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Anglo American Plc - Results
Release Date: 28/02/2003 09:02:58 Code(s): AGL
Anglo American Plc - Results
ANGLO AMERICAN PLC
JSE Code: AGL
ISIN Code: GB0004901517 52E50865BDF5EFDC00AED1A2657FDD37
(The "Company")
Anglo American plc ("Anglo American") achieves 10% increase in headline earnings
per share for 2002 despite tough economic environment
Record headline earnings per share at $1.25, up 10% from 2001;
Headline earnings of $1,759 million, 5% above 2001;
Increased headline earnings in six business sectors with strong performances
from Forest Products, Gold, Diamonds, Industrial Minerals and Ferrous Metals and
a much improved performance from Base Metals;
Continued focus on growing the business - $3.7 billion in acquisitions during
2002 across a broad spectrum of commodities, including the $1.3 billion
acquisition of Chilean copper producer Disputada and an increased stake in Anglo
Platinum to 67.6%(1) for $847 million;
Further efficiency initiatives and cost savings across the Group of $279
million;
Strong cash generation: EBITDA(2) of $4.8 billion. Annualised EBITDA interest
cover of 20 times;
Well balanced capital project portfolio totalling $5.8 billion;
Recommended increased final dividend of 36 US cents, giving a total dividend for
2002 of 51 US cents per ordinary share, up 4%.
Financial highlights
$ million (unless otherwise stated) 2002 2001 Change
Restated(3)
Turnover 20,497 19,282 6%
Total operating profit before 3,332 3,298 1%
operating exceptional items
Headline earnings for the financial 1,759 1,681 5%
year(4)
Net operating assets(5) 21,122 14,744 43%
Net cash inflow from operating 3,618 3,539 2%
activities
Capital expenditure 2,139 1,787 20%
Headline earnings per share for the 1.25 1.14 10%
financial year ($)(4)
Total dividend for the financial 51.0 49.0 4%
year (US cents per ordinary share)
Weighted number of ordinary shares 1,411 1,474 (4)%
in issue (million)
(1) As at 31 December 2002. As at 25 February 2003, Anglo
American`s holding in Anglo Platinum increased to 70.0%.
(2) EBITDA is operating profit before exceptional items plus
depreciation and amortisation of subsidiaries and share of joint
ventures and associates. EBITDA interest cover is annualised to
account for acquisitions during the year.
(3) Restated for the adoption of Financial Reporting Standard 19
(`FRS 19`), `Deferred Tax`.
(4) See note 7 for reconciliation of headline earnings and profit
for the financial year.
(5) See note 10 for reconciliation of net operating assets to net
assets.
Tony Trahar, Chief Executive, said
"Our results for 2002 constitute a strong performance in light of the difficult
economic conditions experienced during the year and reflect the improved
diversity of our assets and the successful integration of recent acquisitions.
We achieved record headline earnings per share, improved operating performances
and efficiencies in the majority of our businesses and generated strong cash
flows. We also expanded our business with a further $3.7 billion of acquisitions
during the year, bringing the total to over $10 billion in the last four years,
and we are making significant investments in organic growth with $5.8 billion in
approved projects across a range of commodities.
By far the most significant development during the year was the debate over the
draft legislation in South Africa regarding black economic empowerment in the
mining sector. A leaked draft of the Mining Charter in July 2002 undermined
investor confidence in South Africa and caused great damage to the Anglo
American share price. Since then, we have been working actively with the
industry and the South African government and have achieved a workable solution
that will result in significant black economic empowerment for value.
The publishing of the empowerment scorecard earlier this month marked a
significant step towards removing the uncertainty that has existed in terms of
attaining the empowerment levels detailed in the Mining Charter. Anglo American,
through our subsidiaries and associates, will aim to meet the targets set out in
the Mining Charter within the specified timeframe and we have already made
significant progress towards attaining the 15% equity or production units
ownership level. To date the Group has undertaken over $1.8 billion of black
empowerment transactions in South Africa and over $800 million of procurement
from black owned businesses. The Money Bill is still to be published which will
introduce a royalty regime in South Africa.
The outlook for our key businesses remains mixed in the face of current global
economic and political uncertainties. Precious metals are presently performing
strongly despite mounting concerns over global economic growth. Current
geopolitical tensions have supported demand for gold while supply concerns have
contributed to price rises in platinum and nickel. The continued strong
performance by the Chinese economy should also benefit copper, platinum group
metals and diamonds. All of this, however needs to be balanced against the
sluggish growth forecasts for the US, Japan and much of the European Union, and
the current uncertainties that prevail in terms of possible military action in
the Middle East.
