Orica Limited (ORI) Earnings Call Transcript & Summary

Good morning, shareholders, and welcome to Orica's 2021 Annual General Meeting. I'm Delphine Cassidy, Chief Communications Officer, and I will act as moderator of today's meeting. As is customary at our AGM, I would like to begin by acknowledging the traditional owners and custodians on the land, on which we present from today, the Wurundjeri people of the Kulin Nation. I pay my respects to the elders past, present and emerging and the elders from other communities who may be attending the meeting today. As the AGM is being conducted entirely online again this year, I want to cover some important procedural and technical matters, before I hand over to your Chairman, Mr. Malcolm Broomhead. The virtual meeting online guide available for download below, includes all the information you need to know about how to vote and ask questions at today's meeting. If you have any trouble using the online platform, please refer to the guide or call the telephone number shown on the screen for assistance. To register to vote and obtain your voting card, click the Get a Voting Card button at the bottom of your screen, and enter your shareholder number and post code or country, if your registered address is outside Australia. To vote, click on the for, against or abstain button for each resolution and click the Submit Vote button. You may change your vote as many times as you like during the meeting, and voting will remain open for 5 minutes at the conclusion of the meeting. Written shareholder questions to the Chairman are now open. If you would like to ask a question relevant to the business of the meeting, I encourage you to do so as soon as possible by clicking the Ask a Question button at the top of the screen or below the webcast and presentation slides. This year, shareholders also have the opportunity to ask questions by phone. However, as outlined in the virtual meeting online guide, you must have obtained your unique security holder pin, prior to the meeting to ask questions in this way. [Operator Instructions] When it is your turn to speak, the operator will introduce you to the meeting and your line will then be unmuted. If you have also joined the meeting online, we ask that you mute your laptop, your desktop, tablet or mobile device you were streaming the meeting on, while you ask your question via your phone. Your telephone line will be muted, once your question has been answered. In terms of how questions will be managed today, the Chairman will invite and answer telephone questions first under the relevant item of business. I will then read out each written question received for the Chairman, and these will be dealt under the relevant item of business, unless they have already been answered during the phone Q&A. If your question is asked on behalf of a particular group or organization, and you would like to make that known, please include that in your question. To assist with the efficient conduct of the meeting, if a number of questions on a similar topic are submitted, I won't read all of them out, but we will endeavor to make sure we broadly cover the issues that shareholders have raised. Any questions or comments submitted that we consider to be defamatory or contains offensive language will not be read out or responded to. In the event, we experience technological difficulties during the meeting, we may need to take a short break. If there are significant technology difficulties, that means the meeting can no longer proceed and an adjournment is necessary, details of the date and time when the meeting will be reconvened will be notified to the ASX. With the procedural matters now out of the way, I will hand over to your Chairman, Mr. Malcolm Broomhead.

