| Fri 9 Feb 2007, 13:45 | | NSX - AGL - Anglo American - De Beers Societe Anon |
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AGL
ANAAL
NSX - AGL - Anglo American - De Beers Societe Anonyme ("DBSA") Today
Reported underlying earnings for the year
ended 31 December 2006 of US$425 Million
Anglo American plc
(Incorporated in the United Kingdom)
Registration number: 3564138
Share code: AGL
ISIN: GB0004901517
(the "Company")
De Beers Societe Anonyme ("Dbsa") today reported underlying earnings for
the year ended 31 December 2006 of US$425 million.
Anglo American plc ("AA plc") arrives at its underlying 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 underlying earnings of US$227 million for
the year ended 31 December 2006 from its investment in DBI, as
reconciled in the table below:
US$ million 2006
*DBI underlying earnings (1) (100%) 425
*Adjustments (2) 18
*DBI underlying earnings - AA plc basis 443
(100%)
*AA plc`s 45% ordinary share interest 199
*Income from preference shares 28
*AA plc underlying earnings 227
(1) DBI underlying earnings is stated before costs of $57m in relation
to the amended class action settlement agreement, and profits of $229m
and $105m relating to the Ponahalo BEE transaction and sale of interest
in Fort a la Corne, respectively.
(2) Adjustments include the reclassification of the actuarial gains and
losses booked to the income statement by Dbsa under the corridor
mechanism of IAS19.
On 30 June 2006, Dbsa redeemed a further 25% of the preference shares
originally in issue, taking the total redemption to 75% of the issue,
and on that date AA plc received US$175 million, representing 25% of its
original US$701 million preference share interest. AA plc now holds
US$175 million of preference shares in Dbsa.
In the year ended 31 December 2006, AA plc received a total of US$315
million in distributions from DBI, consisting of a US$68 million interim
dividend on ordinary shares relating to FY 2006, US$17 million dividends
representing the second payment on preference shares for 2005, interim
dividends totalling US$18 million on preference shares for 2006, and a
share premium repayment of US$212 million relating to the proceeds from
the BEE
transaction. This transaction, which concluded on 18 April 2006,
resulted in 26% of De Beers Consolidated Mines Limited being sold to
Ponahalo Consortium for R3.7 billion.
Underlying Earnings
Underlying Earnings is net profit attributable to equity shareholders,
adjusted for the effect of special items and remeasurements, and any
related tax and minority interests. Special items are those items of
financial performance which are material by nature or amount and should
therefore be separately presented. These principally relate to
impairment and significant closure costs, exceptional legal provisions
and profit or loss on disposals. Remeasurements include (i) adjustments
to ensure that the unrealised gains or losses on non-hedge derivative
instruments are recorded in underlying earnings in the same period as
the underlying transaction against which these instruments provide an
economic, but not formally designated, hedge and (ii) foreign currency
gains and losses arising on the retranslation of dollar denominated De
Beers preference shares held by a rand functional currency subsidiary of
the Group.
The above figures are unaudited.
De Beers Societe Anonyme
(Incorporated under the laws of Luxembourg)
Friday, 9 February 2007
RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2006
DIRECTORS` COMMENT
CONSUMER DEMAND BUOYANT AS DE BEERS INVESTS US$2 BILLION
TO BRING NEW PRODUCTION ONSTREAM
*DTC sales at US$6.15 billion (2005: US$6.54 billion) the second highest
on record, were lower than 2005 reflecting reduced Russian supply
available to the DTC, and the continued challenging environment in the
wholesale market for rough diamonds, where a lack of liquidity, margin
pressure and increased financing costs impacted pipeline demand. However
solid consumer demand for diamond jewellery continued in 2006, with
China and India reporting strong sales growth and the USA growing in
line with GDP.
*EBITDA at US$1.232 billion (2005: US$1.403 billion) is down 12% as a
result of lower level of DTC sales and increased exploration and
development costs.
*Net earnings at US$730 million (2005: US$554 million) increased by 32%
due to the sale of 26% of DBCM to Ponahalo, a broad-based Black Economic
Empowerment consortium, and the sale of the Group`s interest in the Fort
a la Corne joint venture in Canada.
*Underlying earnings at US$425 million are US$277 million lower than
2005, after adjusting for the impact of the Canadian tax credit, due to
reduced margins in the diamond account, the impact of increased finance
charges and the dilution in earnings caused by the sale of 26% of De
Beers Consolidated Mines (DBCM).
