Anglo American CEO Mark Cutifani
Photo by: Duane Daws
JOHANNESBURG (miningweekly.com) – While Anglo American’s financial results were encouraging, they were “not yet satisfactory”, said CEO Mark Cutifani at the diversified major’s results presentation on Friday.
“The business improvement is encouraging, but we are not anywhere near where we need to be as a group,” he stated.
Anglo reported a 6% increase in underlying profit to $6.6-billion for the 2013 financial year, with the company’s earnings before interest, tax, depreciation and amortisation having increased by 7% to $9.5-billion.
After deducting tax and profits attributable to noncontrolling interests, which represented a greater proportion of profit than in 2012, the company’s underlying earnings decreased by 7% to $2.7-billion. Underlying earnings a share amounted to $2.09.
The company also declared impairments of $1.9-billion, principally in relation to its Barro Alto operation, in Brazil, its platinum portfolio review, the Michiquillay operation, in Peru, and the Foxleigh mine, in Australia.
Meanwhile, the group’s net debt increased by $2.14-billion to $10.65-billion, while net debt to total capital at December 31, 2013, was 22.2%, compared with 16.3% at December 31, 2012.
Fund manager Liberum Capital said the group’s debt would probably grow again during the 2014 financial year.
Further, Anglo’s dividend was kept flat at 85c a share.
“The flat dividend was to be expected given that Anglo still has to face its peak capital expenditure year of $7-billion to $7.5-billion,” Liberum noted.
OPERATIONS UPDATE
Cutifani said Anglo had started to make solid progress at Los Bronces and Collahuasi, the group’s two biggest copper interests in Chile, where improvements in waste stripping volumes and process tonnages supported a significant improvement in copper production.
“At the currently constrained Sishen iron-ore mine, in South Africa, a redesign of the pit and changes to core operating processes should result in consistently higher production from 2015 onwards,” he said, adding that Sishen’s challenges had been partially offset by the solid performance of the Kolomela mine, in the Northern Cape, that was operating well above nameplate capacity.
He further said diamond business De Beers had a good year and was able to increase output against a background of rising demand.
“Meanwhile, our single largest investment, the Minas-Rio iron-ore project in Brazil, was 84% complete by the end of [2013] and remains on track to ship its first iron-ore by the end of 2014,” he said.
Meanwhile, Anglo’s platinum business had faced significant challenges – such as cost pressures, declining productivity, trade union militancy and continuing price pressure –during the financial year.
“We finalised a root-and-branch review of the business to address the changed fundamentals of the platinum industry and to understand the primary drivers of the dramatic reduction in profitability across the sector.
“Following an extensive but constructive process of engagement with government and the unions, our labour force is being aligned with operational requirements and we are putting the review’s proposals into action across the business and concentrating on those assets with sustained profitability potential, while adjusting production more closely with current product demand,” Cutifani said.
DRIVING VALUE
He further stated that the company was making headway on its strategy aimed at setting the path for Anglo American to deliver sustainable returns to shareholders.
“We are doing so through a change programme called ‘Driving Value’, which has focused on revitalising our business and laying the foundation for long-term success. We have set demanding but achievable targets and we are determined to meet them by working efficiently and effectively to drive significantly greater value from our asset base,” Cutifani said.
He pointed out that some operational improvements were emerging with 53% of Anglo’s operations hitting their budgets in the last four quarters, as opposed to only 11% in the prior eight quarters.
“During the first half of 2013, only two of the company’s top ten operations hit their budgets, while eight of the top ten operations did so in the second half of the year,” Cutifani added.
However, more had to be done to ensure that the company achieved its goal of exceeding a return on capital employed of more than 15%.
“While I expect headwinds to continue in 2014 as we reset the business, the benefits of much-improved operational processes and performance will flow through largely in 2015 and 2016,” Cutifani said.
Kagiso Asset Management investment analyst Rubin Renecke concurred that operational improvements are set to continue across Anglo's business which was well set to deliver on its financial targets.
Cutifani added that Anglo had a lot of work to do with regard to safety, stating that it would be a key focus for the group in future.
During 2013, 14 Anglo employees and contractors lost their lives in work-related incidents, with two others still missing.