Thank you, Delphine. Good morning, ladies and gentlemen, and welcome to Orica's 2021 Annual General Meeting. My name is Malcolm Broomhead, and I am your Chairman. We do have a quorum present, so I declare the meeting open. And with your permission, I propose to take the Notice of Meeting as read. In attendance today, on my left is Sanjeev Gandhi, our Managing Director and Chief Executive Officer, who will address the meeting shortly. On my right is Kirsten Anderson Llewellyn, our Company Secretary. Joining us remotely from various locations, both interstate and overseas, are my fellow Board members. Our auditor, KPMG, is also in attendance, represented by our audit partner, Penny Stragalinos. And before we move on to the resolutions, as outlined in the notice of meeting, I'd like to make some remarks on what I believe are areas important to Orica and to you, our valued shareholders. Firstly, I'd like to talk about our performance over the year, important remuneration changes as well as governance. And then I'd like to talk more broadly about sustainability, both in what Orica is doing today and the broader industry context. It has been a challenging year with COVID-19 disruptions, geopolitical issues and other external and internal factors impacting our people and our results. The Board and I are extremely proud of how the Orica people have risen to the challenges and shown unwavering commitment and resilience towards each other, towards our customers and towards the communities in which we operate. Despite the ongoing challenges presented this year, safety has remained the highest priority across our organization. I'm pleased to report once again, we have had no fatalities across our operations. Disappointingly, our serious injury case has risen by 0.03 to 0.19. And preventing serious injuries will remain a key focus this year. Our focus again has remained on the health and well-being of our people this year, and we continue to support our employees and their families, in areas most impacted by COVID-19. And sadly, we lost 12 colleagues to COVID during the year. We extend our deepest condolences to the families and the friends of our colleagues, who lost their lives. In September, we announced individually significant items impacting our results by $382 million after tax, which resulted in a statutory net loss after tax of $174 million, which compares to a net profit after tax of $82 million in the 2020 financial year. Underlying earnings before interest and tax were $427 million, which was a decrease of 30% from the prior year. And as a result, the final ordinary dividend of $0.165 per share, unfranked, brought the total dividend to $0.24 per share, which is down by $0.09 per share compared with the 2020 financial year, and that reflects a payout ratio of 47% of underlying earnings. Positively, we maintained a disciplined approach to our balance sheet and to our capital management, while stepping up our cash generation and controlling our levels of debt and gearing. Our cash position was notably enhanced by the sale of non-core landholdings during the year. On an operational front this year, I'm pleased to report that despite the challenges, we were able to achieve the key planned initiatives within our control, which include achieving our new technology targets, the successful integration of Exsa into Orica. Our Burrup ammonia nitrate plant becoming fully operational, the acceleration of our discrete network and product portfolio optimization programs, and our continued execution of our global restructuring program, supported by the continued stabilization of the SAP system. Sanjeev will talk in more detail about these initiatives shortly. In April 2021, the Board appointed Sanjeev Gandhi as the new Managing Director and CEO of Orica Limited. Sanjeev also took the opportunity to reshape the Executive Committee, assembling a strong leadership team with deep expertise and experience from across the organization. Sanjeev and the Executive Committee have the full support of the Board, and with the refreshed strategy and improving employee culture and business environment, we're confident of their ability to navigate Orica's recovery, and to deliver profitable growth and shareholder returns. Given the financial performance over the 2021 financial year, the Board exercised its discretion not to award payments to the executive, under the STI plan or to the CEO and other executives. To further align executive and Board remuneration with value delivered to shareholders, the Board made several key decisions during the year, in relation to remuneration. Firstly, we took the opportunity to reshape the CEO remuneration package, with the appointment of Sanjeev Gandhi as Managing Director and CEO, and a substantial portion of the CEO's FAR or fixed remuneration is now provided in equity, which ensures immediate and ongoing alignment with the shareholder experience. We also addressed feedback from our investors and decreased the CEO's maximum short-term incentive opportunity from 200% to 150%, and the long-term incentive grant opportunity from 215% to 200%. And secondly, no remuneration increases were received by executives, who remained in the same role during the 2021 financial year. And for those individuals whose role changed as part of the reshaping of our Executive Committee, their fixed annual remuneration was set lower than the prior incumbent. Thirdly, to reflect the disappointing results for shareholders, Board fees did not