Our results are highly sensitive to volatility in commodity prices and exchange
rates. The South African rand exchange rate is of particular importance and
maintenance of the current rate throughout 2003 would make it very challenging
to sustain our record 2002 performance. Nevertheless, the balanced mix of our
businesses and our ongoing expansion programme, together with the continuing and
intense focus on costs and efficiencies, will help to underpin our performance."
Review of 2002
Financial results:
Anglo American recorded headline earnings of $1,759 million, a 5% increase on
the prior year. Strong performances from Forest Products, Gold, Diamonds,
Industrial Minerals and Ferrous Metals and a much improved performance from Base
Metals compensated for lower earnings from Platinum and Coal.
Profit for the financial year was $1,563 million, lower than the prior year due
to the significant exceptional gains recorded in 2001 owing to the De Beers
transaction and the exchange of part of the Group`s interest in FirstRand
Limited for interests in Billiton plc and Gold Fields Limited.
Platinum recorded a 27% decrease in headline earnings to $351 million (20% of
Anglo American`s total headline earnings) primarily due to lower realised
palladium and rhodium prices and a stronger South African rand against the
dollar at the year end resulting in translation losses on dollar assets. Refined
platinum production (excluding Northam) rose 7% to 2.25 million ounces, with the
expansion programme, to increase platinum production to 3.5 million ounces per
annum by the end of 2006, on track.
Gold`s contribution to headline earnings increased 27% to $205 million (12% of
Anglo American`s total) as a result of higher gold prices, exchange rates and
improved cash costs, which were reduced by 10% to $161 per ounce. AngloGold`s
production declined by 15% due to the sale of the Free State assets.
Diamonds recorded a 38% increase on 2001 headline earnings to $324 million (18%
of Anglo American`s total) reflecting the first full year contribution from
Anglo American`s increased shareholding in De Beers to 45%. Diamond sales
increased by 16% primarily as a result of strong US retail sales, especially
over the Thanksgiving and Christmas periods.
Headline earnings from Coal declined 31% to $266 million (15% of Anglo
American`s total) owing to significantly lower export thermal coal prices in all
regions, technical difficulties at Dartbrook and Moranbah North in Australia and
translation losses on dollar assets. Export metallurgical coal prices were
higher and total coal sales volumes increased by 9% to 84.5 million tonnes.
Continued improvement in Base Metals resulted in increased headline earnings to
$69 million (4% of Anglo American`s total) following an improved financial
performance from all commodity businesses despite, with the exception of nickel,
lower metals prices. Significant restructuring progress was made in 2002, with
Base Metals focusing on long-life, low-cost operations and disposing of non-core
assets.
Industrial Minerals recorded improved headline earnings of $231 million (13% of
Anglo American`s total), a 44% increase over 2001. This strong performance
reflected improved margins in the UK despite mixed market conditions, and
continued focus on cost reduction. Acquisitions and the impact of exchange rate
movements were also positive factors during the year.
Forest Products recorded headline earnings of $376 million, a 38% increase on
2001, and the largest contribution to 2002 headline earnings (21% of Anglo
American`s total). This performance reflected the successful integration of
recent European acquisitions, increased volumes from European and South African
operations and the sustained focus on profit improvement, cost reductions and
innovation in difficult markets.
Ferrous Metals and Industries contributed $126 million to headline earnings, an
increase of 47% over 2001 (7% of Anglo American`s total) owing to the positive
impact of acquisitions made during the year and a significant upswing in steel
prices.
Growing the business - Acquisitions:
Anglo American`s strategy of growing its businesses resulted in a total of $3.7
billion of acquisitions during the year. The Group continues to achieve a
broader geographical balance in its asset portfolio with the split of net
attributable operating assets(1) in 2002 as follows: 31% South Africa; 35%
Europe; 21% Americas; 7% Rest of Africa and 6% Australasia. Acquisitions made in
2002 included the following:(2)
(1) Net attributable operating assets include the Group`s share of net
operating assets of subsidiaries, joint ventures and associates.
(2) Amounts previously announced, included overleaf, may differ from net cash
consideration paid of $3.7 billion during 2002 due to final settlement upon
completion. Some amounts represent gross consideration.
Disputada, a large, low-cost copper producer in Chile, was acquired for a net
consideration of $1.3 billion and secures Base Metals` position as a leading
global, low- cost producer of copper.
A consortium consisting of Anglo American, BHP Billiton and Glencore acquired
Intercor`s 50% stake in CZN, the largest producer and exporter of steam coal in
Colombia. Anglo Coal Australia announced joint venture plans with Mitsui Coal,
acquiring 51% of the Moura mine for a net cash payment of $13 million, to allow
the development of its export metallurgical and thermal coal business in
Australia.
