| Wed 21 Apr 2004, 13:52 | | Annual General Meeting 2004 |
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Anglo American plc - Annual General Meeting 2004
Anglo American plc
(Incorporated in the United Kingdom)
Registration number: 3564138
Share code: AGL
ISIN: GB0004901517
(the "Company")
Anglo American plc - Annual General Meeting 2004
Address to shareholders by the Chairman and Chief Executive
At Anglo American plc"s Annual General Meeting for shareholders in London
today (21 April 2004), Sir Mark Moody-Stuart, Chairman, and Tony Trahar,
Chief Executive, made the following remarks:
Sir Mark Moody-Stuart:
"2003 was my first full year as your Chairman. It was a year of
considerable uncertainty with international relations being dominated by
the war in Iraq and its aftermath. This uncertainty was mirrored in the
economy. By the end of the year, however, there was significantly greater
confidence with a strengthening of the US, and to a lesser extent
Japanese, economies and continuing vibrant growth in China.
For Anglo American, the defining feature of the macro-economic climate was
the relative weakness of the US Dollar and the notable strength of the
South African Rand.
Last year, I commented on the success of our management team in
transforming the Company since its London listing in 1999 from an
essentially South African conglomerate into a global, focussed, mining and
natural resource business. Last year this rebalancing was put to the test.
The South African export based businesses had to cope with the adverse
impact of the strength of the rand, but even so, Group earnings showed
only a slight year-on-year dip as our stake in De Beers - which we
increased by over a third to 45% in 2001 - and the most European of our
business units - Paper and Packaging and Tarmac - both returned strong
performances. These results validate our strategy of geographical and
product diversity.
At last year"s AGM I announced how your Board had agreed to distribute key
committee chairmanships, in response to the recommendations of the Higgs
Report. This apportionment has worked well.
In December 2003, we were also delighted to recruit to the Board, Dr Maria
Silvia Bastos Marques. Dr Marques brings extensive experience of the
metals industry, valuable perspectives on Latin America - an area of
increasing importance to our Base Metals, Gold and Coal businesses - and
she is also the first woman to join the Board.
Dr Marques" appointment brings Board membership to 15; consisting,
excluding myself, of seven independent Non-Executives, four Executive
Directors and three Non-Executives whom we accept as not being fully
independent. We have increased the scope of the induction and support for
updating and refreshing skills and knowledge which we provide for Non-
Executive Directors and have introduced evaluation of Board members"
performance - including my own.
During 2003 I had the opportunity to visit operations representative of
almost all our business groups in nine countries. I was impressed by the
commitment and dedication of our people of many nationalities and
backgrounds to the Anglo values and to the task of delivering high quality
performance. I should like to thank them on your behalf for that
dedication.
One of my activities in the second half of 2003 was to serve on an
advisory group to Dr Emil Salim who has been conducting a review of the
World Bank"s involvement in the extractive industries.
The core of the critique of those who believe that the Bank should not be
involved in the mining, oil or gas sector is the concept of the so-called
"resource curse".
In his Report Dr Salim accepts that the Bank should remain engaged in the
sector but suggests imposing so many qualifications and conditions that
the net effect would be a virtual disengagement from, and a lessening of
the Bank"s positive influence on performance standards within the industry
and equally importantly on host governments whose policies and practices
are critical to ensuring sustainable development.
There is common ground between the industry and Dr Salim about ways in
which the Bank"s national programmes could be better integrated; about the
need for human rights policies; and about the necessity of establishing
equitable relations with communities in whose areas we operate. These
relations need to be based on openness and a feeling that our operations
bring overall benefits. Transparency is a key to this and that is why we
in Anglo American have been prominent in our support of the UK
Government"s Extractive Industries Transparency Initiative. We will
continue to work with the Bank other members of our industry and civil
society organisations on practical ways forward.