change during the financial year 2021 and also remain at the same level for the financial year 2022. In addition, I elected to forfeit my Board Chair fees from the 1st of June to the 30th of September 2021, in support of our cost reduction focus in the second half of the financial year. And finally, during the 2021 financial year, the Board undertook a formal review of our executive remuneration framework, engaging with shareholders and other stakeholders as part of this process, to better understand their view of our current framework and practices. In addition to the revised CEO remuneration structure, 2 key changes have been made to our executive incentive plans for the 2022 financial year. Firstly, a relative total shareholder return metric was introduced into the long-term incentive, to complement a return on net assets, or RONA, as a second equally weighted metric to better support the implementation of our transformation program. And secondly, recognizing the importance of monitoring the environmental impact of our operations in the 2021 financial year, we introduced loss of containment as an environmental metric within our short-term incentive scorecard. For the 2022 financial year, the renamed Safety and Sustainability component of our short-term incentive scorecard, will include a greenhouse gas emissions based metric, in addition to loss of containment. The new metric is aligned with our stated objective, to reduce Scope 1 and 2 operational emissions by at least 40%, by the financial year 2030. Moving to governance; the Board recognizes that sound corporate governance has never been more important, and responsible business behaviors and processes, as well as transparency are critical to maintaining the trust of our stakeholders, particularly as we navigate the challenges presented by our external operating environment. This year, focus areas of your Board included; strategy and business performance; people and culture; risk management; sustainability; technology and innovation; and safety and corporate responsibility. And you can read more about our work areas in these categories, in our 2021 annual report. The skills, experiences, and diversity of your Board are reviewed regularly to ensure that they're aligned to achieving our strategic objectives, and we undertake Board renewal appropriately. Turning now to sustainability; increases in global temperatures and climate change are impacting weather extremes across the globe. Our industry and customers have progressed efforts towards more sustainable activities, by plotting out various technological routes and reducing greenhouse gas emissions across processes, practices and products, in order to combat our climate changes Around the world, different industries operating in different jurisdictions and serving different commodities, require distinct approaches to climate change, as the world transitions to a low-carbon economy. Orica is acutely aware of these variances, and we're tailoring our solutions to suit the ever-changing market, customer and societal demands. Although we are predominantly focused on where we can have the biggest impact on climate today, our own emissions by deploying low emissions technology to our major manufacturing sites and working with our global suppliers and stakeholders, will reduce the footprint of our global supply chain as well. We are also partnering to help them achieve their own sustainability goals into the future. Despite COVID-19 and the challenges associated with our financial performance, we continued to focus on delivering our sustainability commitments, delivering a 13% reduction in our combined Scope 1, Scope 2 greenhouse gas emissions from 2019 levels, and we remain on track to achieve our target of at least 40% production in Scopes 1 and 2 greenhouse gas emissions by 2030. In recognition of COP26 and the increasing global focus on tackling climate change. This year, we took a significant step in our sustainability journey and established a Net Zero ambition by 2050. Building on our target to reduce Scope 1 and 2 emissions by at least 40% by 2030, this new ambition includes our most material Scope 3 emission sources. We also continued to strengthen our climate governance and linked the achievement of our emissions reduction targets to executive remuneration.. Our commitment to sustainability goes beyond our Net Zero ambition. We'll continue to evolve our approach to deliver long-term value for our shareholders, and we'll be working to achieve more, in delivering on our key social, diversity and environmental targets in the coming year. Sanjeev will talk in more detail about some of our sustainability achievements shortly. And before I invite Sanjeev to talk about our performance, refreshed strategy and sustainability in more detail, I would like to sincerely thank, on behalf of the Board, the entire Orica team have been exceptional during yet another challenging year. Importantly, we thank you, our shareholders, for your continued support and investment in Orica. The Board and I are confident, that the fundamentals of Orica remain strong. The refreshed strategy and executive leadership team have Orica well positioned to navigate the recovery and deliver profitable growth, by seizing opportunity as the market stabilizes, delivering value for our customers and shareholders through a simpler, more efficient organization. I now welcome your Managing Director and Chief Executive Officer, Sanjeev Gandhi to address you.