Mondi Europe continued to consolidate its leading position in the European
corrugated packaging sector, with the acquisition of approximately half the
assets of La Rochette for $110 million, as well as in the A4 office paper
sector, by the acquisition of a controlling stake in Syktyvkar, a Russian paper
mill, for $252 million.
Industrial Minerals further increased its European presence, making 11
acquisitions throughout the year in the UK, Spain, Poland and the Czech Republic
for a total of $190 million.
Strategic shareholdings in Kumba and Avmin have been acquired for a total
commitment of some $600 million. Anglo American acquired a 20.1% shareholding
in Kumba and has a right to acquire a further 10%, subject to approval from the
Competition Tribunal of South Africa, thereby increasing its shareholding to
30.1%. In addition, Anglo American acquired 25% of Avmin and has a right,
subject to approval from the Competition Tribunal, to acquire a further 9.9%,
increasing its shareholding to 34.9%. These transactions were approved by the
Competition Commission of South Africa but are still subject to Competition
Tribunal approval.
Moly-Cop was acquired by Scaw Metals for $105 million, allowing expansion into
the grinding media markets away from its traditional South African base in
particular the growing mining markets of Chile and Peru.
Additional shareholdings in Anglo Platinum (increased to 67.6%) and Gold Fields
(increased to 20.9%) were acquired during the year for $847 million and $252
million respectively.
Growing the business - Internal growth:
Anglo American has $5.8 billion of approved projects in the pipeline which
include:
* four major gold projects, costing $813 million, to contribute 13 million
ounces over their estimated lives;
* the revised suite of projects, totalling $2.7 billion, to increase platinum
production to 3.5 million ounces per annum by 2006 which is on schedule;
* expansions and new projects currently underway in Base Metals totalling $1.1
billion, including Skorpion zinc mine which is due to commence production in the
first half of the year; and
* a total of nine projects to increase both production and converting capacity
in Forest Products totalling $335 million.
Cost savings:
All businesses across the Group continued to focus on efficiency initiatives and
cost control during 2002. The total cost savings achieved amounted to $279
million, of which operating efficiencies realised $154 million, restructuring
and synergies $77 million and procurement $48 million.
Exceptional items:
Operating exceptional charges amounted to $81 million. These include impairments
or write-downs of $97 million in Base Metals and the reversal of a $46 million
impairment of Salobo, recorded in 2000, following its sale in 2002. Write-down
of investments account for the remaining $30 million operating exceptional
charges.
Non-operating exceptional gains amounted to $64 million. These include the
profit on disposal of Tati Nickel amounting to $53 million, an additional cost
of $34 million relating to the withdrawal from Konkola Copper Mines, the share
of DBI`s exceptional items and the disposal of non-core investments and other
fixed assets.
Taxation
The effective rate of taxation before exceptional items was 33%. This was a
reduction from the effective rate of 36% in 2001 (as restated for FRS 19) which
is largely due to a change in the mix of earnings contribution by businesses.
Dividends
The directors recommend a final increased dividend of 36 US cents per share to
be paid on 30 April 2003. Total dividends for the year will amount to 51 US
cents per share, a 4% increase on last year`s total dividend.
Outlook
The outlook for Anglo American`s key businesses remains mixed in the face of
current global economic and political uncertainties. Precious metals are
presently performing strongly despite mounting concerns over global economic
growth. Current geopolitical tensions have supported demand for gold while
supply concerns have contributed to price rises in platinum and nickel. The
continued strong performance by the Chinese economy should also benefit copper,
platinum group metals and diamonds. All of this, however, needs to be balanced
against the sluggish growth forecasts for the US, Japan and much of the European
Union, and the current uncertainties that prevail in terms of possible military
action in the Middle East.
Anglo American`s results are highly sensitive to volatility in commodity prices
and exchange rates. The South African rand exchange rate is of particular
importance and maintenance of the current rate throughout 2003 would make it
very challenging to sustain the record 2002 performance. Nevertheless, the
balanced mix of Anglo American`s businesses and ongoing expansion programme,
together with the continuing and intense focus on costs and efficiencies, will
help to underpin the Group`s performance.
Board changes
The board comprises four executive directors and ten non-executive directors,
seven of whom are independent within the definition contained in the Higgs
review of "The role and effectiveness of non-executive directors" ("Higgs
Review") published in January 2003. The independent directors are Sir Mark
Moody-Stuart, D J Challen, F T M Phaswana, Professor K A L M Van Miert, Dr C E
Fay, G Lindahl and R J Margetts. The other non-executive directors are Sir
David Scholey, Mr R M Godsell and Mr N F Oppenheimer.
