| Fri 7 Sep 2001, 0:00 | | Anglo American plc - Interim Results |
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Anglo American plc - Interim Results
Anglo American plc reports interim results for 2001
Headline profit for core businesses increases by 7%
Group's strategy and diversity delivering value in difficult
economic conditions
Net profit for the first half up by 122% to US$2,678 million
reflecting exceptional gains arising from the FirstRand
disposal and the De Beers transaction;
New acquisitions in Coal, Forest Products and Industrial
Minerals performed well;
Core headline profit up 7% to US$803 million; non core
contribution down due to major disposals in Industries and
Financial Services;
Headline profit for the first half down by 7% to US$884
million; headline profit per share down by 5%;
Further cost savings of US$84 million achieved; exploration
expenditure reduced by US$17 million;
Commodity prices were variable - platinum group metals and
coal prices were strong but weakness in the global economy
was reflected in declines in copper, zinc, nickel, chrome,
gold and pulp prices;
Major strategic restructuring continued with the elimination
of the cross-holding between Anglo American and De Beers and
the increase in Anglo American's interest in its diamond
holding to 45%;
Interim dividend maintained at 15 US cents per share;
Balance sheet gearing reduced to 8.7%.
Tony Trahar, Chief Executive, said:
"In the first half of this year we made important progress in
simplifying the Group structure through the elimination of
the cross-holding between Anglo American and De Beers,
continuing our disposals programme and completing the
integration of last year's coal, industrial minerals and
forest products acquisitions, all of which contributed to
higher profits.
Strong coal and platinum group metals prices were positive
factors for the period. However, our results were impacted by
weaker global economic conditions that depressed demand and
market prices for diamonds, base and ferrous metals and some
forest products.
In this difficult economic environment, we are continuing to
focus on reducing costs and are examining ways of further
improving the efficiency and effectiveness of our business
and head office structures. The corporate review announced in
March will be completed by the end of September, with any
changes being implemented by the end of the year.
The differential movements in commodity prices show the
strength of Anglo American's diversified portfolio of world-
class assets and our modest level of gearing during a
downturn provides us with the flexibility to take advantage
of value enhancing opportunities."
HIGHLIGHTS FOR THE SIX MONTHS TO 30 6 months 6 months Change
JUNE 2001 ended ended
30.06.01 30.06.00
US$ million except per share amounts
Group turnover & share of turnover of 9,807 10,312 (5) %
joint ventures & associates
Total operating profit 1,695 1,608 5 %
Profit for the financial period 2,678 1,207 122 %
Headline profit for core businesses 803 748 7%
Headline profit for all businesses (1) 884 951 (7) %
Earnings per share (US$): (2)
Profit for the financial period 1.74 0.77 126 %
Headline profit for the financial 0.58 0.61 (5) %
period
Dividend for the period (US cents per 15 15 -
share) (2)
(1) See note 7 for basis of calculation of headline profit.
(2) Earnings and dividends per share have been restated to reflect
the three-for-one-bonus issue.
First Half Results - Overview
Following Anglo American's record earnings for 2000, the first half of 2001
saw a much more difficult trading environment. In March this year we
referred to the uncertain global economic growth prospects for 2001 and
since then conditions have weakened further, negatively affecting most
commodity prices. Although coal and platinum group metal prices remained
firm, pulp, base metals and ferrous metals prices fell significantly.
Diamond sales were also lower while the contribution from AngloGold declined
marginally.
Operating profit for the six months to June increased by 5% to US$1,695
million enhanced by significant contributions from recent acquisitions.
Headline earnings from core businesses increased by 7%, however overall
headline earnings fell by 7% reflecting the sale of non-core businesses
during the last 12 months. After taking into account the reduced number of
shares in issue following the cancellation of the Anglo American shares
received from De Beers, headline earnings per share decreased by 5% to 58 US
cents per share.
An increase in volumes and prices helped boost performances from the
Platinum and Coal divisions. This improved performance was offset by weaker
diamond markets and a disappointing performance from the Base Metals
division as a result of significantly lower base metal prices and
operational problems at the Konkola Copper Mines in Zambia. The Ferrous
Metals division was badly impacted by weaker chrome and steel prices.
However, the Industrial Minerals division reflected a marked improvement in
trading conditions in the second quarter.
These results include five months of De Beers' investment income. From 1
June 2001, as a result of the elimination of the cross-holding between Anglo
American and De Beers, the cross-holding accounting ceased and we now
account for our 45% interest in DB Investments, the new parent company of De
Beers.
Net debt at 30 June was US$1,767 million, representing an 8.7% gearing
level, a decrease from the 16.5% level at 31 December 2000. The reduction in
net debt is primarily due to proceeds received from the sale of the Billiton
stake and the inflow of funds arising from the De Beers transaction. As a
result of these transactions, the current low level of gearing is well below
Anglo American's previously stated net debt : total capital target of
between 25% and 30%.
