Anglo-American Posts Steep First-Half Loss --Update
July 28 2016 - 5:15AM
Dow Jones News
By Scott Patterson
LONDON-- Anglo American on Thursday reported a steep first-half
loss as the mining giant continues to suffer from weak commodity
prices, though it showed some success in paring down its heavy debt
load.
The U.K.-listed miner posted a net loss of $813 million for the
first half of 2016, compared with an adjusted $3 billion loss for
the same period last year.
The loss included a $1.2 billion impairment for some of Anglo's
Australian coal assets, the company said.
Excluding some one-time items, Anglo posted a net profit of $698
million in the first half, down 23% from last year but better than
forecasts for a gain of $340 million, according to a survey of six
analysts by The Wall Street Journal. Anglo's shares rose 7% in
early trading Thursday.
"The balance sheet is stronger and we're in a much better
position than we were six months ago," Anglo American Chief
Executive Mark Cutifani said on a media conference call
Thursday.
Using a rugby metaphor, he said Anglo is "at half time, and
we're in the lead, [but] we're facing off against the All Blacks,"
a reference to New Zealand's world-beating rugby team. Despite such
a formidable obstacle, "I wouldn't bet against us," he said.
Soft commodity prices weighed on sales, however. Anglo's revenue
fell 20% to $10.6 billion during the period from last year. Net
debt fell to $11.7 billion as of June 30, down from $12.9 billion
at the end of 2015, the result of cost cuts and volume increases,
among other things.
The company earlier this year said it expects to sell $3 billion
to $4 billion in assets this year it launches a sweeping
restructuring plan. Anglo expects its net debt to fall to less than
$10 billion by year-end, reflecting the $1.5 billion sale of its
Brazilian niobium and phosphate assets earlier this year and other
asset disposals.
Diamonds were a big driver of first-half earnings, accounting
for 42% of earnings before interest and taxes. A 29% increase in
volumes sold over the same period last year provided a boost to
results at Anglo's De Beers unit. Mr. Cutifani cautioned that
second-half results aren't likely to be as robust.
Cost cuts and favorable currency moves in countries such as
South Africa, where De Beers has big mining operations, provided a
boost to earnings, the company said. Bruce Cleaver, the newly
appointed CEO of De Beers, said in an interview the company expects
to be able to continue to trim costs while maintaining ambitious
production, exploration and other investment goals.
"We've caused no structural damage to the business by cutting
costs," he said. "We'll continue to work hard on that."
Still, Anglo continues to struggle with low prices for the other
commodities it mines and sells amid ongoing soft demand from China.
While earnings at De Beers were slightly higher than last year's
first half, they fell in every other asset category, including
platinum, copper, nickel, iron ore and coal. Overall earnings
before interest and taxes slid 27% in the first half from last
year.
In February, Anglo said it plans to exit coal entirely and to
pare back its exposure to iron ore, even floating the potential
sale of its massive Brazilian iron-ore mine Minas Rio. Mr. Cutifani
said the company plans to reduce its mining businesses to 16 from
45, sales that will help cut its staff by more than half.
Anglo in 2015 reported a loss of $5.6 billion, the result of a
steep dive in commodity prices in the second half of the year as
well as $3.8 billion in impairment charges.
Write to Scott Patterson at scott.patterson@wsj.com
(END) Dow Jones Newswires
July 28, 2016 05:00 ET (09:00 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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