Following publication of the Higgs Review, although the board believes that Sir
David`s relationship with UBS Warburg, the company`s joint broker, in no way
affects his ability to act independently, it was felt that it was preferable
that another board member should fill the role of Senior Independent Non-
Executive director. Accordingly, with effect from the AGM, Mr Margetts will be
appointed as the Senior Independent Non-Executive director.
Also with effect from the AGM, Sir Mark will stand down as Chairman of the
Nomination Committee and Mr Fred Phaswana will be appointed Chairman of this
committee in his place. Sir Mark continues as a member of the committee. At the
same time, also in accordance with the Higgs Review, Mr Margetts will step down
as Chairman of the Audit Committee and Mr Challen will assume the chairmanship
of this committee. In the interests of continuity, Mr Margetts will remain a
member of the Audit Committee.
For further information, please contact:
Anglo American - London
Investor Relations
Nick von Schirnding
Tel: +44 (0)20 7698 8540
Media Relations
Kate Aindow
Tel: +44 (0)20 7698 8619
Anglo American - Johannesburg
Investor Relations
Anne Dunn
Tel: +27 (0)11 638 4730
Media Relations
Marion Dixon
Tel: +27 (0)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 platinum, gold, 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.
OPERATIONAL REVIEW
Platinum
$ million 2002 (Restated)
2001
Total operating profit 802 1,345
Headline earnings 351 478
Net operating assets 3,580 1,847
Capital expenditure 586 391
Share of Group headline earnings (%) 20 28
Share of Group net operating assets 17 13
(%)
Platinum`s contribution to headline earnings was $351 million, $127 million
lower than in 2001, mainly owing to lower prices realised for palladium and
rhodium. Rand-based costs were impacted positively by a weaker exchange rate
during 2002, but this was offset by losses on the translation of dollar assets
resulting from the stronger rand at the end of 2002 compared with gains in 2001.
The average realised dollar price for platinum of $544/oz was $18/oz higher than
the 2001 figure, while palladium and rhodium prices achieved were significantly
lower at $329/oz (2001: $582/oz) and $831/oz (2001: $1,610/oz) respectively.
Recent market demand reviews continue to confirm that there is a significant
growth opportunity and Anglo Platinum remains committed to the expansion
programme to produce 3.5 million ounces of refined platinum by the end of 2006.
Refined platinum production across the group increased by 141,900 ounces to 2.25
million ounces (excluding Northam).
The company has made significant progress in including empowerment groupings in
its expansion plans and is well on the way to meeting the requisite ownership
percentages as envisaged by South Africa`s Minerals and Petroleum Resources
Development Act. The strong demand and thin liquidity in the platinum market
are expected to remain in 2003, resulting in continuing firm prices.
Gold
$ million 2002 (Restated)
2001
Total operating profit 463 443
Headline earnings 205 162
Net operating assets 2,511 2,086
Capital expenditure 246 243
Share of Group headline earnings (%) 12 10
Share of Group net operating assets (%) 12 14
In 2002, AngloGold`s contribution to headline earnings was $205 million, 27%
higher than in 2001, despite gold production having declined by some 15% to 5.94
million ounces (2001: 6.98 million ounces), as a result of the sale of
AngloGold`s assets in the Free State of South Africa. Total cash costs decreased
from $178/oz ($170/oz excluding Free State) to $161/oz as a result of the rand`s
weakening against the dollar and the establishment of a robust suite of high-
margin and low-cost assets.
In July 2002, AngloGold announced the acquisition of additional production of
120,000 ounces per annum, doubling its stake to 92.5% in the Cerro Vanguardia
gold/silver mine in Argentina. AngloGold currently has five capital projects,
two of which are now complete and the other three are on track for completion on
time and within budget. Together, these projects will yield some 15 million
additional ounces of gold production over their lives.
Dollar weakness, international political tension, equity market declines and a
halt to the dismantling of producer hedging have all been positive for gold in
2002. Against this background, a solid platform for the gold market is expected
in the year ahead. However, whilst there has been a decline in physical demand,
scrap sales and recycling have increased sharply in response to higher gold
prices. With further gold price volatility expected in 2003, a resurgence of
physical demand should not be expected immediately.