Thank you, Chairman, and thank you to our shareholders for joining us today. This morning, I will talk about our performance over the past year, our refreshed strategy, our approach to sustainability and the outlook for the year ahead. At Orica, nothing is more important than safety, and we are pleased to report that, once again, we had no fatalities across our operations. As Malcolm said earlier, disappointingly, there was a slight increase in our serious injury case rate. Preventing serious injuries will remain a key focus for us this year. As COVID continued to impact our activities and the communities we operate in, we remain focused on the health and well-being of our people, as well as the community, via initiatives and investments. Our employees went to extraordinary lengths, working with customers to protect their workplaces and communities, and ensuring uninterrupted operations. As we emerge from the pandemic, we are partnering with customers and governments to proactively introduce vaccination standards and programs across our operations. Our financial performance has been disappointing, due to the impact of COVID, a strong Australian dollar, and ongoing trade tensions with China. Overall, we delivered an underlying EBIT of $427 million, a decrease of 30%. Despite this drop in performance, we maintained a disciplined approach to our balance sheet and capital management, while stepping up our cash generation and controlling our levels of debt and gearing. Gearing of 34.6% remains within our target range of 30% to 40%. We are pleased to report that, in the 2021 financial year, our Burrup plant, a long-term strategic asset position in the Pilbara, became fully operational. And Exsa, Peru's leading manufacturer and distributor of industrial explosives, acquired by Orica in May 2020, was successfully integrated into Orica, and continues to deliver in line with the business case. Our discrete network and product portfolio optimization programs have been accelerated, resulting in the closure of several sites and the exit from a number of countries that are not strategically aligned, or could be served through alternate distribution channels. This year, we also sold some of our noncore land holdings, and just earlier this week, we announced the sale of the Minova business. We continue to stabilize the recently implemented SAP ERP system, with the integrated platform, helping us align our overheads and operating model with the current environment. Despite challenges in rollout due to COVID restrictions, we were able to achieve our new technology returns target. Our digital solutions portfolio continues to grow, and is now active across more than 200 customer sites globally, as we continue to expand our expertise and capability beyond blasting. It was a difficult year for our people, through a time of significant organizational change, as we continue to adapt our business to the current operating environment. However, our people rose to the challenge, ensuring that the safety of our operations and fulfilling our customers' needs remained our top priorities. We are especially grateful for this commitment and remain focused on creating a diverse workplace, where our people are energized and inspired, to shape our future together. Our refreshed strategy focuses on sustainably driving profitable growth and creating enduring value for our shareholders and other stakeholders. Our strategy is to deliver solutions and technology that drive productivity for our mining and infrastructure customers across the globe. It is centered on optimizing our operations, delivering smarter solutions and partnering for progress across our core business, as well as focusing on our 4 key business verticals: mining, quarrying and construction, digital solutions and mining chemicals. Organic growth will be pursued in the 4 dedicated business verticals. We will continue to optimize our manufacturing and supply chains, while maintaining commercial discipline and accelerating the adoption of our innovative technologies that help promote productivity for our customers. In mining, our largest vertical, we aim to grow our presence in future-facing commodities, as the world continues to transition to a low-carbon economy, while increasing the adoption of our premium blasting solutions. In quarrying and construction, we will deliver focused technology specific to the needs of our customers, diversifying our portfolio and increasing our presence in high-growth economies, such as in Asia. Our Mining Chemicals business offering will be expanded in high-growth markets across gold and other future-facing commodities, unlocking new opportunities to capture growing demand. We will also continue the adoption and expansion of our digital products, by providing best-in-class solutions and integrated digital workflows to unlock greater value for customers across all segments and drive growth for Orica. Our technology program will also include our second-generation fully wireless technology, WebGen 200. This entered alpha trials with a commercial product this year. The technology has been engineered for new markets and applications, and paves the way for the first stages of blast automation through our world’s first Avatel technology. We also unveiled 4D, our new variable density bulk explosive system, providing a step change in bulk explosives and value delivery. With our integrated SAP platform stabilizing, we will start to realize the benefits and efficiencies while managing our cost base and operating model and continue to optimize our operations and reduce complexity across manufacturing and supply. Finally, we will partner with our stakeholders in executing our strategy. Our focus remains on empowering our people and partnering with customers, as well as communities to solve shared challenges and champion for a safer and more sustainable industry. As Malcolm mentioned earlier, we have worked hard this year to make Orica an even safer and more sustainable organization. Continuing to focus on delivering our sustainability commitments, particularly greenhouse gas emissions, diversity and inclusiveness and community investment. We achieved a 13% reduction in our combined Scope 1 and 2 greenhouse gas emissions from 2019 levels, and we remain on track to achieve our target of at least 40% reduction in Scope 1 and 2 greenhouse gas emissions by 2030. In October, we completed the installation of tertiary abatement catalyst technology at our Carseland plant in Canada and have announced our Kooragang Island Decarbonization Project for tertiary abatement in partnership with the New South Wales Government and Clean Energy Finance Corporation. We have assigned approximately $45 million over the next 5 years in capital to deploy similar tertiary abatement technology across our Australian ammonium nitrate sites, which could deliver 750,000 tonnes of carbon dioxide equivalent reduction annually. As Malcolm mentioned, this year, we also took a significant step in our sustainability journey and established a net zero ambition by 2050. Building on our target to reduce Scope 1 and 2 emissions by at least 40% by 2030. This new ambition includes our most material Scope 3 emission sources and provides a clear roadmap that prioritizes the decarbonization of our operations, development of low carbon solutions and partnering with our stakeholders to move towards Net Zero emissions by 2050. We are also supporting the construction of a mobile demonstration plant of carbon capture and utilization technology at our Kooragang Island manufacturing facility, led by Mineral Carbonation International, in partnership with the federal government and the University of Newcastle. We are a company with a long history of technical innovation, which is already helping our customers improve mine site safety, productivity and efficiency. We will continue to develop and deploy low emissions technologies to our major manufacturing sites and work with our global suppliers and stakeholders, to reduce the footprint of our supply chain. COVID-19 has also had an impact on the communities in which we operate. In response, we have continued community initiatives and investments, directing our support to where it is needed most. We have launched the Orica Impact Fund, targeting investment to communities most impacted by COVID, essential to our operations, or with a focus on science, technology, engineering and maths, driving long-term benefits and positive social and environmental impacts. With regard to our diversity and inclusion targets, we saw a slight drop in the percentage of women in senior leadership positions, as we restructure the organization. But we remain committed to our 2024 target of 35% women in senior leadership and have programs in place that support achieving this target. Moving now to the outlook; the fundamentals of our business remain strong, by controlling what we can, optimizing our operations and supply chain, and embedding our Refreshed Strategy and growth drivers, we will seize opportunities as the market continues to stabilize. The 2022 financial year EBIT from continuing operations, is anticipated to increase from the 2021 financial year. With a much stronger first half than the prior year, as we see continued strong momentum from the last quarter. Global commodity growth in copper and gold and in the quarrying and construction market is anticipated to continue, and we are seeing some tightening in the explosives market. Whilst we do see some inflationary pressures throughout the business, this is effectively being managed through stringent cost control, as well as through the rise and fall pricing structures we have in place as well as with the execution of price increases wherever our contracts permit. Earnings are expected to be weighted towards the second half, partly owing to planned manufacturing plant turnaround activity, as well as seasonal effects in the first half. Our focus on pricing discipline and cost efficiency is expected to mitigate rising input costs. Our refreshed strategy and executive leadership team have Orica well positioned, to improve our return on net assets and deliver value for our customers and shareholders via our 4 business verticals, and through a simpler and more efficient organization. While it has been a challenging year with ongoing COVID disruptions, geopolitical issues and other external and internal factors impacting our results, our people have risen to tackle each and every challenge and shown commitment and resilience towards each other, our customers and our communities. I am very proud of our team. With our new executive team in place and improving business environment in our core business and future growth potential, we are confident in our ability to continue our recovery and deliver profitable growth and stakeholder returns. Finally, thank you to our shareholders for your continued support and investment in Orica.