Although the IFC is a minority partner in some of our projects, Anglo
American will probably not be impacted materially by the conclusions of
the Review. Moreover, I suspect that the Bank will steer a middle course
between its own internal evaluation and Dr Salim"s findings. But the
reason for my having devoted some time to this topic today, is that it
illustrates the need for resource companies both to communicate better the
benefit that we create and also to ensure that we maximise our positive
developmental contributions in the emerging markets where we work. We
need, in short, to show that natural resources can be a blessing rather
than a curse.
Anglo American has, I believe, developed a significant competitive
advantage in this respect in a number of areas such as the experience
gained by our Anglo Zimele small business development unit in South
Africa, our recently introduced Socio-Economic Assessment Toolbox - or
SEAT process - to support mature operations in improving their interaction
with communities, and the seriousness with which the Company is addressing
the sustainable development agenda. I think it important to stress that
for Anglo American and others in the sector, issues of corporate
responsibility are fundamental to our business, to our access to resources
and to our long-term licence to operate.
Lastly, a week ago we have seen South Africa"s third democratic election
proceed smoothly. It is clear that after ten years of democracy the
institutions of society in that country are growing robustly and healthily
in a way that has rightly attracted much positive attention from around
the world. Although it is the general policy of Anglo American not to give
party political donations, your board decided that it should make an
exception at this juncture in South Africa"s democratic transition.
Accordingly a donation of six million Rand was divided equally between on
the one hand the African National Congress as the ruling party enjoying
majority electoral support and on the other hand the various other parties
including the Democratic Alliance as the official opposition. These
donations were announced publicly when they were made.
I now invite our Chief Executive, Mr Tony Trahar, to present a review of
2003 and to highlight the key challenges in the current year."
Tony Trahar:
"Thank you Chairman. Good morning ladies and gentlemen.
Although the year finished on a more optimistic note, 2003 was, for the
most part, defined by its fragility. Exchange rates played a key role
with the Rand strengthening more than any other major currency against the
US Dollar for the second year running. Since our production costs are
denominated in domestic currency and our sales in US Dollars, and previous
currency weakness had resulted in a surge in domestic inflation, this
applied an almost unprecedented squeeze to the earnings of our South
African and Australian operations.
Against this background, I am pleased to report that in 2003 Anglo
American achieved headline earnings of $1.694 billion - and earnings per
share of 120 cents - down 4%. The recommended final dividend of 39
cents, if approved, will bring our total for the year to 54 cents per
share - an increase of 6% which reflects the Board"s confidence in the
improving outlook for our business.
Turnover increased by 22% to $25 billion. 2003 was another year of strong
cash flow, with cash generation (EBITDA) virtually unchanged at $4.785
billion.
During 2003 we achieved cost savings of $335 million - compared with a
target of $200 million as part of our continuing drive to improve
efficiency and returns. In 2004 we are targeting further savings in
excess of $250 million.
Strategy
Our strategy is to achieve steady growth for shareholders across the cycle
by investing in acquisitions at prices capable of creating value and by
developing attractive greenfield and brownfield projects.
Since we established our primary listing in London we have sought to:
- Dispose of non-core or under performing assets;
- Strengthen our asset base; and to
- Achieve better geographical balance in our portfolio.
In pursuit of this strategy since 1999 we have acquired some $12 billion
of new core assets and realised $8 billion from sales of non-core assets.
In recent months we have disposed of the remainder of our stake in First
Rand and, at the end of March, sold our 20% stake in Goldfields for $1.16
billion. We achieved a $480 million profit on this disposal.
Strategically, the most important development of 2003 was our acquisition
of a controlling stake - currently standing at around two-thirds - of the
world"s fifth largest iron ore producer Kumba Resources. This marked the
realisation of our long-standing objective of securing a substantial
presence in the iron ore market with a base for further expansion in due
course.