Diamonds
$ million 2002 2001
Total operating profit 541 373
Headline earnings 324 234
Share of Group headline earnings (%) 18 14
De Beers` contribution to headline earnings amounted to $324 million. Sales of
rough diamonds by the marketing arm of De Beers, The Diamond Trading Company
(DTC), were 15.7% higher reaching $5.15 billion. Diamond stocks were reduced by
nearly $1 billion - the main contributor to the exceptionally strong operating
cash flow figure of $1.6 billion. As a consequence, De Beers was able to reduce
its Senior Debt by $1,065 million to $2,485 million.
Following a promising first half, the second six months saw an eroding of
consumer confidence, particularly in the US, owing to fears of deflation, rising
unemployment, sharply declining stock markets and the threat of war in the
Middle East. Nevertheless, worldwide retail diamond jewellery sales held up
reasonably well and were estimated to have been 3% ahead for the year.
In 2002, De Beers and its principal partners, Debswana and Namdeb, produced 40.2
million carats (2001: 38.5 million carats).
In South Africa, the Combined Treatment Plant in Kimberley will come fully on
stream this year. The permitting process continues at Snap Lake in Canada and
the mine should commence operations in 2007.
De Beers has now received clearance from the European Commission on its Supplier
of Choice strategy and is proceeding with its implementation.
Continuing geopolitical concerns and greater economic uncertainty are likely to
make 2003 a challenging year. The DTC`s sales prospects will depend on the
timing and scale of global economic growth, a recovery in consumer confidence
and the level of stocks that the trade pipeline will be comfortable to hold.
Coal
$ million 2002 2001
Total operating profit 427 493
South Africa 244 267
Australia 130 173
South America 50 49
United Kingdom 3 4
Headline earnings 266 387
Net operating assets 1,658 1,373
Capital expenditure 142 93
Share of Group headline earnings (%) 15 23
Share of Group net operating assets (%) 8 9
In 2002, Coal`s headline earnings were $266 million, a 31% decrease on 2001.
Export metallurgical coal prices were marginally higher, but export thermal coal
prices were significantly lower resulting in a net negative impact of $56
million. Headline earnings were adversely affected by $45 million due to the
rapid strengthening of the rand at year end, in contrast to a gain of $39
million in 2001 on the back of a weakening rand. Operating profit of $427
million was 13% below 2001.
South African operating profit reduced by $23 million to $244 million. Average
thermal coal export prices were 16% weaker. Higher inflation was offset by an
11% increase in export volumes, a net weaker average rand for the year and $31
million from improved operating efficiencies and cost savings.
In Australia, operating profit fell by 25% to $130 million mainly due to
technical difficulties at the Dartbrook and Moranbah North mines. In 2002, Anglo
Coal Australia acquired 51% of Moura mine and a 23% interest in the Jellinbah
East mine and divested 30% of its interest in the German Creek mine and 49% of
its interest in the Theodore, Dawson and Taroom projects.
South American attributable operating profit was $50 million (2001: $49
million). This performance reflected weaker thermal coal prices, a cutback of
Colombian production in response to market conditions and the impact of the
general strike in Venezuela. This was offset by the Anglo/BHP Billiton/Glencore
consortium`s acquisition of the remaining 50% of the Cerrej"n Zona Norte
operation.
A moderate export coking coal capacity increase in 2003 is expected to have
limited impact on price levels. Export thermal coal prices will, as previously,
be driven by a mix of demand and supply factors, inter-fuel competition, weather
and sentiment.
Base Metals
$ million 2002 (Restated) 2001
Total operating profit/(loss) before 133 (22)
exceptional items
Copper 110 2
Nickel, Niobium, Mineral Sands 94 56
Zinc (51) (57)
Head office expenses and other (20) (23)
Exceptional items (51) (488)
Total operating profit/(loss) after 82 (510)
exceptional items
Headline earnings/(loss) 69 (18)
Net operating assets 3,617 1,977
Capital expenditure 346 446
Share of Group headline earnings (%) 4 (1)
Share of Group net operating assets (%) 17 13
Headline earnings for Base Metals were $69 million, compared with a $18 million
loss in 2001. Despite base metals demand remaining weak, with the partial
exception of nickel, all three commodity businesses improved their financial
performance. Exceptional charges were reduced significantly owing to reduced
impairments.
In 2002, Anglo American acquired the Chilean world-class integrated copper
producer, Disputada, from ExxonMobil for a net consideration of $1.3 billion.
Anglo American also completed an orderly exit from Zambia Copper Investments
(ZCI) and Konkola Copper Mines (KCM), and disposed of its interests in the
Salobo copper/gold project, Tati Nickel, BCL and the Kolwezi copper project. In
addition, since the year end Anglo American has entered an agreement with
MatlinPatterson Global Opportunities Partners LP in terms of which, it has
disposed of substantially all of its interests in Anaconda Nickel Limited.