Thank you, Sanjeev. Before opening the formal part of the meeting, I'd like to make some brief comments about the procedure. This is a shareholders' meeting, and only shareholders and their proxies, attorneys and authorized corporate representatives may participate in this meeting. As Delphine mentioned, questions on all items of business will be fielded through me, as the Chairman of the meeting. And if you wish to submit a question or comment, please ensure that they're relevant to the matters before the meeting and to shareholders as a whole and if a shareholder has a detailed question about the operations of the company or a question which appears to be more relevant to the shareholders' own circumstances, that question will be dealt with by management following the meeting. I thank you for adhering to these procedures. A number of our shareholders are not able to join our virtual meeting today, but have taken the time to send us their direct or proxy votes in advance of the meeting. So as not to preempt the view of shareholders attending today's webcast, and at the same time, to ensure that all shareholders who have voted directly or lodged proxy votes in advance of their meeting have their views known, I will provide a summation of the direct and proxy votes received after questions, on each item of business, but before the resolutions are put to a vote. In relation to open proxies received for the Chairman, they have been voted in favor of all resolutions. And as indicated in the notice of meeting, each resolution will be decided on a poll. After question time on each resolution, I'll invite you to cast your vote by making the appropriate selection on your voting card, and I appoint Julie Stokes of Link Market Services Limited, the company's share registrar, who have examined and prepared summaries of the direct and proxy votes received, to act as returning officer for the poll. Please also note, that if you are a proxyholder, attorney or nominee and your appointer has directed how you should vote on any item, you must follow that direction. I now move to the formal business of the meeting. The first item of ordinary business in the notice of meeting is to receive and consider the financial report, directors' report and auditor's report for the year ended 30 September 2021. [Operator Instructions]. We'll take telephone questions first, followed by written questions submitted via online platform. Are there any questions via the phone? No? Thank you, Delphine. And now to the written questions, Delphine, are there any questions on this item of business?