Other significant acquisitions in 2003 include purchases in continental
Europe and China for our Industrial Minerals business unit and assets in
Europe, Mexico and China for Anglo Paper and Packaging. We also increased
our holdings in Anglo Platinum and AngloGold.
Recently, we have announced the acquisition of the outstanding 30%
minority stake in Frantschach - a major element in our European packaging
portfolio.
The largest Group transaction announced in 2003 was the proposed merger
between AngloGold and Ashanti Goldfields. This merger has now received
all outstanding shareholder approvals, including the full support of the
Government of Ghana. Completion of the transaction next month will allow
initial evaluation of the Obuasi Deeps project to commence.
We apply demanding standards to any acquisition proposal and have been
prepared to walk away if we felt that the price would not allow an
acceptable return to be made for our shareholders. The EBITDA cash flow
returns on our key acquisitions of Minera Sur Andes (formerly known as
Disputada) in Chile, Cerrejon Coal in Colombia, Shell Coal in Australia,
Syktyvkar in Russia and Tarmac in the UK range between 16% and 23%. The
Minera Sur Andes purchase, made from Exxon at the end of 2002, has been
particularly satisfactory since the projected synergies have been
exceeded; the operations have been earnings accretive in their first year;
significant additional reserves of copper ore have been identified; and
the recent surge in the copper price is resulting in substantial cash
generation.
Black Economic Empowerment
In South Africa the Minerals and Petroleum Resources Development Act is
expected to be promulgated in early May. The five year period during
which old order mining rights must be converted to new order rights will
then commence. Anglo"s mining operations are working closely with the
South African Government to ensure that the transition proceeds smoothly.
We are confident that we are making satisfactory progress towards meeting
the various requirements of the Mining Charter in such areas as ownership
and control, employment equity, procurement, social investment and so on.
A second draft of the Royalty Bill is expected to be made available by the
South African Treasury later this year for consultation before proceeding
to the Parliamentary stage. Recent comments from senior officials appear
to indicate that the South African Government is considering lower royalty
rates than contemplated in the first draft Bill, albeit still to be levied
on a turnover, rather than a profit, basis and with implementation only in
2009. We intend to continue to engage government on this issue and the
announced overview of the South African mining tax regime.
Organic Growth
During 2003 we successfully commissioned a number of projects including
the Skorpion zinc mine in Namibia and the Ruzomberok paper mill expansion
in Slovakia. We continue to have one of the strongest growth project
pipelines in the natural resource sector, involving investment of some $6
billion with expansions planned across all of our business units.
The uplift in the quality of our assets and the expansions achieved since
1999 have led to significant volume growth - of 40% for diamonds; 17% for
platinum; 67% for copper; 57% for nickel; 40% for coal; 152% for
aggregates; 166% for uncoated woodfree paper; 158% for packaging; and 346%
for industrial sacks. These volume expansions, together with a number of
significant acquisitions, are in line with our stated strategy of
maintaining a balanced allocation of resources in precious metals,
diamonds, base and ferrous metals, industrial minerals and paper and
packaging.
China
Last month I visited our operations in Australia and China. Whereas in
Australia we now have well over $2 billion invested, mainly in profitable
coal and gold operations, China is a relatively new area of investment
interest. We have established a number of small operations and have a
representative office in Beijing. Including both direct and indirect
sales, we sell over $800 million worth of goods into the Chinese market.
China has been having a major impact on commodity markets. Indeed, some
commentators have suggested that Chinese - and possibly Indian - demand
may be set to exert a long-term structural uplift on commodity markets
because of the material intensity of this stage of their growth. On this
analysis, the real decline in commodity prices experienced over the last
30 years might be reversed. Time will tell.
What is apparent, is that China is fast becoming a key - and increasingly
integrated - player in the world economy. I was struck, ladies and
gentlemen, not only by the speed and sophistication of China"s development
but also by the evident desire to learn from international companies in
areas like safety and sustainable development. I hope at future events to
be able to brief you on our efforts to ensure that Anglo American is an
active participant in the opportunities presented by the Chinese economy.
