| Thu 3 Feb 2005, 12:34 | | Anglo American Plc - De Beers Societe Anonyme toda |
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Anglo American Plc - De Beers Societe Anonyme today reported headline earnings
ANGLO AMERICAN PLC
JSE Code: AGL
ISIN Code: GB0004901517
(The `Company`)
De Beers Societe Anonyme (`Dbsa`) today reported headline earnings for the year
ended 31 December 2004 of US$652 million.
Anglo American plc (`AA plc`) arrives at its headline earnings in respect of De
Beers by accounting for the interests arising from the ordinary shares and the
10% preference shares it holds in DB Investments (`DBI`).
AA plc will therefore report headline earnings of US$381 million for the year
ended 31 December 2004 from its investment in DBI, as reconciled in the table
below:
Reconciliation of headline earnings for the year ended 31 December 2004
US$ million Total Ordinary Preference
shares shares (3)
DBI headline earnings - IFRS (100%) 652 - -
GAAP adjustments (1) 65 - -
DBI headline earnings - UK GAAP (100%) 717 622 95
AA plc`s 45% ordinary share interest 280 280 -
Additional 3.65% ordinary share interest 23 23 -
(2)
AA plc`s portion of the preference shares 78 - 78
(3)
AA plc headline earnings 381 303 78
(1) The GAAP adjustments include the reclassification of the US$75 million
preference dividends which are finance charges to Dbsa under IFRS, but are not
treated as finance charges under UK GAAP. The GAAP adjustments also include -
US$31 million relating to the mark-to-market of interest rate hedging contracts
referred to in Dbsa`s 2003 year end press release. Whereas in Dbsa`s earnings,
the full amount of US$70 million was charged against earnings in 2003, under UK
GAAP US$31 million is charged against earnings in 2004, being the portion that
was realised in the period.
(2) As a result of De Beers` partial interest in Debswana Diamond Company
(Proprietary) Limited (one of the shareholders in DBI), AA plc accounts for an
additional 3.65% of DBI`s post-tax earnings attributable to ordinary shares. As
previously announced, the Debswana interest in DBI was ceded to the Government
of the Republic of Botswana as part of a renewal of De Beers` mining licences in
Botswana, signed on 20th December 2004. Accordingly, from this date AA plc no
longer accounts for this additional 3.65% interest.
(3) AA plc grosses up its preference share income to the operating profit level
and accounts for its preference share interest in operating profit, exceptional
items, investment income and net interest, tax and minorities, in the same way
as it accounts for its ordinary share interest in these balances. This
treatment is in accordance with FRS9, paragraph 33, which indicates that where
preference shares are an integral part of the investor`s long-term interest, it
is appropriate to include the preference share interest with the ordinary share
interest in determining the investor`s overall share of an associate`s results.
The headline earnings attributable to AA plc`s US$61 million preference share
income are arrived at by adjusting for a proportion of exceptional items (-US$2
million) and goodwill amortisation (+US$19 million) in the same way as the
ordinary share interest is calculated.
On 30 June 2004, Dbsa redeemed 25% of its preference shares and on that date AA
plc received US$175 million, representing 25% of its US$701 million preference
share interest.
In the year ended 31 December 2004, AA plc received a total of US$250 million in
dividends from DBI, consisting of US$68 million dividends on ordinary shares
relating to FY 2003, a US$112 million interim dividend on ordinary shares for
2004, US$35 million dividends representing the second US$35 million payment on
preference shares for 2003, and interim dividends totalling US$35 million on
preference shares for 2004. A US$90 million final dividend on ordinary shares
relating to FY 2004 and the second US$26 million payment on preference shares
for 2004 are expected to be received in early 2005.
In the year ended 31 December 2003, AA plc received a total of US$238 million in
dividends from DBI, consisting of US$56 million dividends on ordinary shares
relating to FY 2002, a US$112 million interim dividend on ordinary shares for
2003, US$35 million dividends representing the second US$35 million payment on
preference shares for 2002, and a US$35 million interim dividend on preference
shares for 2003.
