BHP Group Limited (BHP) Earnings Call Transcript & Summary

[Presentation] [Foreign Language] Welcome to the BHP General Meeting. I'm Ian Hunter, a member of the Wurundjeri people, the traditional owners of the Melbourne region. The name Hunter, of course, is a good title for an indigenous person, [ but ] the name Hunter comes from the other side of the family, [ from my father side ] of the family. My father happened to be of Scottish descent, so I'm as much a Scot as I am indigenous. No, it doesn't make me a Scot originally. That actually makes me a proud Australian. I'm proud of both of my heritage of my Scottish descendancy and my indigenous heritage, but today I'm representing the Wurundjeri people. In this situation, rather than [ give leaves ], of which we can't [ give personal leaves ], I'd like to actually welcome you with a song that I've created. The song consists of 4 words: first word, [Foreign Language], meaning, "Go away;" [Foreign Language], meaning, "Come back." 2 other words: [Foreign Language], the word that we use [ and our ] ancient people used when they first met non-indigenous people. [Foreign Language] means the [ ghost ] ones, the people that came into our country that we [ greeted ] with great reverence. And the last word is [Foreign Language], a word that we refer to our [ souls as ]. So the song goes, "Go away," [Foreign Language]. Come back, [Foreign Language], not meaning that we want non-indigenous people to go away. We want people to be here. I want people to be here. It's a welcoming. So think of yourself, when you listen to the words, that you are indigenous, that you belong to this country, that it's welcoming you to the land of the Wurundjeri people. And the song goes like this. [Presentation] Welcome to the BHP General Meeting. [Foreign Language]