Strategic Progress:
1. Removing the cross-holding
On 8 June this year the De Beers transaction was successfully completed,
resulting in the elimination of the cross-holding, which historically had
been a major value inhibitor to the Anglo American share price. The benefits
to Anglo American have been an increase in its effective stake in De Beers
from 32.2% to 45%, an inflow of US$1.0 billion in cash with a further inflow
of US$701 million in future years on redemption of the preference shares and
retention of a full weighting in the FTSE 100 index. As a result of Anglo
American's entitlement to its shares distributed by De Beers, approximately
10% of Anglo American's ordinary share capital was cancelled on 11 June.
On 8 May a three-for-one bonus issue was effected to bring Anglo American's
share price more in line with that of other FTSE 100 companies. It is
believed this will improve liquidity and encourage a larger retail
shareholder base. Following the distribution of De Beers' Anglo American
shares to its shareholders, the increased level of UK institutional
ownership of Anglo American is encouraging.
2. Update on acquisitions
Last year the value-enhancing integration of major acquisitions was
identified as a strategic priority. The acquisition of Shell's coal assets
in Australia and Venezuela and of a stake in Cerrejon Zona Norte in Colombia
has put in place a global structure of coal operations in South Africa,
Australia and South America. The acquisitions also enabled Anglo American to
participate more fully in the strong prices which coal has been commanding
in 2001.
Tarmac's operating results improved significantly and benefited from the
achievement of synergies and cost savings, which should be running at an
annualised rate of at least US$60 million in the second half of the year,
well ahead of target. The company is well positioned to benefit from the
planned increase in transport infrastructure spending in the UK in 2002.
The acquisition of control of the Frantschach group, together with the
purchase of Assi Sacks and SCP Ruzomberok were significant developments in
Anglo American's European paper and packaging strategy and contributed to
improved profits from the Forest Products division.
3. Disposal of non-core assets
Further progress was made with the disposal of non-core assets, the major
development being the sale in April of 7.1% of Billiton for US$754 million.
Anglo American acquired its holding in Billiton in exchange for part of its
stake in FirstRand, a financial services group.
4. Cost structure and efficiencies
It is almost two and a half years since the formation of Anglo American plc.
Now that the major strategic changes envisaged in our Listing Prospectus
have been delivered, it is appropriate to review the balance of
responsibilities between the business units and the corporate centre. Having
already downsized the Sao Paulo and Luxembourg corporate offices, the Group
is in the process of an exercise to further improve the efficiency and
effectiveness of its London and Johannesburg offices. This exercise is
expected to be completed by the end of September 2001, with any changes
implemented by the end of this year.
5. Future strategy
Despite the current uncertainty and difficult economic conditions, the Group
continues to seek opportunities for growth and expansion supported by a
strong balance sheet and sound cash flow from its diversified businesses.
The ongoing internal restructuring of the business and corporate centres
will deliver enhanced value and greater operational efficiencies.
Dividend
An unchanged interim dividend of 15 US cents per share has been declared.
Absent any unforeseen developments, it is the Board's intention to recommend
a total dividend in respect of the full year of 47.5 US cents per share.
Outlook
The global slowdown has adversely impacted Anglo American's results in the
first half of the year, particularly in Base and Ferrous Metals, where
weakness in the physical metal markets has been much greater than expected.
Sharp declines in demand have been experienced principally in the US and
Asia, but increasingly in Europe as well.
Platinum and palladium prices have also fallen from their recent high
levels, which will adversely impact profits in the second half of the year,
although prices and demand for coal, industrial minerals and some value
added forest products remain satisfactory.
Any improvement in the global economy is unlikely to result in price
recovery in the near term. In this environment, Anglo American will continue
to focus on improving efficiencies and reducing costs in all its businesses
whilst assessing new opportunities for investment and expansion.
For further information, please contact:
Anglo American - London
Investor Relations Media Relations
Nick von Schirnding Kate Aindow
Tel: +44 (0)20 7698 8540 Tel: +44 (0)20 7698 8619
Anglo American - Johannesburg
Investor Relations Media Relations
Anne Dunn Marion Dixon
Tel: +27 11 638 4730 Tel: +27 11 638 3001
Anglo American plc website: www.angloamerican.co.uk
Anglo American plc is a global leader in the mining and natural resource
sectors. It has significant and focused interests in gold, platinum,
diamonds, coal, base and ferrous metals, industrial minerals and forest
products, as well as financial and technical strength. The Group is
geographically diverse, with operations in Africa, Europe, South and North
America and Australia. Anglo American represents a powerful world of
resources.
High resolution pictures are available to the media at www.newscast.co.uk
Operations review
Highlights
The Group's results in certain sectors were adversely impacted by the global
economic slowdown and its marked impact on industrial production and
consequently on many commodity prices. The Base and Ferrous Metals divisions
were particularly affected. In contrast, however, the Coal division saw
buoyant prices and Anglo Platinum benefited for much of the period from
historically very high platinum group metals prices. The Group's policy of
product diversity continued to demonstrate its benefits in this period of
global economic uncertainty.
Earnings per share were US$1.74 compared with US$0.77 per share f