Reconciliation of headline earnings for the year ended 31 December 2003 (4)
US$ million Total Ordinary Preference
shares shares
DBI headline earnings (100%) - restated (4) 590 - -
GAAP adjustments - restated (4) 126 - -
DBI headline earnings - UK GAAP (100%) 716 599 117
AA plc`s 45% ordinary share interest 269 269 -
Additional 3.65% ordinary share interest 22 22 -
AA plc`s portion of the preference shares 95 - 95
AA plc headline earnings 386 291 95
(4)Dbsa`s headline earnings for the year ended 31 December 2003 have been
restated to US$590 million (previously reported as US$676 million). The
restatement does not affect the UK GAAP figures previously reported by AA plc,
consequently the GAAP adjustment has also been restated accordingly.
The above figures are unaudited.
De Beers Societe Anonyme
(Incorporated under the laws of Luxembourg)
Thursday 3 February 2005
DIRECTORS` COMMENT
2004 was another good year for the diamond industry. Against the background of
accelerating economic growth in the major diamond consuming countries, diamond
jewellery sales performed well. Preliminary indications are that global retail
sales of diamond jewellery for the year as a whole were about 6% higher than the
previous year in local currency and, because of the continued weakening of the
US dollar, about 8% higher in US dollars. Strong areas of growth were Asia-
Pacific, India and the Gulf region with Japan also recording modest growth for
the second year running. The USA, accounting for over 50% of world diamond
jewellery sales, reports a solid Christmas season overall, despite concerns over
high personal debt levels.
During the year, levels of polished stocks in the cutting centres declined but
cutting centre bank debt continued to climb in line with the increase in the
volume of trade. However, the lending banks seem reasonably comfortable with the
ability of the trade to finance the higher level of debt.
There was strong demand for rough diamonds from the cutting centres throughout
the year and full year sales by the Diamond Trading Company (`DTC`), the
marketing arm of De Beers, were US$5,695 million, 3% higher than in 2003. During
the year, the DTC raised its rough diamond prices on three occasions, the
cumulative effect of which was that sales by the DTC in 2004 were at prices, on
average, 14% higher than in 2003. The DTC had a strong first sight in 2005 at
which it raised its rough diamond prices by a further 3% on the evidence of the
underlying demand growth achieved in 2004 and anticipated in 2005.
Despite De Beers Group diamond production being significantly below target in
the first half of the year, the deficit was more than made up in the second
half. Production for the year as a whole, inclusive of its joint ventures in
Botswana and Namibia, totalled 47 million carats, 3 million carats (7%) more
than in 2003. Debswana produced a record 31.1 million carats, an increase of 2%
over 2003, notwithstanding experiencing a number of operational difficulties and
industrial action. Namdeb`s production of 1.86 million carats was 28% higher
than in 2003 and included record marine production of 865,000 carats.
De Beers` South African mines produced a total of 13.7 million carats in 2004,
an increase of 1.8 million carats (15%) on 2003. Mainly because of the new
Combined Treatment Plant, Kimberley mines produced a record 2 million carats, a
production level last achieved 90 years ago, in 1914. Although Rand mining costs
per ton in 2004 were lower than in 2003, the weakness of the US Dollar, the
currency in which diamonds are sold, has put De Beers` older and more marginal
mines under continued pressure with five of its seven mines operating at a loss.
Management continues to focus its efforts on further reducing costs and driving
efficiencies throughout its operations
Headline earnings for the year ended 31 December 2004 were US$652 million, 11%
higher than for 2003, and operating cash flow generated during the year was
US$985 million. Net interest bearing debt reduced from US$1,762 million at 31
December 2003 to US$1,588 million at 31 December 2004 and net gearing reduced
from 29% to 25%. Diamond stocks at year end were at a similar level to that
reported at the end of 2003.
The Board has recommended to the shareholders that a final ordinary dividend of
US$200 million in respect of the year 2004 be declared at the forthcoming Annual
General Meeting. Together with the interim ordinary dividend of US$250 million
paid in August 2004, total ordinary dividends for the year amount to US$450
million (2003:US$400 million).
2005 is likely to be a more challenging year for the diamond industry. However,
with the transformation of the industry that has taken place over the last few
years, there is now growing evidence that diamonds are competing favourably with
other luxury products.