Thank you, Chairman. We've received one question. And the question goes, as countries progressively move to renewable energy sources over the next 10 to 20 years, what strategies has the Board put in place to ensure that Orica remains a viable business into the future, as the demand for future -- for bulk explosives, including ammonium nitrate. And have you got the current expertise and knowledge within Orica to grow the business into other industries?

Well, our refreshed strategy highlights some of the areas in which we are continuing to reduce our exposure to coal -- to thermal coal, in particular, really by growing the other parts of our business and focusing on other commodities and future-facing commodities. And we do have, within the company, the experience, of course, of North America, where thermal coal has been in decline for a long period of time, particularly in the Appalachians, and we have still continued to grow that business and do very well in the other markets, quarrying, construction in particular, and the base metals and gold. That said, there are a lot of other targeted commodity exposures around the world, where we are increasing our commitment, and I mentioned copper and gold in particular, which now represent 40% of our total revenue, compared with a declining share of thermal coal of around 17%. And we are looking at growing in other commodities, as I mentioned, such as manganese cobalt and lithium, which are clearly going to the future battery and other technologies. Delphine, are there any other questions?

Mr. Chairman, there are no further questions on this matter.

Thank you, Delphine. I'll now move on to Item 2 of the business of the meeting, which is the election of directors. Resolution 2.1 in the Notice of Meeting seeks to the reelection of Denise Gibson as a Director. Denise was appointed an independent nonexecutive director in January 2018. She is the Chairman of the Innovation and Technology Committee and is a member of the Human Resources and Compensation Committee, as well as the Nominations Committee. In accordance with the constitution of the company, Denise retires and being eligible, offers herself for reelection. And I shall now invite Denise to say a few words in support of her reelection. Denise?

Good morning. It is a great privilege to seek reelection to the Board of Orica. I am truly energized by the company's direction. Despite a challenging 2021 fiscal year, the Q4 trajectory, coupled with the refreshed strategy under Sanjeev's leadership and Orica's market-leading position will, I believe, create significant opportunities for the company. As Chair of the Innovation and Technology Committee, we are focused on the acceleration and commercialization of Orica's cutting-edge disruptive technologies. It is really exciting to see the company at the forefront of industry innovation. Across Orica's regions, we are seeing an increased pace of customer adoption, most notably amongst the company's digital service offerings. This area has double-digit uptake over the past couple of years, and has brought many new customers to Orica, more than doubling the footprint where these solutions are being deployed. The company has also launched 4D, a new variable density bulk explosion system, and is also testing the second-generation fully wireless technology, WebGen 200, which has entered into alpha trials with a commercial product this year, with technology that has been engineered from new markets and from new applications. These exciting new technologies focus on better blasting outcomes. With the company's green technology roadmap and commitment to sustainability, Orica will bring further value creation to the ecosystem and to its many customers. In my 2 successful entrepreneurial companies, as well as my corporate executive goals, I have accumulated over 30 years of technology experience in product design, manufacturing, supply chain and customer engagement. I continue to serve as the Co-Founder and Executive Chairman for Ice Mobility. The company engages and serves technology companies, network operators, manufacturers and retailers to bring a wide array of IoT services and wireless devices to market. I am also very active in industry leadership in emerging technologies, commercial development and deployment, serving on the Board of industry leaders of the Consumer Technology Association and also serving as the Chair Emeritus of their nonprofit foundation. In addition to my industry work, I serve as an independent director on NASDAQ listed, as well as privately held companies. It is my continued intention as an Orica Director, to deploy my entrepreneurial experience and knowledge of cutting-edge technology, to support the transformational and technological strategies of the company. Should I have the privilege of being reelected. I look forward to working with my fellow directors, with Sanjeev and with his management team to continue to advance the business results and strategic initiatives of Orica. Thank you for your investment and support of Orica, and thank you for your time today.

Thank you, Denise. Denise abstains from voting her own shares on this resolution. [Operator Instructions] Are there any questions via the phone?

