Cha irma n s a d d re ss to sha re ho ld e rs; Chie f E xe c - - PDF document

Do wne r E DI L imite d

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6 No ve mb e r 2013 Co mpa ny Anno unc e me nts Offic e ASX L imite d L e ve l 4, 20 Bridg e Stre e t Sydne y NSW 2000

RE : Downe r E DI L imite d 2013 Annual Ge ne r al Me e ting

Ple a se find a tta c he d a c o py o f the fo llo wing do c ume nts re la te d to the Annua l Ge ne ra l Me e ting o f Do wne r E DI L imite d to b e he ld a t 11.00a m to da y:

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Cha irma n’ s a d d re ss to sha re ho ld e rs;

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Chie f E xe c utive Offic e r’ s re po rt; a nd

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Annua l Ge ne ra l Me e ting pre se nta tio n. Yo urs fa ithfully,

Pe te r T

• mpkins

Co mpa ny Se c re ta ry

DOWNE R GROUP ANNUAL GE NE RAL ME E T ING 2013 CHAIRMAN’S ADDRE SS AND CHIE F E XE CUT IVE OF F ICE R’S RE PORT Chairman’s Addre ss, Mike Harding

L a d ie s a nd Ge ntle me n I a m ve ry ple a se d to re po rt tha t Do wne r d e live re d a stro ng fina nc ia l a nd o pe ra tio na l pe rfo rma nc e fo r the 2013 fina nc ia l ye a r. I n pa rtic ula r, we :

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De live re d o n o ur g uida nc e , g ive n a t the sta rt o f the ye a r;

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Co nside ra b ly stre ng the ne d o ur b a la nc e she e t; a nd

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Ha ve no w d e live re d 59 Wa ra ta h T ra in se ts to the Ne w So uth Wa le s g o ve rnme nt a nd the y a re o pe ra ting ve ry we ll. T he re a re 68 se ts in the c o untry a nd the fina l se t is sc he d ule d fo r de live ry in mid-2014. At la st ye a r’ s Annua l Ge ne ra l Me e ting , I sa id the Bo a rd wo uld like to re sume pa ying d ivid e nd s a s so o n a s it wa s a ppro pria te , ha ving re g a rd to the Co mpa ny’ s p e rfo rma nc e , its b a la nc e she e t stre ng th a nd its c a pa c ity to d istrib ute fra nking c re d its. I a m ple a se d tha t the se c rite ria we re sa tisfie d a nd we pa id a Ha lf Ye a r a nd a F ull Ye a r divide nd. I n wha t ha s b e e n a d iffic ult ye a r fo r c o mpa nie s in o ur se c to r, Do wne r’ s stro ng pe rfo rma nc e a nd the re sumptio n o f d ivid e nd s is a we lc o me o utc o me fo r yo u, o ur sha re ho lde rs. On b e ha lf o f the Bo a rd , I wo uld like to tha nk yo u fo r yo ur suppo rt. I n a dditio n, I wo uld like to tha nk yo ur Chie f E xe c utive Offic e r, Gra nt F e nn, his e xe c utive te a m a nd impo rta ntly a ll the Do wne r e mplo ye e s a nd c o ntra c to rs who wo rke d ve ry ha rd during the ye a r to de live r the re sults. I c a n a ssure yo u we a re a wa re tha t we must c o ntinue the ha rd wo rk, b uild o n the se fo und a tio ns a nd d e live r c o nsiste ntly in the ye a rs a he a d . Yo ur Chie f E xe c utive Offic e r will so o n o utline the hig hlig hts o f o ur fina nc ia l a nd o pe ra tio na l pe rfo rma nc e in his re po rt to sha re ho ld e rs. T he he a lth a nd sa fe ty o f o ur pe o ple is pa ra mo unt a t Do wne r. T ra g ic a lly, a s re po rte d a t la st ye a r’ s Annua l Ge ne ra l Me e ting , we ha d a fa ta lity in Ne w Ze a la nd in Oc to b e r 2012. Do wne r is fo c using o n its c ritic a l risks a nd we ha ve intro duc e d c a rdina l rule s tha t pro vide dire c tio n a nd g uida nc e o n the se c ritic a l risks. L a te r in the Me e ting yo u will b e a ske d to vo te fo r the re -e le c tio n o f thre e No n-e xe c utive Dire c to rs – Anna b e lle Cha pla in, Dr Gra nt T ho rne a nd Jo hn Humphre y. Yo u will he a r b rie fly fro m e a c h o f the m b e fo re yo u vo te a s pa rt o f the fo rma l pro c e e ding s. Sub je c t to the ir re -

