International diversified mining giant, Anglo American plc has announced a radical restructuring programme that will see the group redefine the focus of its asset portfolio and transform into a competitive position with a view to creating a more resilient business to deliver sustainable shareholder returns.
The salient features of the restructuring include; radical portfolio restructuring, driving operational discipline and protecting the balance sheet.
Under the radical portfolio restructuring, Anglo would focus on the priority 1 assets to deliver free cash flow and greater returns through the cycle. The number of assets will be reduced by ~60% with corporate structures consolidated from six to three businesses: De Beers, Industrial Metals, Bulk Commodities and London office co-locating with De Beers in 2017.
“As we redefine our operational footprint, we are aligning our organisation to ensure optimal efficiency and effectiveness. As a next step and as we determine the future portfolio, we will be consolidating our six business unit structures into three – De Beers, Industrial Metals and Bulk Commodities – providing further opportunity to reduce the cost burden on our business,” said Chief Executive of Anglo American, Mark Cutifani.
The group is also targeting $3.7 billion in cost and productivity improvements by 2013 to 2017 as part of driving operational discipline while care & maintenance / closure of cash negative assets – Snap Lake C&M, Thabazimbi.
Anglo is also reducing capex, which is expected of a further c.$1 billion (2) to the end of 2016. Cutifani said they are setting out an accelerated and more aggressive strategic restructuring of the portfolio to focus it around those assets that are best placed to deliver free cash flow through the cycle and that constitute the core long term value proposition of the group.
“While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action. We will set out the detail of the future portfolio in February, with the aim of delivering a resilient Anglo American and a step change in the transformation of the Company,” Cutifani said.
“Our work to drive out costs and increase productivity will have delivered $1.6 billion of benefit by the end of 2015, following our volume reductions in De Beers and Kumba. By the end of 2017, we expect to have delivered a total of $3.7 billion of such efficiency improvements, made up of productivity, operating costs and indirect costs,” he added.
He said they are also increasing their targeted disposal proceeds to $4 billion and will be progressing the sale process for the Phosphates and Niobium businesses during 2016.
“The Board has also taken the decision to suspend dividend payments in respect of the balance of 2015 and 2016. Upon their resumption, the dividend policy will reflect a pay-out ratio to provide flexibility through the cycle and clarity for shareholders.”