Division would weaken chairman says

Press, Volume CXI, Issue 32708, 10 September 1971, Page 8

Division would weaken chairman says

(N.Z. Press Association —Copyright) SYDNEY, September 9. The criticism of the company’s size was not a bona fide reason for splitting it up; dividing the company would merely weaken it without reducing criticism, the chairman of the Broken Hill Proprietary Company, Ltd (Sir lan McLennan) said at the annual meeting.

He also said that he did not believe that to hive off the company’s oil and gas and other mineral interests would increase dividends to shareholders.

“The boards of the newlyformed companies would be just as concerned to safeguard the long-term future of their particular businesses by ploughing back profits into new projects as your present board is,” he said.

Disputing the argument that B.H.P. was “crosssubsidising,” he said that he believed the decision to raise steel prices 8 per cent at the beginning of June was sufficient indication of the board’s intentions not to subsidise permanently any part of the company. Referring to the annual accounts, he said that the directors did not adopt the principle of deferred taxation in relation to mineral and mining companies other than Hematite Petroleum — because for coal and ore expenditure on mining development had been a major source of tax deduction for many years, and he thought that this was likely to continue.

“In our view the effects on our consolidated accounts of not adopting the principle of deferred taxation have not been such as to cause serious variation of profit between succeeding years. “However, if we had suddenly adopted the principle in respect of such operations, distortion of a major kind would have occurred—this year to the extent of reducing the profit by $12.8m,” he said. On steel Sir lan McLennan said that the slackness of

overseas steelmarkets was having little effect on B.H.P. production, which was still less than adequate to satisfy domestic demand.

By early 1972, however, the new facilities at Port Kembla should start progressively coming into operation unless further delayed by strikes, and by the middle of next year, raw steel capacity at that centre should be raised from 3.8 m to 4.5 m tons a year.

A major drive would therefore be necessary to improve the company’s share of the international steel market.

The depressed condition of the steel industry overseas was influencing the thinking of some of the foreign companies with which B.H.P. had been discussing the development of Kwinana into a large, export-orientated plant for semi-finished steel products. Discussions were proceeding with several overseas companies, however, which had still expressed interest in participating. Two major shareholders of the company enlivened the meeting with an attack on the board.

They were Mr A. Shepherd, of Sydney, and Mr H. Fairey, of Waikanae. Mr Shepherd, who has been a consistent critic of the company’s policies in recent years, said he objected strongly to the use of income from oil and gas to finance

an uneconomic steel industry. Mr Fairey, who waved a large sheaf of letters sent to him by New Zealand shareholders, criticised the present board and said that if Australia’s interests were to come before those of the shareholders, then the directors should resign and stand for Australian Parliamentary seats.

In his attack Mr Fairey queried the right of the board to appoint themselves as directors of Hematite Petroleum, Ltd.

Sir lan McLennan defended the action and said the appointment was valid in that Hematite was in fact a wholly-owned subsidiary. In his criticism of the company for using funds from its planned debenture issue to finance expansion of the steel sector, Mr Shepherd said that any expansion of steel production under the company’s present conditions would be a disaster for shareholders.

In his opinion all Australian companies should be required to distribute at least 75 per cent of their profits each year. He urged the board to set Out future dividends under the headings of “Steel,” “Mining Activities,” “Other Activities,” and “Hematite Petroleum.”

He also asked the board to make a one-for-10 issue at par of new shares to cut the size of the proposed debenture issue.