Attributable production of copper amounted to 497,700 tonnes compared with
468,700 tonnes in 2001 (excluding KCM), of which Disputada contributed 39,100
tonnes from the date of acquisition.
Increased production at Codemin and Loma de N!quel entering commercial
production at the beginning of the year resulted in attributable production of
nickel of 25,600 tonnes, despite the sale of Tati.
Attributable zinc production rose from 165,600 tonnes to 211,500 tonnes. Lisheen
operated above design throughput capacity and achieved record production levels.
Hudson Bay saw increased throughput and higher copper and zinc grades.
At Namakwa Sands, throughput rates at all processing plants rose, but the
strengthening of the rand in the second half of the year compared to the first
half of the year meant operating profits were 6% down on 2001.
The outlook for base metals is expected to remain weak until there is tangible
evidence of a recovery in underlying demand and a sustained reduction in refined
metal inventories.
Industrial Minerals
$ million 2002 (Restated) 2001
Total operating profit 277 201
Europe 253 179
Brazil 24 22
Headline earnings 231 160
Net operating assets 3,848 3,246
Capital expenditure 363 205
Share of Group headline earnings (%) 13 10
Share of Group net operating assets (%) 18 22
Headline earnings for Industrial Minerals rose to $231 million in 2002. The
Tarmac group was the principal contributor to this increase, achieving an
operating profit of $253 million, an improvement of 33% on the prior year`s $189
million. This was principally due to improved margins in the UK, despite mixed
market conditions, and a continued focus on cost reduction, although
acquisitions and the impact of exchange rate movements were also positive
factors during the year.
In addition, an improved profit from Copebr s, the Brazilian phosphate producer,
and the sale of the loss-making UK based Cleveland Potash contributed to the
increase.
In the UK, the major aggregates, asphalt, ready-mixed concrete and concrete
products businesses all reported improved results. The benefits of the cost
reduction initiatives introduced in the previous year were also felt together
with new initiatives, which were implemented during the year.
In continental Europe, operating profit increased by 48%. The operations in
Spain had another excellent year and Central Europe recorded an improved result
largely due to acquisitions, efficiency improvements and good performances from
the Polish paving and Czech Republic businesses. However, difficult market
conditions continued in Germany.
At the end of 2002, Copebr s` new plant commenced production. The Buxton cement
plant in the UK is scheduled to be completed towards the end of the year, within
budget.
The short term outlook for the Tarmac group is largely dependent on the private
sector in the UK holding up relatively well, and government expenditure on
infrastructure not being sacrificed as a result of events in the Middle East or
government financing concerns. The increased focus on cost reduction and
customer service should strengthen the group`s position.
Forest Products
$ million 2002 (Restated) 2001
Total operating profit 649 520
Europe 434 328
South Africa 215 185
Brazil - 7
Headline earnings 376 272
Net operating assets 3,897 2,732
Capital expenditure 365 283
Share of Group headline earnings (%) 21 16
Share of Group net operating assets 18 19
(%)
Forest Products` total headline earnings for 2002 were $376 million, a 38%
increase on 2001. Operating profit increased in both Europe and South Africa,
reflecting the benefit of acquisitions, higher volumes and margin improvement.
Mondi Europe continued its strong performance, achieving a further 32% increase
in operating profit to $434 million for the year. The improved profits arose
from the successful integration of acquisitions, increased volumes and the
sustained focus on profit improvement, cost reductions and innovation, despite
difficult market conditions.
There was further expansion in Europe, with the completion of two acquisitions:
an additional 78% interest in the Russian pulp and paper group Syktyvkar Forest
Enterprises and, jointly with the Spanish group Saica, the business of the
French Corrugated packaging group La Rochette.
Mondi South Africa increased operating profit by 16% to $215 million, a
consequence of increased volumes and improved margins. In the domestic market,
strong demand and the weaker rand/dollar exchange rate supported good volume
growth and real increases in prices for graphic papers, packaging papers and
board and converted products. In export markets, dollar prices were lower during
the year for bleached eucalyptus pulp and for woodchips.
Further progress was also made with disposals of non-core timber businesses -
specifically the sale of two softwood sawmills and a reduction in the
shareholding in Global Forest Products.