Ladies and gentlemen, my name is Ken MacKenzie, and I'm your Chair. Thank you for joining us today. And I'd like to welcome you to this BHP Group Limited General Meeting to consider the proposed unification of BHP. Now it is unfortunate that we cannot be together in Melbourne as originally intended for today's meeting, but I am glad we are able to hold this meeting virtually. Today, I'm in Melbourne, joined by our CEO, Mike Henry; and group company Secretary, Stefanie Wilkinson. And I am joined remotely by our directors based in Australia and around the world. Let me first thank Ian Hunter, Wurundjeri elder, for his warm welcome to country. And I'd like to acknowledge and pay my respects to the Wurundjeri people, who are the traditional owners of the land from which I am speaking to you. And I'd also like to pay respects to the elders both past and present of the Kulin nation and extend that respect to other First Nations peoples who are joining us today. There is a quorum present, and as the time is shortly after 6:00 p.m. in Melbourne, we can now start the meeting. Today's meeting has been called to specifically consider the unification of BHP. A shareholder circular including the notice of meeting was made available to shareholders on the 9th of December 2021. The notice for this meeting was set out in appendix 4 of the shareholder circular and provides the full text of each resolution and notes whether each resolution is proposed as an ordinary resolution or a special resolution. After the conclusion of this meeting, a BHP Group Plc scheme meeting and a BHP Group Plc General Meeting will also be held. For unification to proceed, all of the resolutions proposed at these 3 unification meetings will need to be approved by the requisite majority of relevant shareholders. The poll is now open for all items to be considered at this meeting. And Stefanie Wilkinson, our group company Secretary, will outline the relevant voting procedures shortly, but first I'd like to make some introductory comments. We believe BHP is in a strong position. Our people have proven their resilience during challenging times. Our balance sheet is strong, as is our performance culture. And we have a clear strategy in place focused on shaping the company to meet the world's needs and deliver long-term shareholder value. In August last year, we announced our intention to make a number of strategic changes that will ensure BHP is in the best position to capture the opportunities presented as our world evolves. And at the center of these changes was the announcement of our intention to unify BHP's corporate structure under BHP Group Limited. Since that announcement, we've worked through that process, and the Board approved the proposal in December. And now it's up to you as our shareholders to decide whether BHP unifies. We are here today to discuss this proposal with you, take your questions and put the proposal to a shareholder vote. First, I think it is important to set out some background regarding our current dual listing company structure better known as our DLC. This structure was established with the BHP and Billiton merger in 2001. The DLC structure comprises 2 parent companies, BHP Group Plc and BHP Group Limited, operating as a single economic entity. While shareholders in both plc and limited have equivalent shareholder and economic rights, there are 2 share registries and 2 share prices. BHP Group Plc has its primary listing on the London Stock Exchange, while BHP Group Limited has its listing on the ASX. This structure has served us well for a number of years. However, the Board and management believe that its suitability for us has diminished over time. So why unify now? As we have stated previously, we have kept our DLC structure under review because, as an organization, we value simplicity. And having 2 parent companies listed in 2 locations is complex, and managing them requires significant management time and focus. In addition, over time, the makeup of our organization has changed. We are not the same group we were in 2001. When the DLC was first established in 2001, about 40% of the earnings were generated through the UK plc entity. And due to changes to our portfolio over the years, this is now down below 5% today. Put simply, the DLC structure is no longer the optimal configuration for BHP. However, even though this reality has emerged over time, the business case for unwinding the DLC has not been compelling enough to make the change until now. And a key driver is cost. Today, one-off unification costs have come down substantially by approximately USD 1.2 billion since 2017. And these are now expected to range between USD 350 million to USD 450 million. Under the proposed structure, a significant part of these unification costs relate to stamp duties to be paid by BHP for the purchase of plc shares. As a result, our most recent review of the DLC concluded that now was the right time to unify, facilitating a corporate structure that better supports the BHP of today and the BHP of tomorrow. And the value will be delivered for our shareholders and stakeholders, as a result. So what does this mean for shareholders? Well, from an overarching standpoint, it means that shareholders will have a company with a corporate structure that is fit for purpose: to support the BHP we are today and our exciting future. In addition, shareholders will be able to buy the same BHP share around the world via BHP Group Limited's listings on the Australian, London and Johannesburg Stock Exchanges; as well as our New York Stock Exchange-listed ADR program. We believe these benefits are significant for our future, underpin our strategy and support long-term shareholder value creation. Now turning to the proposal in more detail. A unified BHP will have a primary listing on the ASX, a standard listing on the London Stock Exchange, a secondary listing on the Johannesburg Stock Exchange and a level 2 ADR program on the New York Stock Exchange. Now this means that shareholders can continue to invest in BHP in the same markets as they do now. Plc shareholders will have their plc shares exchanged for limited shares on a one-for-one basis. And for our limited shareholders, you will retain your shareholding in a unified BHP. Importantly, the dividend policy and ability to distribute franking credits will remain the same. It will also not change BHP's strong fundamentals. It will not change BHP's underlying assets nor operations, workforce, executive leadership team, Board or cash flow generation or our strong commitment to corporate governance and social value. As a result, the Board is strongly supportive of the move to unification and the benefits it will bring. So to conclude. The DLC has served us well for many years. However, its suitability for our organization has diminished over time. Today, BHP's portfolio is simpler and focused on growing long-term value from future-facing commodities. And we require a corporate structure that supports this, that is fit for purpose; and we believe now is the right time to take this step. Unification will only proceed if is -- if it is supported by both limited and plc shareholders. Your directors consider that unification is in the best interests of BHP shareholders as a whole. And each of your directors intends to vote all BHP shares that they own or control in favor of the resolutions at this meeting and the meetings of plc which will be held after this meeting. Grant Samuel, the independent expert, has also concluded that unification is in the best interests of BHP shareholders. The Board unanimously recommends this proposal to you, and we ask for your consideration and support for the unification of BHP. I'll now hand across to our group company Secretary, Stefanie Wilkinson, to run through the items of business and voting procedures. Thank you.