*Cash available from operating activities increased to US$809 million
from US$473 million in 2005.
Financial Summary - Full Year
US Dollar Millions
2006 2005 % change
DTC sales 6 150 6 539 - 6%
EBITDA 1 232 1 403 - 12%
Net earnings 730 554 + 32%
Underlying 425 850 - 50%
earnings
Cash available 809 473 + 71%
from operating
activities
Capital 949 370 + 156%
expenditure -
expansion
Gearing 38.7% 34.5%
2006 Operational Highlights
Strengthening our partnerships
*On 4 April De Beers announced agreement to implement the sale of 26% of
DBCM to Ponahalo Holdings (Proprietary) Limited, creating a new
partnership in DBCM which will add value to the company.
*On 19 May the Government of Botswana and De Beers signed the renewal of
the Mining Licence for Jwaneng mine. The renewed licence will run for
twenty five years (effective from 1 August 2004). In addition, the
currently held licences for the Orapa, Lethlakane and Damtshaa mines
were extended to run until 2029, in line with the Jwaneng Licence. The
agreement also covered the sale of Debswana`s production to the DTC for
a further five years and the establishment in Botswana of Diamond
Trading Company Botswana, a 50:50 partnership between De Beers and the
Government of Botswana, which will sort and value all Debswana`s diamond
production. In addition, it was announced that Diamond Trading Company
Botswana will carry out local sales and marketing activities to support
the establishment of local diamond manufacturing operations.
*On 30 January 2007 De Beers and the Government of Namibia formalised
the agreement to extend the DTC sales contract for a further eight years
(effective from 1 January 2006) and to establish a new Namibian company
- Namibia Diamond Trading Company - a 50:50 partnership between De Beers
and the Government of Namibia, that will sort and value Namdeb`s diamond
production and carry out local sales and marketing activities.
Record production from existing mines
The De Beers family of companies achieved record production in 2006 of
51 million carats (2005: 49 million). Debswana produced a record 34.3
million carats (2005: 31.9 million) and Namdeb production exceeded two
million carats (2005: 1.8 million carats) for the first time since 1977,
with land and sea each contributing over one million carats, while in
South Africa, production totalled 14.6 million carats (2005: 15.2
million carats) from six mines in the DBCM Group.
US$ 2 billion capital expansion programme
*In June, DBCM announced that it had been granted a new order right to
mine for diamonds at the Voorspoed Mine, near Kroonstad in the Free
State. This will be the Group`s first "greenfields" mine since Venetia
(US$170 million).
*The mining vessel Peace In Africa, has arrived in Cape Town and, once
commissioned, will commence mining off the west coast of South Africa in
Q3 2007 (US$145million).
*In Canada, De Beers is on target to start production at the Snap Lake
mine in North West Territories in October 2007 and at the Victor mine in
Ontario in Q4 2008 (US$1.7 billion).
When all four are in full production they will contribute approximately
3.3 million carats and US$700 million to De Beers` annual production
capacity.
Significant investment in exploration
In 2006 De Beers positioned itself to take advantage of exciting
exploration opportunities:
*In Angola, De Beers was granted three new concessions, each covering an
area of 3,000 square kilometres. Airborne surveys completed during 2006
identified new targets to be followed up in 2007.
*In Botswana De Beers has been granted prospecting licences around the
Jwaneng and Orapa areas. The AK6 project is under evaluation and shows
potential.
*De Beers has access to prospective ground in the Democratic Republic of
the Congo, and a number of joint ventures are in place.
*On 6 September, De Beers and ALROSA signed a Memorandum of
Understanding which should lead to joint diamond prospecting and
exploration activities in Russia.
*As part of De Beers` global strategy of rationalising our project
portfolio, on 22 September, De Beers Canada Corporation announced the
sale of the company`s entire 42% participating interest in the Fort a la
Corne joint venture project in Saskatchewan to Shore Gold Inc., for
CAN$180 million in cash.
Effective marketing programmes
DTC marketing initiatives continued to drive demand for diamond
jewellery. Preliminary anecdotal reports suggest global sales of
diamond jewellery increased by four to five percent in 2006 with China
and India achieving double digit growth. DTC marketing programmes such
as `Journey Diamond Jewellery` and `Trilogy` were strong growth drivers
in 2006. The pilot `Forevermark` programme in Hong Kong continues to
achieve its targets, and the programme is being expanded in Asia.