Ferrous Metals and Industries
$ million 2002 (Restated) 2001
Total operating profit/(loss) 264 191
Highveld Steel 38 6
Scaw Metals 51 31
Samancor Group 48 19
Tongaat-Hulett 96 112
Boart 31 30
Terra (3) (23)
Other 3 16
Headline earnings 126 86
Net operating assets 1,696 1,104
Capital expenditure 85 93
Share of Group headline earnings (%) 7 5
Share of Group net operating assets 8 7
(%)
Headline earnings for Ferrous Metals and Industries were $126 million (2001: $86
million), reflecting a solid underlying performance and the positive impact of
the acquisitions made during the first half of 2002. World crude steel
production increased by 6.4% and international steel prices have shown a
significant upswing since February 2002.
Scaw Metals` operating profit was $51 million (2001: $31 million), which
included an $11 million contribution from the Moly-Cop forged grinding media
operations acquired at mid-year. Highveld Steel recorded a significant increase
in operating profit from $6 million to $38 million on the back of domestic sales
of 570,000 tonnes, which surpassed the previous best year of 1997.
In 40% held Samancor, manganese profits were higher than last year owing to
greater ore and alloy sales volumes and lower production costs. Samancor chrome
showed an improved operating performance as the major restructuring programme
resulted in lower production costs. Ferrochrome prices for the year firmed over
those of last year.
During the year good progress was made in the strategic objective of securing a
meaningful interest in the iron ore sector. Interests were acquired in both
Kumba and Avmin.
The Boart Longyear group reported an operating profit $31 million (2001: $30
million). Tongaat-Hulett`s operating profit, although increasing in rand terms,
was lower at $96 million (2001: $112 million). Terra recorded an attributable
operating loss of $3 million (2001: $23 million loss), following a resumption of
normal demand levels in US markets.
Exploration
In 2002, total Group expenditure on exploration was $93 million, of which $47
million was spent on Base Metals` grassroots and brownfields exploration, $13
million by Anglo Platinum and $27 million by AngloGold.
During the year, Base Metals` exploration efforts focused on areas most likely
to produce enhanced results. Consequently the number of active countries was
reduced from 18 to 13, and the global staff complement reduced by 20%. Further
rationalisation will continue during 2003.
Exploration in Chile delineated copper resources, which may extend the lives of
existing operations. The porphyry-copper programme in Peru, Chile and Argentina
identified a number of promising targets for drilling.
African exploration programmes continued to target zinc and nickel in Namibia,
zinc in South Africa and copper in Zambia. Target generation for zinc and nickel
in Australia and India identified a number of promising targets for follow-up in
2003. In Mexico, encouraging early stage drill results were obtained from a
polymetallic base metal prospect. Iron oxide copper/gold exploration continued
in several countries, with positive initial drill results from Sweden and
Brazil.
In the Philippines, resource definition drilling progressed at the Boyongan
copper/gold project. An initial resource estimate and a decision whether to
proceed to pre-feasibility will be made in 2003.
Anglo Platinum`s exploration efforts in South Africa are directly linked to its
commitment to increase production levels to 3.5 million ounces per year of
platinum by the end of 2006. There was good progress on all fronts and targets
for the year were reached. Internationally, Anglo Platinum`s partners have taken
several exciting projects forward, including the joint venture with Pacific
North West Capital (principally in the River Valley area near Sudbury, Ontario,
Canada) and the Russian Urals projects in a relationship with Eurasia Mining
plc.
AngloGold`s exploration focus continued in countries in which it already has
operations, namely in Argentina, Australia, Brazil, Tanzania, Mali, Namibia,
South Africa and the USA. In addition, exploration was pursued in highly
prospective areas in the state of Alaska, Canada and Peru. Some 63% of
expenditure was spent on increasing near and in-mine resources.
Balance Sheet
Total shareholders` funds were $16,261 million compared with $12,856 million at
31 December 2001. The increase was primarily due to retained earnings and the
appreciation of the South African rand which strengthened by 28% during the year
against the dollar.
Net debt was $5,578 million, an increase of $3,560 million from 2001. This
increase was principally due to debt incurred to fund acquisitions during the
period. Net debt comprised $7,791 million of debt, offset by $2,213 million of
cash and current asset investments.
Net debt to total capital at 31 December was 23.1% compared with 12.2% in 2001.
Cash flow
Net cash inflow from operating activities was $3,618 million compared with
$3,539 million in 2001. Depreciation and amortisation, which increased by $91
million, are analysed below.
Analysis of depreciation by business segment (subsidiaries)
US$ million 2002 2001
Platinum 107 77
Gold 182 157
Coal 104 108
Base Metals 124 130
Industrial Minerals 142 136
Forest Products 228 193
Ferrous Metals 21 25
Industries 42 46
Other 12 9
962 881
Analysis of goodwill amortisation by business segment (subsidiaries)
2002 2001
US$ million Restated(1)
Platinum 16 16
Gold 31 30
Coal 4 4
Base Metals 1 1
Industrial Minerals 46 42
Forest Products 15 13
Ferrous Metals 1 1
Industries 3 1
Other 22 21
139 129
(1) Restated for the adoption of FRS 19 - see note 1.