Thank you, Chair. And hello, everyone. My name is Stefanie Wilkinson, and I am the Group Company Secretary of BHP Group Limited. Today's meeting is being held virtually via the Lumi platform. I will now run through the procedural aspects of today's meeting. We have published on our website a guide to using Lumi. If you experience any technical issues, please refer to the Lumi help guide available on our meetings page of our website. In the unlikely event that we do experience any major technical issues, we will provide you with updates through our website and the exchanges. Voting on all items today will occur by a poll. On a poll, each shareholder attending online by proxy or by corporate representative has one vote for every share held. If you are eligible to vote, a polling icon or voting tab will appear on your screen. Selecting this icon will bring up the resolutions and voting options. To cast your vote, simply select for, against or abstain for each resolution. Your selection is automatically recorded. There is no submit or enter button. You are able to change your vote until the time that the Chair declares that voting is closed. The poll is now open and you can vote at any time. You do not need to wait until we have discussed a resolution. The results of the unification proposal, including the results of the meeting of BHP Group Plc shareholders, will be made available after the conclusion of the meetings today; and announced at the stock exchanges in London, Australia, New York and Johannesburg. Turning to the items of business in the notice of meeting. Items 1, 2, 3 and 4 are proposed as special resolutions and require approval of 75% of votes cast. Item 5 is proposed as an ordinary resolution and requires the approval of a majority of the votes cast. The Board recommends that you vote in favor of all items of business. None of today's items are joint electorate actions with BHP Group Plc shareholders. However, as Ken mentioned, all the unification resolutions are inter-conditional. And for unification to proceed, all of the resolutions at the 3 shareholder meetings must be passed by the requisite majorities. This means that BHP Group Limited shareholders must approve the unification resolutions at this meeting and BHP Group Plc shareholders must approve the unification resolutions being proposed at the BHP Group Plc scheme meeting and the BHP Group Plc General Meeting to be held later today. Your directors consider that unification is in the best interests of plc shareholders as a whole, limited shareholders as a whole and BHP shareholders as a whole. [Operator Instructions] I encourage you to submit your written questions or comments now to assist us in getting through as many of your questions as possible. Questions should relate to the items of business under consideration at today's meeting. We will deal with the questions at the relevant item of business. We will ensure that there is a reasonable opportunity for shareholders as a whole to ask questions or make comments at this meeting. However, we may not be able to get to every question or address every comment received. Please refer to the help guides on our website if you are having any difficulty in asking a question or making a comment or have any other question. Thank you, Chair.

Great. Thank you, Stefanie. I now invite you to submit your questions, and as Stefanie said, we'll do our best to get to as many of your questions and comments as possible. We have with us today Lisa Farrelly, our Vice President, Communications, who's going to assist with the moderation and flow of questions. So welcome to you, Lisa. [Operator Instructions] And for clarity -- and I think shareholders are aware of this, but this is not an Annual General Meeting. This is a meeting that we've convened very specifically to discuss the unification proposal that's before shareholders, so apologies in advance. We're -- I'm only going to be accepting questions around unification, and that's in order to be fair to all shareholders who want to discuss unification. All items of business relate to unification, and as I said, I'll only be dealing with those questions that relate to that topic. Item 1 relates to the amendments to the BHP Group Limited constitution. If your question relates to unification more generally, please ask it during this item of business. If your question relates to items 2 to 5 specifically, please wait until we ask for questions on those items. So I'd now like to invite any questions from shareholders on items -- item 1 or on unification more generally. Thanks, Lisa.

Thank you, Chair. Our first written question is from [ Mr. John Robinson ], who has asked, "Will dividends be paid in Australian dollars in the future, instead of U.S. dollars? I find that the value of Australian dollars against the U.S. dollar is -- always rises right on conversion date. With the size of my holding, it can make hundreds of dollars of difference to my dividend payment."

All right. Well, thank you for your question, [ Mr. Robinson ]. I mean, just in terms of limited shareholder implications, we covered the rationale and benefits in the opening comments. All shareholders, including limited shareholders, will benefit from corporate simplification and the strategic flexibility that will come from unification, but outside of that, there is no practical impact or any tax impact for limited shareholders because there's no change in the nature of their shareholding. Now specifically to your question around dividends: Our reporting currency is in U.S. dollars. And that makes sense for us given the global nature of operations and the fact that we're -- our commodities are bought and sold and -- in U.S. dollars. So that makes sense for us, but we do pay our dividends in local currency. And so if you're a limited shareholder, that's Australian dollars. If you're a plc shareholder, then that's going to be in pounds. And there's no change to that going forward. Thanks, Lisa.

Thank you, Chair. Our next question, also a written question, is from [ Mr. Desmond Peter Moriarty ]. He has asked, "Please address the fact that the 1:1 ratio probably is unfair to Australians. I can't see myself supporting the dissolution at the 1:1 ratio."

Right. Well, thanks for the question, [ Mr. Moriarty ]. I think, first, as I said in the opening comments, a core principle of the DLC from the very beginning going back to 2001 has been that shareholders of both limited and plc enjoy the same economic and voting rights. So from the very beginning, this has been codified in all the arrangements of the DLC by this 1:1 equalization ratio in the DLC agreements, and so shareholder consideration of unification shouldn't be any different. This is why there's been no additional incentive provided to either set of shareholders to approve unification. Thanks, Lisa.

