| Thu 24 Feb 2005, 9:28 | | Anglo fails to impress despite a 59% increase in e |
|
Anglo fails to impress despite a 59% increase in earnings
John Fraser
--------------------------------------------------------------------------------
E-Mail article Print-Friendly
Resources Editor
ANGLO American yesterday unveiled a record earnings performance for the 2004 financial year, but still failed to impress analysts.
The company’s results fell near the bottom of the range of analysts’ expectations, even though Anglo posted a 59% jump in headline earnings and a 49% jump in cash generation.
Much of Anglo’s growth was driven by its base metals and ferrous and industries divisions. These divisions include copper, zinc, nickel, mineral sands, iron ore, manganese and steel. Base metals accounted for 39% of headline earnings in 2004, a spectacular leap from the 12% figure in 2003.
Meanwhile, ferrous metals and industries shot to 18% of headline earnings, from just 6% the previous year.
Trahar said this demonstrated the benefits of Anglo’s diversified portfolio. He said that despite the benefits of the commodities boom, Anglo was still hit by the strong rand.
In 2003, 34% of its headline earnings came from SA, but this fell to 26% in 2004.
“The reduction of the contribution from SA is a reflection of the strength of the South African currency this year,” said Trahar.
He said over the same period, the contribution from the Americas — which most notably includes South American operations — jumped from 18% to 45%, making the region the most important contributor to Anglo’s earnings, overtaking SA.
While cash generation in all of Anglo’s businesses rose last year, the rises were most spectacular for the ferrous and base metals businesses — reflecting the upsurge in commodity prices, driven by rampant Chinese demand.
Trahar said Anglo had continued to launch new projects, and would continue to do so.
Important zinc, cement pulp and paper, platinum and copper projects were commissioned last year, and Anglo has a pipeline of approved projects worth $4,7bn — with yet-to-be approved projects worth $8bn, half of which are in base metals.
Trahar said the company had been “significantly transformed” since 1999, with the sale of non-core assets bringing in $9bn, and a series of acquisitions worth about $15bn.
Trahar stressed the importance of keeping costs under control, and said last year Anglo achieved savings of $554m, ahead of a target of $350m.
Anglo finance director Tony Lea said while Anglo profited from price increases last year to the tune of $1,7bn, there was a $385bn fall in headline earnings due to currency changes, mainly the strengthening of the rand.
The biggest effect of the rand was felt by Anglo Platinum, followed by AngloGold Ashanti.
He said the outlook for 2005 was favourable, with demand for commodities being driven by further growth in China.
Anglo will continue to look for acquisition opportunities, although Trahar said in the current commodities boom it was difficult to find any bargains.
He said Anglo was looking at Russia, China and India.
When asked why Anglo had underperformed other London-listed diversified mining groups, Trahar said the company had a balanced and a growth portfolio, but its product mix was different to those of other companies.
“A year ago, we were outperforming the others — these things work through in the long-term,” he said.
“Our gold, diamonds and platinum differential sets us apart.”
Anglo’s turnover for 2004 rose to $31,8bn from $24,9bn in 2003 — a rise of 27,6%. Profit rose 83% to $2,9bn, and headline earnings a share rose 56,7% to $1,88. The final dividend was up 31% to 51c.
“These results were good, but not quite as good as had been hoped for,” said an analyst.
“They really need to work hard to keep their costs under control.”
