Anglo American plc has managed to deliver solid performance despite the challenging 2014—chairman, Sir John Parker says. Addressing the group’s Annual General Meeting, the chairman stated that over the past year, the mining industry had to weather a particularly difficult year as macro-economic conditions in general worsened.
“In China, growth came in slightly under target at 7.4% – and it could slow further to around 7% in 2015 – while economic recovery faltered in the Eurozone and Japan, as well as in major developing countries such as Brazil and South Africa,” Sir Parker said.
“The major exceptions were the United States, which strengthened through the year though appears to have lost a little momentum early in 2015, and India where economic conditions have improved significantly since Narendra Modi’s election win”.
He added that in the face of a deteriorating economic outlook, exacerbated by the over-supply of a number of mined commodities, many spot prices continued to decline. For example, iron ore – the major earnings driver or a very important component of most of the world’s biggest mining companies – experienced a year-on-year decline of just under a half, with a further drop of almost 30% so far in 2015, he revealed.
Again, however, in respect of our Anglo, there was an exception in the gloom as De Beers increased underlying EBIT by 36% in a growing diamond jewellery market. It is gratifying that the $5.1 billion acquisition of the Oppenheimer family’s 40% stake in De Beers in 2012 is indeed delivering good returns.
Despite the economic headwinds and intense pricing pressures, Anglo American delivered an underlying EBIT of $4.9 billion (2013: $6.6 billion) and underlying earnings of $2.2 billion (2013: $2.7 billion).
“Our balance sheet remains sound, as was reflected in the ratings agencies recently maintaining Anglo American’s credit rating. Moreover, the heavy capital commitments such as Minas-Rio are now largely behind us, and we expect net debt to peak this year, and then gradually to come down – on the back of a reducing capex programme, along with disposals such as our interest in Lafarge Tarmac – to a sustainable level of our target of $10-$12 billion,” he said.
“Importantly, we are recommending a maintained total dividend of 85 cents per share for the year (including a final dividend of 53 cents) – and it is our expectation that with our planned further cost reductions the dividend should be funded out of free cash flow from 2016 onwards.”