Investing in independently managed businesses
*De Beers Diamond Jewellers (DBDJ), the De Beers retail joint venture
with LVMH, had an excellent year. While continuing its steady growth in
Japan, it reported a promising performance in the United States, a
market that it entered in late 2005 in New York and Los Angeles. De
Beers has strengthened its presence in London and opened its first
boutique in the Middle East, in Dubai. The Talisman and Secrets of the
Rose collections, fine jewellery and engagement rings contributed to
substantial growth in revenue per store. To increase its recognition and
image, a new advertising campaign was launched in 2006 for DBDJ. The
company introduced its first wristwatch collection this past Christmas,
and will increase its presence in the United States (in Las Vegas last
month), the Middle East, Japan, Hong Kong and Korea.
*Element Six continues to achieve sustained growth and recorded good
profits for 2006.
Regulatory compliance and reputation
*On 31 January 2007, the European Commission formally announced that it
had decided to reject all of the outstanding complaints against De Beers
and the DTC in respect of the DTC Sales and Marketing policy, and the
Russian Trade Agreement.
*Following the announcement in 2004 that De Beers had reached a
settlement with the United States Department of Justice, De Beers
announced agreement in March 2006 to settle and consolidate all of the
class actions against De Beers for a total sum of US$295 million.
*In December, De Beers published its `Report to Stakeholders` which
details the Group`s performance against a wide range of issues
identified by relevant stakeholders covering economics, ethics,
employees, communities, and the environment.
Management Changes
De Beers is pleased to announce that Rene Medori, Finance Director of
Anglo American plc, will be joining the Board of De Beers s.a. with
effect from 6 February 2007. David Hathorn, Executive Director of Anglo
American plc, will therefore be stepping down with effect from the same
date. Also announced today is the retirement of Ollie Oliveira, who
will step down from the De Beers s.a. Board on 28 February 2007.
Outlook
The outlook for further growth in retail diamond jewellery sales remains
positive, with India and China likely to be the leading growth markets,
and the US continuing its five-year growth trend. While DTC sales are
likely to be constrained by availability in 2007, due to the reduction
in Russian purchases as agreed with the EU, the De Beers Group will
benefit from bringing new production on-stream towards the end of Q3.
De Beers will focus on implementing its new vision of `maximising the
value of its leadership position`. This includes, in addition to new
production, reviewing assets that do not fit the De Beers portfolio
criteria, focussing exploration on the most prospective areas,
continuing to improve cost efficiency, and investing in DBDJ and the
Forevermark marketing programmes.
De Beers announces results as follows:
De Beers Societe Anonyme
Consolidated Income Statement
for the year ended 31 December 2006
(Abridged)
US Dollar millions
Year to Year to
31 December 31 December
2006 2005
Diamond sales
-DTC 6 150 6 539
-Other 476 513
Joint venture and other income 1 012 906
7 638 7 958
Deduct:
Cost of sales 5 737 5 906
Sorting and marketing 428 484
Exploration, research and development 287 242
Group services and corporate 138 130
overheads (Note 1)
Net diamond account 1 048 1 196
Deduct:
Net finance charges (Note 2) 140 101
New business development 24 19
Income before taxation 884 1 076
Taxation (Note 3) 361 283
Income after taxation 523 793
Attributable to outside shareholders 74 1
in subsidiaries (Note 4)
Own earnings 449 792
Share of retained income of joint 4 22
ventures
Net earnings before special items 453 814
Special items:
Surplus in respect of the sale of 26% 229
of DBCM (Note 4)
Surplus in respect of the sale of 105
Fort a la Corne (Note 5)
Payment in terms of class action (57) (260)
settlement agreement (Note 1)
Net earnings 730 554
Underlying earnings reconciliation
(Note 6)
Net earnings before special items 453 814
Adjusted for:
Surplus on realisation of fixed (9) (14)
assets less provisions
Mine impairment and retrenchment 35 48
costs
(Gains ) losses on non-hedge (48) 16
derivative financial instruments
Taxation and minority interests (6) (14)
Underlying earnings 425 850
EBITDA 1 232 1 403
Ordinary distributions in respect of:
2004 - Final 200
2005 - Interim 150
- Final (including a partial 250
repayment of share premium)
2006 - Repayment of share premium 473
- Interim 150
- Final 50
De Beers Societe Anonyme
Consolidated Balance Sheet
31 December 2006
(Abridged)
US Dollar millions
31 31
December December
2006 2005
Ordinary shareholders` interests 3 532 3 597
Outside shareholders`interests (Note 4) 302 104
Total shareholders` interests 3 834 3 701
Net interest bearing debt (Notes 2 & 7) 2 944 2 362
Other liabilities 1 487 1 729
8 265 7 792
Fixed assets 6 394 5 790
Investments and loans 94 66
Diamond inventory and other assets 1 777 1 936
8 265 7 792
Exchange rates US$ = Rand
- average 6.72 6.39
- year end 6.99 6.36
Cash flow information
for the year ended 31 December 2006
Cash available from operating 809 473
activities
Investing activities
Fixed assets - stay-in-business 245 248
- expansion 949 370
Investments (442) 21
752 639
Financing activities
Preference share capital redeemed 214 214
Share premium redeemed 473
(Increase) in debt (962) (645)
Ordinary distributions 173 600
(102) 169
De Beers Societe Anonyme
31 December 2006
Notes and Comments.