De Beers is pleased to have recently reached agreement with the Government of
the Republic of Botswana (`GRB`) in relation to the renewal of the Jwaneng
mining licence for a further 25-year period from 1 August 2004 and the extension
of the Orapa, Damtshaa and Letlhakane mining licences for a similar period. De
Beers and the GRB have also agreed that the 15% holding in De Beers` ultimate
holding company, DB Investments sa, previously owned by Debswana, be directly
owned by GRB. The agreement marks the long-term continuation of the unique and
important partnership between the GRB and De Beers.
De Beers has made a number of commitments to the European Commission regarding
its proposed trade agreement with the Russian diamond producer, Alrosa. De Beers
believes that it has now addressed the concerns raised by the Commission and
looks forward to having the commitments formally accepted by the Commission in
the near future.
The reorganisation of De Beers` South African assets, which has involved focus
and planning over the past year, is now in the process of being implemented.
Accordingly, De Beers Consolidated Mines Limited should be in a position to
implement a Black Economic Empowerment transaction during 2005.
De Beers Societe Anonyme
Consolidated Income Statement
for the year ended 31 December 2004
(Abridged)
US Dollar millions
Year to Year to
31 December 31 December
2004 2003
Diamond sales
- DTC 5 695 5 518
- Other 512 397
Trade investment and other income 836 656
7 043 6 571
Deduct:
Cost of sales 4 890 4 794
Depreciation and amortisation (Note 345 294
1)
Sorting and marketing 543 490
Exploration and research 174 147
Corporate expenses 80 52
Net diamond account 1 011 794
Deduct:
Net finance charges (Note 2) 83 144
Costs related to reorganisation and 39 22
restructuring
Income before taxation 889 628
Taxation 386 239
Income after taxation 503 389
Attributable to outside 26 10
shareholders in subsidiaries
Own earnings 477 379
Share of retained income of joint 21 114
ventures
Total earnings 498 493
Costs of early debt redemption 95
Net earnings 498 398
Headline earnings reconciliation
Net earnings 498 398
Adjusted for:
Amortisation of intangible fixed 175 170
assets
After tax surplus on realisation of (21) (3)
fixed assets less provisions
Facility fees 25
Headline earnings 652 590
Cash available from operating 985 1 520
activities
Dividends in respect of:-
2002 - Final 124
2003 - Interim 250
- Final 150
2004 - Interim 250
De Beers Societe Anonyme
Consolidated Balance Sheet
31 December 2004
(Abridged)
US Dollar millions
31 December 31 December 2003
2004
3 801 3 549
Ordinary shareholders`
interests
Outside shareholders` 132 115
interests
Total shareholders` interests 3 933 3 664
Net interest bearing debt 1 588 1 762
(Notes 2 and 3)
Other liabilities 1 776 1 517
7 297 6 943
Fixed assets 5 391 5 145
Investments and loans 50 53
Diamond stocks and other 1 856 1 745
assets
7 297 6 943
Exchange rates US$ = Rand
- average 6.43 7.64
- year end 5.74 6.38
Notes and Comments
1. Amortisation amounting to US$144 million in respect of the goodwill
attributable to De Beers Consolidated Mines Limited and De Beers Centenary AG
has been expensed in the current year (2003 : US$144 million).
2. On 30 June 2004, the Company took advantage of an early redemption clause
attaching to its 10% preference shares in issue and redeemed the maximum
permissible amount of US$214 million, or 25% of the total. As a result, the
preference shares, with a value of US$642 million (2003: US$856 million) have
been more appropriately reclassified as debt in the balance sheets. The
preference dividends, amounting to US$75 million (2003: US$86 million) have
accordingly been reclassified as finance charges in the respective income
statements.
3. Cash has been offset against interest bearing debt.
Contacts:
De Beers London:
Lynette Hori +44 20 7430 3509/+44 7740 393260
De Beers South Africa
Nicola Wilson +27 11 374 7399/+27 83 299 5552
Visit the official De Beers group website for more in formation on the Company
and where you can view and download a selection of images - www.debeersgroup.com
N Jordan
Company Secretary
3 February 2005
