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Anglo American Plc - Interim Results For The Six Months Ended 30 June 2005
ANGLO AMERICAN PLC
JSE Code: AGL
ISIN Code: GB0004901517
(The `Company`)
De Beers Societe Anonyme
(incorporated under the laws of Luxembourg)
Monday, 25 July 2005
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005
DIRECTORS` COMMENT
Results
Own earnings at US$345 million were 8% lower than the equivalent period in 2004,
and headline earnings were 21% lower at US$336 million. The decrease in own
earnings was mostly due to the impact of a weaker dollar and to tighter margins
arising largely from a significant reduction in stockpile realisations. Headline
earnings were further impacted by the negative swing of US$46 million in the
group`s share of retained earnings of joint ventures. This was because of the
release last year, as the diamond stockpile was being run down, of higher
provisions for unearned profits in diamond stocks purchased from the group`s
joint venture partners.
Operating cash flow fell to US$158 million from US$871 million in the first half
of 2004 when there was a draw down of stocks of nearly US$500 million. In
addition there was a substantial increase in other working capital in 2005.
In line with the lower earnings and cashflow, the Board has declared a reduced
interim dividend of US$150 million (2004: US$250 million) payable on 1st August
2005.
Production
Group production for the period was 23.7 million carats, an increase of 23% over
the same period in 2004. As a result of the increased production, stock levels
have risen by about $400 million compared with June 2004.
Sales and marketing
Despite mixed economic data it is estimated that the demand for diamond
jewellery in the United States is up by 6% in the first half over the same
period last year. Larger chains and high-end independents have shown the
strongest results and polished prices have started to edge up at the consumer
level. Performance in other markets was mixed. The local currency value of
global diamond jewellery sales is estimated to be higher by 5% than the
equivalent period in 2004. De Beers is currently forecasting growth of 6% in
local currency retail demand for the full year due to the level and quality of
diamond marketing activity as well as regional macro-economic strength.
Throughout the first half, demand for rough diamonds from the cutting centres
was strong. Sales by the DTC, the marketing arm of De Beers, for the first six
months totalled US$ 3.2 billion, 8% higher than the equivalent period in 2004.
The DTC raised its rough diamond prices on two occasions.
Projects
De Beers recently announced the approval of C$636 million for the Snap Lake
project in Canada with construction scheduled to commence in 2006. Further
expansion projects in Canada and Southern Africa are under evaluation.
Agreement was reached with Endiama, the Angolan state mining company, for the
establishment of a joint venture for the exploration of diamonds.
Regulatory
In early June, the European Commission published a notice indicating its
intention to accept the commitments offered by De Beers and Alrosa in relation
to the Alrosa Trade Agreement and allowed a 30 day period for public comment.
The Commission is now considering any third party comments received.
Outlook
The market for rough diamonds remains firm and we expect that, unlike in
previous years, sales in the second half of 2005 will at least match those of
the first half and that stocks will reduce. This should have a beneficial impact
on both cash flow and earnings.
De Beers announces interim results as follows:
De Beers Societe Anonyme
Consolidated Income Statement
for the half-year ended 30 June 2005
(Abridged)
US Dollar millions
6 Months 6 Months 12 Months to
to to 31 December
30 June 30 June 2004
2005 2004
Diamond sales
-DTC 3 220 2 983 5 695
-Other 265 259 512
Joint venture and other 421 373 836
income
3 906 3 615 7 043
Deduct:
Cost of sales 2 810 2 507 4 825
Depreciation and 104 88 201
amortisation (Note 1)
Sorting and marketing 199 230 543
Exploration, research and 106 99 239
development (Note 2)
Corporate expenses 43 34 80
Net diamond account 644 657 1 155
Deduct:
Net finance charges (Note 56 55 83
3)
Costs related to 12 17 39
reorganisation and
restructuring
Income before taxation 576 585 1 033
Taxation 228 203 386
Income after taxation 348 382 647
Attributable to outside 3 9 26
shareholders in
subsidiaries
Own earnings 345 373 621
Share of retained income of (6) 40 21
joint ventures
Total earnings 339 413 642
Amortisation of goodwill 72 144
(Note 1)
Net earnings 339 341 498
Headline earnings
reconciliation
339 341 498
Net earnings
Adjusted for :
Amortisation of goodwill 72 144
(Note 1)
Amortisation of intangible 15 31
fixed assets
After tax surplus on (3) (4) (21)
realisation of fixed assets
less provisions
Headline earnings 336 424 652
Cash available from 158 871 985
operating activities
Dividends in respect of:
2003 - Final 150 150
2004 - Interim 250
2004 - Final 200
2005 - Interim 150
De Beers Societe Anonyme
Consolidated Balance Sheet
30 June 2005
(Abridged)
US Dollar millions
30 June 30 June 31
2005 2004 December
2004
Ordinary shareholders` 3 663 3 663 3 801
interests
Outside shareholders` 130 124 132
interests
Total shareholders` 3 793 3 787 3 933
interests
Net interest bearing debt 1 842 1 169 1 588
(Notes 3 &4)
Other liabilities 1 490 1 489 1 776
7 125 6 445 7 297
Fixed assets 5 196 5 001 5 360
Investments and loans 76 87 81
Diamond stocks and other 1 853 1 357 1 856
assets
7 125 6 445 7 297
Exchange rates US$ = Rand
- average 6.17 6.58 6.43
- period end 6.87 6.62 5.74
Notes and Comments
1. In terms of International Financial Reporting Standard 3 (Business
Combinations), with effect from 1 January 2005 it is no longer permissible to
amortise goodwill arising on consolidation. The standard does not require the
restatement of prior periods, which include amortisation of goodwill amounting
to US$72 million and US$144 million for June and December 2004 respectively.
2. The costs of feasibility studies to prove the viability of mineral resources,
previously included in cost of sales, have now been included with exploration,
research and development. Prior periods have been restated accordingly.
3. Preference share capital is included in net interest bearing debt. Preference
dividends, amounting to US$32 million (2004 : US$43 million and US$75 million
for June and December respectively) are included in finance charges in the
respective income statements.
On 30 June 2005, the Company took advantage, for the second time, of an early
redemption clause attaching to its 10 per cent preference shares in issue and
redeemed the maximum permissible amount of US$214 million, or 25 per cent of the
total originally in issue.
4. The US$2.5 billion revolving credit facility was replaced on 31 March with a
US$3 billion multicurrency revolving facility, on more favourable terms, split
into two equal tranches with tenors of five and seven years.
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 information on the Company
and where you can view and download a selection of images - www.debeersgroup.com
.
