Troubled steelmaker BlueScope Steel has slashed bonuses and cut its chief executives pay packet to help it avoid a damaging shareholder protest vote at its annual general meeting.
BlueScope has made two consecutive $1 billion annual losses, cut more than 1000 jobs and its share price has plummeted, as a range of economic headwinds hit the Australian steel market forcing the company to end its export operations.
The company’s export business was profitable only two years ago, highlighting how quickly it was hurt by a high Australian dollar and weak steel market.
At least 97 per cent of shareholders voted in favour of this year’s remuneration report, following a 39 per cent protest against last year’s report.
Chief executive Paul OMalley’s total salary package was slashed from $3.8 million to $2.8 million (base pay $1.7 million) – the fall including no bonus, unlike last year’s controversial $721,000 bonus payment shortly after the posting of the $1 billion plus loss.
The prospect of a board spill – if 25 per cent or more of shareholders voted against its remuneration – prompted the action, with just under $1 million in short term incentives paid compared to $3 million in 2011.
BlueScope director and remuneration committee chair Diane Grady acknowledged last year’s negative feedback had influenced this year’s changes, while defending management’s performance amid difficult business conditions.
However, the company has not made a profit and has not resumed paying dividends, she told the meeting.
These factors have been considered in determining executive remuneration.
Ms Grady called for less transparency around executive pay, saying it was forcing salaries up.
Mr O’Malley said he expected BlueScope to post an underlying net loss approaching break-even for the current six months to December 31.
The factors causing the company’s problems, including high costs and currency and a flat steel and Australian housing market, still exist.
However, the $500 million cost of closing a furnace at Port Kembla in New South Wales had now been incurred and that, along with export losses, won’t be incurred anymore and iron ore prices had eased.
BlueScope is freer to focus on its more profitable steel building products and coated products.
“Outside Australia our businesses are actually performing very well, particularly in the US where we are seeing an industrial building recovery,” Mr O’Malley told reporters after the meeting.
The implementation of the company’s $1.36 billion joint venture with Japanese giant Nippon in its coated steel-products business was progressing well and the proceeds were expected to be received in March quarter of 2013, BlueScope chairman Graham Kraehe said.
“We are now seeing the rewards of that investment foresight as our Asian businesses continue to perform well and we see further growth opportunities in our markets in the region,” he said.
Mr O’Malley said discussions were progressing well with the federal government about cracking down through Customs on anti-competitive dumping of cheap steel in Australia that had breached World Trade Organisation rules.
The practice was costing BlueScope well above $50 million a year, he said.
The company would not comment on the threat to BlueScope posed by the Asian consortium including steel giant Posco that recently bid for Australian steelmaker Arrium.
BlueScope shares closed steady at 46 cents.
