take any questions about Christine's election from the floor. Okay. So no questions on this from the floor. Michael, are there any questions on the online portal?

Mr. Chairman, there are no questions at this time.

All right. As there are no further questions, I'll now move to the proxy results. Proxy results with respect to the election of Christine Yan are now displayed on the screen. The next item of business relates to the grant of performance share rights to Chief Executive Officer, Neil Salmon, under the terms of the company's long-term incentive plan, which is part of Neil's remuneration package, entitling him to an annual grant under the plan. This award is subject to the satisfaction of various performance conditions and entitles Neil to the grant of 1 ordinary share in Ansell Limited per performance share right. Accordingly, shareholders' approval is sought for the issue of 117,764 performance share rights to Neil Salmon under the plan in accordance with ASX Listing Rule 10.14. I now approve -- move that approval be given to the grant of the performance share rights to Neil on the basis summarized in the exponential notes of the notice of meeting. I'll now take any questions from the floor on this item. Okay. No questions. Are there questions from the floor? No. Michael, are there any questions on the online portal?

Mr. Chairman, there are no questions at this time.

All right. I will now move on to the proxy results. As set out in the notice of meeting in accordance with the Corporations Act, any votes cast in favor of this resolution by Neil Salmon or by his associates will be disregarded. Proxy results are now displayed on the screen. Ladies and gentlemen, the final item on the agenda is a nonbinding advisory vote on the adoption of the remuneration report which is set out on Pages 49 to 74 of the company's 2022 annual report. Your Board commends the remuneration report to you. And I now move that the remuneration report for the year ended the 30th of June 2022 be adopted. I'll now take any questions from the floor on the remuneration report. Okay. I think there's no question -- because we had some earlier. Michael, are there any more questions on the line?

Mr. Chairman, there are no questions at this time.

All right. As there are no further questions, I'll move on to the proxy results. As set out in the notice of meeting, none of the company's key management personnel, including directors and senior management may vote in relation to this matter, except as a proxy for a shareholder who is not prohibited from voting. And if the proxy is the Chairman and the appointment expressly authorizes the Chairman to exercise the proxy even though the resolution is connected with the remuneration matters. Proxy results in respect of the approval remuneration report for the year ended 2022 are now displayed on the screen. Now as this is the first time we've conducted a hybrid meeting and we've had some technical problems with the online participants, I'll just set aside some time now if there are any final questions from anyone on the floor. And Michael, are there any questions online?

Mr. Chairman, there are no questions at this time.

Okay. Well, ladies and gentlemen, I think there are no further questions. So that concludes our discussion on the items of business. I will now close the voting system. Please ensure that you have cast your vote on all resolutions. And I'll now pause to allow you time to finalize your votes. [Voting]

Okay. Voting is now closed. The results of these votes will be released to the stock exchange later today. Ladies and gentlemen, that brings the conclusion of our business today. I thank you for attending, and I now declare the meeting closed. Thank you very much, and join us for a cup of tea. Thank you.