e le c tio n, we no w fe e l the Bo a rd ha s the a ppro pria te b a la nc e o f skills it ne e d s fo r the future . F urthe rmo re , a s the a ve ra g e te nure o f the No n-e xe c utive is thre e ye a rs, we ne e d to no w ha ve so me sta b ility. Re c e ntly, the Do wne r Bo a rd fe lt it wa s a ppro pria te to und e rta ke a c o mpe titive te nd e r pro c e ss fo r the e xte rna l a ud it o f Do wne r. T his is b e c a use De lo itte ha s b e e n Do wne r’ s e xte rna l a udito r sinc e 1998 a nd De lo itte ’ s le a d a udit pa rtne r, Andre w Griffiths, is c o mple ting his 5-ye a r ro ta tio n a t the e nd o f the 2014 fina nc ia l ye a r. F

• llo wing d e ta ile d e xpre ssio ns o f inte re st fro m the fo ur la rg e st a ud it firms in the Austra lia n

ma rke t, inc luding De lo itte , the Bo a rd pro po se s to re c o mme nd to sha re ho lde rs tha t K PMG b e a ppo inte d a s the ne w a udito r o f the Do wne r Gro up , e ffe c tive fro m the 2015 fina nc ia l ye a r. Sha re ho lde rs will vo te o n this a ppo intme nt a t the 2014 Annua l Ge ne ra l Me e ting . T he Dire c to rs o f Do wne r re c o g nise the pro fe ssio na lism, o b je c tivity a nd ind e pe nd e nc e displa ye d b y De lo itte during the ir te nure a s a udito r a nd, in pa rtic ula r, the c o ntrib utio n ma d e b y And re w Griffiths, the le a d a ud it pa rtne r. T he Bo a rd b e lie ve s the c a pa b ility o f Do wne r’ s se nio r ma na g e me nt te a m ha s stre ng the ne d furthe r during the ye a r, a nd tha t this is re fle c te d in the Gro up’ s impro ve d pe rfo rma nc e a nd b usine ss c ulture . Sig nific a nt pro g re ss ha s b e e n ma de o n the Wa ra ta h T ra in Pro je c t o ve r the pa st ye a r. As I me ntio ne d e a rlie r, we ha ve no w d e live re d 59 o f the 78 tra in se ts, the y a re pe rfo rming e xtre me ly we ll a nd the fina l tra in is d ue to b e d e live re d in mid -2014. T he Bo a rd ha s e nsure d tha t ma na g e me nt c o ntinue s to fo c us o n pro je c t a nd risk ma na g e me nt, whic h is the life b lo o d o f a c o mpa ny like Do wne r. Ge tting the rig ht pe o ple , pro c e sse s a nd skills o n the pro je c ts is ke y to o ur future suc c e ss. As the Co mpa ny sta te d a t its F ull Ye a r re sults in Aug ust, the 2014 fina nc ia l ye a r will b e a c ha lle ng ing o ne fo r Do wne r a nd its pe e rs, a ltho ug h we e xpe c t to d e live r a fla t ne t pro fit a fte r ta x re sult. I no w invite o ur Chie f E xe c utive Offic e r, Gra nt F e nn, to pro vide a n upd a te o n the Gro up’ s

• pe ra tio ns a nd the o utlo o k fo r 2014 b e fo re I

re turn to disc uss the ite ms o utline d in the No tic e o f Me e ting . T ha nk yo u.

Chie f E xe c utive Offic e r ’s Re por t, Gr ant F e nn

T ha nk yo u, Mike , a nd Go o d Mo rning e ve ryo ne . I a m ple a se d to re po rt tha t Do wne r ha s pe rfo rme d ve ry we ll, b o th fina nc ia lly a nd