Corporate Responsibility
In his introduction, our Chairman highlighted the central importance of
corporate responsibility issues to our industry and I am pleased to report
that we have recently produced our 2004 Report to Society which reflects
the many important initiatives underway around the world in terms of the
Group"s high level of commitment to sustainable development.
2003 saw some progress in our determined programme to improve safety with
a further improvement in our Lost Time Injury Frequency Rate, although
disappointingly our level of fatalities was only slightly lower than in
the previous year. Improving safety is an important element in determining
the remuneration of senior managers and further improvements remain an
over-riding priority.
In August 2002, we announced our intention to make anti-retroviral
treatment available to our HIV positive employees who are at the stage of
infection where ART is most effective. We now have some 1,300 employees
on ART, as well as having a further 3,300 HIV positive employees on
wellness programmes. We welcome the South African Government"s decision
to provide ART and, where possible, we will seek to support the public
health infrastructure in rolling-out its ambitious treatment programme.
We are working in partnership with the ngo loveLife, the Nelson Mandela
Foundation, the Henry J Kaiser Foundation and the Global Fund on HIV to
create a network of adolescent friendly clinics. We are also in discussion
with the donor community and voluntary organisations about the most
effective means of extending access to treatment to dependents,
contractors and local communities neighbouring our operations. The AIDS
pandemic is an inescapable dimension of doing business in developing
countries, particularly in Africa. We are seeking to manage its impacts
and to use our capacities and influence to help stabilise the societies in
which we operate.
We recognise that, especially in developing countries, we have a
significant impact upon the physical and social environment of the places
in which we typically work. We recognise that the scale of our potential
impacts carries with it a special duty of care. That is why we require
each of our significant operations to have in place a Community Engagement
Plan. These are based upon an analysis of each operation"s local social,
economic and environmental impacts, how contentious issues are to be
managed, how complaints are to be handled and how the effectiveness of
social investment projects can be maximised. We hope to enrich the
quality of these plans through use of our new Socio-Economic Assessment
Toolbox. An extensive training programme is now underway to build
capacity in this critical area of risk management.
Outlook
In conclusion, ladies and gentlemen, let me say a few words about the
outlook for 2004.
The macroeconomic outlook in the United States and Asia provides an
encouraging platform for the remainder of the year, although the
sustainability of the global upswing against a background of significant
macroeconomic imbalances and exchange rate volatility remains uncertain.
Anglo American offers investors a unique mix of geographic and product
diversity which has shown an ability to absorb some of the volatility
generally associated with single product companies.
In US Dollar terms commodity prices are strong and demand for our precious
and base metals and minerals continues at a high level, although the
results of our South African operations in particular continue to be
affected by the strength of the South African currency. In Europe, demand
in the paper and packaging sector is steady but prices are somewhat muted
while some of our industrial minerals businesses are experiencing
increased price impacts from market competition.
Overall, we believe the company remains well positioned for profitable
growth in 2004.
Thank you."
For further information:
Anglo American - London
Investor Relations Media Relations
Nick von Schirnding Kate Aindow
Tel: +44 207 698 8540 Tel: +44 207 698 8619
Anglo American - Johannesburg
Investor Relations Media Relations
Anne Dunn Marion Dixon
Tel: +27 11 638 4730 Tel: +27 11 638 3001
Notes to Editors:
Anglo American plc is one of the world"s largest mining and natural
resource groups. With its subsidiaries, joint ventures and associates, it
is a global leader in gold, platinum group metals and diamonds, with
significant interests in coal, base and ferrous metals, industrial
minerals and paper and packaging. The group is geographically diverse,
with operations and developments in Africa, Europe, South and North
America, Australia and Asia. (www.angloamerican.co.uk).
Date: 21/04/2004 01:45:01 PM Produced by the JSE SENS Department