1. In the prior year US$10 million in respect of legal costs incurred
in concluding the class action settlement agreement were included in
corporate overheads. These have been reclassified as special items in
the current year and added to the original class action payment of
US$250 million.
In terms of an amended class action settlement agreement dated 17 March
2006, a further US$45 million was paid into escrow on 28 April 2006
pending conclusion of the settlement process. Legal costs incurred in
2006 in respect of the settlement amount to US$12 million.
2. Preference share capital is included in net interest bearing debt.
Preference dividends, amounting to US$32 million (2005 : US$54 million)
are included in finance charges.
On 30 June 2006, the Company took advantage, for the third 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.
3. In the prior year, following the approval of the Victor Project, the
value of the group`s accumulated tax losses in Canada was brought to
account as a deferred tax asset which had the effect of reducing the
2005 tax charge by US$148 million.
4. De Beers concluded a broad based Black Economic Empowerment (BEE)
transaction on 18 April 2006 which resulted in 26 percent of De Beers
Consolidated Mines Limited being sold to the Ponahalo Consortium for
R3.7 billion. This has resulted in a profit of US$229 million in the
consolidated income statement. As a result of the sale transaction,
US$473 million has been returned to shareholders through a repayment of
capital. The sale process involved, inter alia, the arrangement of
incremental financing of US$640 million in revolving and term facilities
and facilitation by De Beers in the form of guarantees amounting to
approximately US$130 million.
With effect from 18 April 2006, Ponahalo`s share of DBCM`s earnings has
been included in income attributable to outside shareholders in
subsidiaries in the income statement. The impact of the BEE transaction
was US$50 million on underlying earnings for the year and $184 million
in respect of net asset value.
5. On 28 September 2006, De Beers Canada concluded the sale of its 42
per cent participating interest in the Fort a la Corne Joint Venture to
Shore Gold Inc for C$180 million (US$155 million), of which tax
amounting to US$50 million was attributable.
6. In previous reporting periods Headline Earnings were reported as a
primary indicator of performance. In line with accepted practice, De
Beers believes that the presentation of Underlying Earnings provides a
better indicative measure of underlying performance principally through
the exclusion from earnings of significant non-operating items and
unrealised profits or losses which arise due to the valuation impact of
financial market volatility.
Underlying earnings comprises net earnings attributable to shareholders
adjusted for the effect of any special items and remeasurements, less
any tax and minority interests. Special items include closure costs,
exceptional legal provisions and profits and losses on disposals of
assets. Remeasurements include adjustments to ensure that the unrealised
gains and losses on non hedge derivative instruments are recorded in
underlying earnings in the same period as the underlying transaction
against which these instruments provide an economic, but not formally
designated, hedge.
7. Cash has been offset against interest bearing debt.
Contacts:
De Beers London:
Lynette Gould +44 20 7430 3509 / +44 7740 393260
De Beers South Africa
Tom Tweedy +27 11 374 7173 / +27 83 308 0083
De Beers Botswana
Chipo Morapedi +267 361 5205 / +267 7132 1889
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 .
09 February 2007
Sponsor: J.P.Morgan Equities Limited
Date: 09/02/2007 13:45:26 Produced by the JSE SENS Department.