Purchases of tangible fixed assets amounted to $2,139 million, an increase of
$352 million from 2001. The major components of expansion were in Platinum,
Industrial Minerals and Forest Products.
Analysis of capital expenditure by business segment (subsidiaries)
US$ million 2002 2001
Platinum 586 391
Gold 246 243
Coal 142 93
Base Metals 346 446
Industrial Minerals 363 205
Forest Products 365 283
Ferrous Metals 32 28
Industries 53 65
Other 6 33
2,139 1,787
Acquisition expenditure accounted for an outflow of $3.7 billion. The principal
acquisitions included: Disputada by Base Metals; Mondi Europe`s additional
acquisition in Syktyvkar and part of the assets of La Rochette; Anglo Coal`s
participation in the purchase of the remaining 50% in Cerrejon Zona Norte and
its 51% participation in the Moura mine in Australia; Ferrous Metals` 9.6%
shareholding in Kumba, a 25% interest in Avmin, and a 100% interest in Moly-Cop;
and Industrial Minerals` acquisition of Mavike and Durox. The Group has also
increased its interests in Anglo Platinum and Gold Fields.
Exchange rates against the US dollar
Average 2002 2001
South African rand 10.48 8.62
Pound sterling 0.67 0.69
Euro 1.06 1.12
Australian dollar 1.84 1.93
Year end
South African rand 8.58 11.96
Pound sterling 0.62 0.69
Euro 0.95 1.12
Australian dollar 1.79 1.96
Commodity prices
Average market prices for the period
Year end 2002 2001
Gold - US$/oz 310 272
Platinum - US$/oz 541 531
Palladium - US$/oz 336 597
Rhodium - US$/oz 838 1,606
Copper - US cents/lb 71 72
Nickel - US cents/lb 307 267
Zinc - US cents/lb 35 41
Lead - US cents/lb 21 22
European eucalyptus pulp price (CIF) 452 490
- US$/tonne
Consolidated profit and loss account for the year ended 31 December 2002
Before Excep- Before Excep-
tional tional
Excep items Excep- items
tional tional
items (note 5) items (note 5)
Note 2002 2002 2002 2001 2001 2001
US$ million Restated Restated
(1) (1)
Group and
share of 2 20,497 - 20,497 19,282 - 19,282
turnover of
joint
ventures
and
associates
Less: 2 (1,066) - (1,066) (1,109) - (1,109)
Joint
ventures`
turnover
Asso- 2 (4,286) - (4,286) (3,387) - (3,387)
ciates`
turnover
Group 2 15,145 - 15,145 14,786 - 14,786
turnover -
subsidia-
ries
Operating (12,757) (47) (12,804) (12,140) (498) (12,638)
costs
Group 2 2,388 (47) 2,341 2,646 (498) 2,148
operating
profit -
subsidia-
ries
Share of 2 219 (34) 185 193 (15) 178
operating
profit of
joint
ventures
Share of 2 725 - 725 459 - 459
operating
profit of
associates
Total 2 3,332 (81) 3,251 3,298 (513) 2,785
operating
profit
Profit on 5 - 98 98 - 2,148 2,148
disposal of
fixed
assets
Loss on 5 - (34) (34) - - -
termination
of
operations
Profit on 3 3,332 (17) 3,315 3,298 1,635 4,933
ordinary
activities
before
interest
Investment 304 - 304 799 - 799
income
Interest (483) - (483) (669) - (669)
payable
Profit on 3,153 (17) 3,136 3,428 1,635 5,063
ordinary
activities
before
taxation
Tax on 6 (1,042) (3) (1,045) (1,247) (147) (1,394)
profit on
ordinary
activities
Profit on 2,111 (20) 2,091 2,181 1,488 3,669
ordinary
activities
after
taxation
Equity 3 (528) - (528) (648) 64 (584)
minority
interests
Profit for 3 1,583 (20) 1,563 1,533 1,552 3,085
the
financial
year
Equity
dividends (720) - (720) (690) - (690)
to sharehol-
ders - paid
and
proposed
Retained 863 (20) 843 843 1,552 2,395
profit for
the
financial
year
Headline 7 1,759 1,681
earnings
for the
financial
year
Basic
earnings
per share
(US$)(1) :
Profit for 7 1.11 2.09
the
financial
year
Headline 7 1.25 1.14
earnings
for the
financial
year
Diluted