Thank you, Chair. I'm just waiting for some technical -- to see if there's one more question. Bear with me. It looks like there may be no more questions on item 1, Chair.

Okay. Are there any questions on the Lumi platform?

There is one coming through as we speak, Chair, and I'll read it now. What has rule 55 mean -- I apologize. Correction. Sorry. It's come through.

All right.

I'll start again. Sorry, Chair.

That's okay.

A question from [ Mr. Peter Ross Graeme ]. What does rule [ 55-4 ] mean when it refers to the nonexistent rule [ 55-3 ]?

I'm not sure I understand the question. Stefanie, is...

I think it relates to the constitution, Chair, so I'll just pull up a copy while -- and we'll see. You might see if there's another question while we do that, Lisa. Thanks.

No more questions at the moment.

Okay, are there any questions on the phone lines?

And no questions on the phone, so far.

Okay, well, [ Mr. Graeme ], bear with us.

I think, Chairman, we'll -- might return back to the shareholder with an answer to that question...

Okay, okay. Well, we know [ Mr. Graeme ] quite well, so we'll be able to revert to him with an answer around that.

Thank you, Chair. And we have no more further questions on item 1.

Okay, well, as there are no more questions, we'll move to the next item of business, items 2 to 5, which I'll take together given each of these items also relates to unification. Item 2 relates to the approval of the limited special voting share buyback agreement. Item 3 relates to the approval of the DLC dividend share buyback agreement. Item 4 relates to the approval of the class rights action that arises in connection with the amendment to Article 35-5 of the BHP Group Plc articles of association, with respect to the plc special voting share buyback. Item 4 -- my apologies. Item 5 relates to the approval of the class action, the class rights action, in connection with the change in the status of BHP Group Plc to a private limited company. So are there any specific questions on items 2 to 5?

No further questions on items 2 to 5, Chair.

Okay. Stefanie, is there any update on [ Mr. Graeme's ] question? Or we'll just write back to him directly.

No...

Okay, great. No questions, no text questions, no phone line questions, on items 2 to 5 either, Lisa?

I've just had notification that we're getting one through right now, Chair, if you can bear with me.

Sure.

Here we go, a question from [ Mr. Stephen Eric Kirby ] related to unification cost. What is the expected cost saving of unification?

Great. Thank you, [ Mr. Kirby ]. I look at it from 2 perspectives. One is the quantitative benefits, and then we've got the qualitative benefits. In terms of the quantitative benefits, the direct cost savings are in the order of $3 million to $4 million per annum. And that's from the removal of dual AGMs, additional share registers and no sort of administrative costs. There is also the important [ NPV ] benefit associated with structurally distributing franking credits rather them all going through the DLC, that they go directly to limited shareholders. That will be in the billions of dollars. And then there is also specific to the Woodside transaction. There's also $6 billion of franking credits that will go directly to shareholders from the in specie distribution of Woodside shares by executing unification first, as opposed to us having to do a franked dividend from limited to plc in order to provide the retained earnings that allows them then to distribute the Woodside share out to plc shareholders. So instead, it's a franked dividend that goes straight to limited shareholders, who can then use the franking credit. And then finally there's the simplicity of a single-headed company and the strategic flexibility it offers for the future. That's hard to quantify in value, especially over time, but we know the value is there in the reduced complexity that a unified structure will bring and the agility that it will provide to BHP to pursue opportunities going forward. So there's both the -- a quantitative benefit, but there's a really important qualitative benefit around it as well. Thank you, [ Mr. Kirby ].

Thank you, Chair. And there are no further questions on items 2 to 5.

Okay, thank you. Well, I think we've had a reasonable opportunity to discuss items 1 through 5. I will close the poll 5 minutes after the conclusion of this meeting, so if you haven't already done so, please complete your voting now. As discussed earlier, results of the voting from this general meeting and the meetings to be held in London will be announced to the stock exchanges later today. The proxy results are being shown on the screen now. Ladies and gentlemen, that concludes the business to be dealt with at this general meeting. And I now declare the meeting closed, subject to the finalization of the poll, so thanks for joining us today.