Chairman, there are no questions via the phone, neither there are any written questions on this item.

Thank you, Delphine. Before I ask you to vote on this resolution, results of direct and proxy votes received in respect of the resolution are displayed on the screen. I now put the motion that Denise Gibson be reelected as a Director of the company, and ask that you cast your vote by making the appropriate selection on your voting card. [Voting]

Thank you. Resolution 3 in the notice of meeting is to adopt the remuneration report. The remuneration report is found on pages 86 to 105 of the Annual Report, and as you will be aware, the vote on this item is advisory only and does not bind the company or the directors who remain responsible for the remuneration policy of the group. However, the Board takes into account feedback from our shareholders, including the discussion and vote on this resolution, when considering future remuneration strategy. By casting your vote in favor of the remuneration reports, you'll be indicating your support for the remuneration strategy the Board has adopted for its most senior executives, including the Managing Director. The Board sets the remuneration strategy, with a view to offering competitive remuneration that attracts and retains the best executives possible, and which aligns executives with the long-term success of Orica and with its shareholders. The 3 elements to remuneration at Orica are fixed pay, a bonus for the achievement of short-term objectives and a long-term incentive plan. Full details of Orica's remuneration framework and a summary of the company's performance and the effect on remuneration outcomes for the 2021 financial year, can be found in the remuneration report. I would be pleased to take any comments or questions you may have, in relation to the company's remuneration strategy. I now declare the resolution open for questions. [Operator Instructions]. Are there any questions via the phone?

Mr. Chairman, there are no questions via the phone. We have received a question from the ASA online, which I will now table at the meeting. The question is the size of the potential bonus combined STI and LTI exceeds the level that the ASA considers appropriate. The cap of 100% of FAR on STI and 150% of FAR on LTI is the limit that the ASA recommends. This compares to the 100% for SCI and 200% of LTI that exists currently. This was the basis of the ASAs against vote on the remuneration report. However, they have acknowledged that the CEO received none of these bonuses at the discretion of the Board. So it's more of a statement, Mr. Chairman, than a question.

Thank you, Delphine. I'm aware of the ASA's position on this issue, and we have canvassed widely with our shareholders, in arriving at what is a reduced percentage in terms of both STI and LTI as a percentage of FAR. So thank you for that feedback, and we'll continue to review the issue each year, and to consult with shareholders in so doing. Are there any other questions Delphine?

There are no further questions.

Thank you. There being no further questions, I'll now put the motion that the remuneration report be adopted. I wish to highlight that none of your directors nor any of the senior executives listed in the remuneration report, may vote their own shares in relation to this resolution. Before I ask you to vote on this resolution, results of direct and proxy votes received in respect of the resolution are displayed on the screen. I'll now ask you to vote on this item of business, by making the appropriate selection on your voting card. [Voting]

We now come to the proposed grant of performance rights to the Managing Director under the long-term incentive plan, as the long-term element of his remuneration for the 2022 financial year. The actual number of rights to be granted will be calculated as set out in the explanatory notes to the notice of meeting. Under the ASX listing rules, shareholder approval is required for a director to be issued securities under an employee incentive scheme. I now declare the resolution open for questions. [Operator Instructions]. Are there any questions via the phone, Delphine?

Chairman, there are no questions via the phone nor are there any written questions.

Thank you, Delphine. Before I ask you to vote on this resolution, results of the direct and proxy votes received in respect of this resolution are displayed on the screen. I will now put the motion that approval be given to the grant of performance rights under Orica's long-term incentive plan to the Managing Director on the terms summarized in the explanatory notes in the notice of meeting. Any votes cast in favor of this resolution by the Managing Director or an associate, will be disregarded in accordance with the ASX listing rules. I'll now ask you to vote on this item of business by making the appropriate selection on your voting card. [Voting]

Shareholders, that concludes today's business, and I now formally close the meeting. Voting will remain open for a further 5 minutes to enable shareholders to submit their votes. Following the close of voting, the results of the poll will be announced to the ASX as soon as they are finalized. Thank you for your attendance today, and on behalf of my fellow directors, I thank you, our shareholders, for your continued support during the year. I very much hope that the relaxation of COVID restrictions that we're now enjoying continues, and I look forward to being able to welcome you back in person at next year's AGM.