• pe ra tio na lly, sinc e la st ye a r’ s Annua l Ge ne ra l Me e ting a nd I

wo uld like to o utline a numb e r o f the hig hlig hts fro m the pa st 12 mo nths. Our fina nc ia l pe rfo rma nc e wa s stro ng in c ha lle ng ing c irc umsta nc e s a nd , sig nific a ntly, we we re o ne o f ve ry fe w c o mpa nie s in o ur se c to r to d e live r o n the g uid a nc e pro vide d to the ma rke t fo r the 2013 fina nc ia l ye a r. T his a c hie ve me nt, to d e live r o n o ur pro mise d e spite a d iffic ult o pe ra ting e nviro nme nt, re fle c ts the q ua lity o f o ur pe o ple a nd the ro b ustne ss o f o ur b usine ss. Our o pe ra ting c a sh flo w wa s ve ry stro ng o nc e a g a in, d ue to o ur c o ntinuing a nd rig o ro us fo c us o n c a sh a nd wo rking c a pita l ma na g e me nt. Mo re b ro a d ly, Do wne r’ s b a la nc e she e t ha s b e e n re b uilt sub sta ntia lly, with g e a ring le ve ls no w a t 12%, b e lo w o ur histo ric ta rg e t ra ng e , a nd ne t d e b t a ro und a third lo we r tha n this time la st ye a r. Ove ra ll, the re ha s b e e n a n e xtra o rd ina ry impro ve me nt in o ur b a la nc e she e t fro m a c o up le o f ye a rs a g o . We re fina nc e d the Gro up suc c e ssfully during the ye a r, a c hie ving a 20% re duc tio n in funding c o sts a nd intro duc ing a c o mmo n te rms de e d . Our e nha nc e d c re dit po sitio n wa s a c a ta lyst fo r F itc h ra ting s to upg ra d e Do wne r fro m BBB- to BBB, with a sta b le o utlo o k. An impo rta nt c o nse q ue nc e o f o ur stre ng the ne d fina nc ia l po sitio n is tha t the Bo a rd wa s a b le to re c o mme nc e pa ying divid e nd s d uring the ye a r, a nd tha t is o b vio usly a g o o d

• utc o me fo r yo u, o ur sha re ho ld e rs.

T he pro g re ss ma de o n the Wa ra ta h T ra in Pro je c t wa s a re a l hig hlig ht o f the pa st ye a r a nd I a m de lig hte d with wha t ha s b e e n a c hie ve d. T he re a re no w 59 tra ins a va ila b le fo r pa sse ng e r se rvic e o n the Syd ne y Ra il Ne two rk. T he la st tra in will le a ve China in la te De c e mb e r 2013 a nd the 78th tra in re ma ins due fo r de live ry in the middle o f the 2014 c a le nd a r ye a r. T ha t is o nly se ve n mo nths a wa y. I mpo rta ntly, the pe rfo rma nc e o f the tra ins c o ntinue s to b e ve ry g o o d a nd p a sse ng e rs a re ve ry ha ppy with the m. F ro m a n o pe ra tio na l pe rspe c tive , the I nfra struc ture Divisio n impro ve d ma rke dly during the ye a r in wha t is a ve ry c o mpe titive a nd c ha lle ng ing ma rke t. T his wa s d ue to b e tte r c o ntra c t pe rfo rma nc e a nd g re a te r e ffic ie nc ie s fro m o ur o ng o ing fo c us o n re d uc ing c o sts. I n Austra lia , the I nfra struc ture Divisio n wo n a numb e r o f ro a d a nd ra il ma inte na nc e , e le c tric a l a nd instrume nta tio n, te le c o mmunic a tio ns a nd re ne wa b le e ne rg y c o ntra c ts. I n Ne w Ze a la nd , wo rk o n the re b uild ing o f Christc hurc h ra mpe d up , a nd we wo n a NZ$500 millio n c o ntra c t with Cho rus to b uild the c o untry’ s ultra fa st b ro a db a nd ne two rk, a s we ll a s se ve ra l sig nific a nt ro a d infra struc ture c o ntra c ts in Auc kla nd a nd We lling to n.

I n the pa st we e k, we ha ve a nno unc e d two sig nific a nt ne w pro je c t wins fo r Do wne r I nfra struc ture . T he first wa s a $400 millio n c o ntra c t with Be c hte l fo r two e le c tric a l a nd instrume nta tio n pa c ka g e s o n the Whe a tsto ne o il a nd g a s pro je c t in We ste rn Austra lia , o ne

• f the la rg e st re so urc e s pro je c ts in the c o untry. Do wne r is Austra lia ’ s le a ding E

&I c o ntra c to r a nd the Whe a tsto ne c o ntra c ts will he lp us b uild o n o ur tra c k re c o rd in o il a nd g a s. E a rlie r this we e k, Ro a ds a nd Ma ritime Se rvic e s in NSW a wa rde d the Do wne rMo uc he l jo int ve nture a Ste wa rd ship Ma inte na nc e Co ntra c t fo r the Syd ne y We st Zo ne ro a d ne two rk. T he c o ntra c t is va lue d a t a ppro xima te ly $100 millio n pe r ye a r fo r se ve n ye a rs, with a n

• p tio n to e xte nd it to te n ye a rs. Unde r the c o ntra c t, we will ma inta in a nd imp ro ve ro a d

a nd b ridg e a sse ts o n a ne two rk o f 2,200 la ne kilo me tre s. T his c o ntra c t c o nso lida te s o ur po sitio n a s Austra lia ’ s le a ding pro vide r o f ro a d infra struc ture se rvic e s. T he se two e xc e lle nt c o ntra c t wins will c o ntrib ute to o ur 2015 pe rfo rma nc e a nd we a re a lso te nde ring o n a numb e r o f o the r ma jo r o pp o rtunitie s tha t will ha ve a n impa c t in 2015. Do wne r Mining ha d a ye a r o f c o nso lida tio n a fte r se ve ra l ye a rs o f ve ry stro ng g ro wth. Our c usto me rs a re re spo nding to lo we r c o mmo dity pric e s b y re vie wing the ir o pe ra tio ns a nd se e king to re d uc e c o sts. I mpo rta ntly, we a re rising to the c ha lle ng e a nd wo rking with o ur c usto me rs to he lp the m impro ve pro duc tivity. We a re a lso e nsuring tha t we impro ve o ur

• wn b usine ss a nd the re is a stro ng fo c us o n o pe ra tio na l e ffic ie nc y a nd a sse t utilisa tio n

a c ro ss the Mining Divisio n. While the Wa ra ta h T ra in Pro je c t wa s a re a l hig hlig ht o f the ye a r, o ur lo c o mo tive b usine ss ha s b e e n a ffe c te d sig nific a ntly b y the dro p-o ff in mining de ma nd . T he Ra il Divisio n is g o ing thro ug h sub sta ntia l c ha ng e , with a stro ng fo c us o n pro duc tivity. T he tra nsfo rma tio n

• f o ur ra il b usine ss will ta ke so me time , ho we ve r we b e lie ve the re is a sig nific a nt ma rke t fo r

the ra il se rvic e s tha t we pro vide , pa rtic ula rly a s Sta te Go ve rnme nts a nd priva te o pe ra to rs lo o k to impro ve the e ffic ie nc y o f the ir o pe ra tio ns a nd ne two rks. I wa nt to stre ss tha t the he a lth a nd sa fe ty o f o ur pe o ple re ma ins o ur to p prio rity. I mpo rta ntly, we a re c o nc e ntra ting o n the c ritic a l risks tha t c a n c a use se rio us injury in o ur wo rkpla c e s. Our Ca rdina l Rule s pro g ra m, whic h fo c use s o n the se c ritic a l risks, ha s g a ine d re a l tra c tio n a c ro ss the Gro up a nd this is ha ving a sig nific a nt impa c t o n o ur pe o ple a nd the wa y we do o ur wo rk. L a die s a nd Ge ntle me n, a t o ur F ull Ye a r Re sults in Aug ust we sta te d tha t the 2014 fina nc ia l ye a r will b e c ha ra c te rise d b y a re d uc tio n in ma jo r c a pita l wo rks in the re so urc e s se c to r, a g re a te r e mpha sis b y mining c usto me rs o n o ptimising the ir vo lume s a nd c o st o f pro duc tio n a nd b ud g e ta ry pre ssure o n the le ve l o f Go ve rnme nt e xpe nd iture o n ro a d a nd ra il ma inte na nc e . As a re sult, the re is a hig he r le ve l o f unc e rta inty in re ve nue fo r the 2014 fina nc ia l ye a r tha n in the prio r ye a r.

Our re sults in the first thre e mo nths o f the 2014 fina nc ia l ye a r ha ve b e e n to pla n. T he re fo re , a t this po int, a nd de sp ite future ma rke t unc e rta intie s, we ma inta in o ur g uida nc e fo r the F ull Ye a r re sult o f ne t pro fit a fte r ta x o f $215 millio n. L a d ie s a nd Ge ntle me n tha nk yo u ve ry muc h, a nd I wo uld no w like to ha nd the Me e ting b a c k to the Cha irma n.