Anglo American Doubles Profit Amid Commodities Boom -- 3rd Update
February 22 2018 - 07:35AM
Dow Jones News
By Scott Patterson
Buoyed by booming commodity prices and lower costs, Anglo
American PLC doubled its net profit in 2017, slashed debt and said
it would pay its highest dividend in a decade.
Anglo American's results mark a decisive turnaround from two
years ago, when the British mining giant, hammered by plunging
commodities and hamstrung by a debt load of nearly $13 billion,
began a dramatic corporate downsizing. Now the company is raking in
cash and promising to maintain firm discipline on spending, a
consistent theme among miners burned by the sharp downturn.
Chief Executive Mark Cutifani said Thursday that Anglo American
would avoid a return to the big-spending ways that plunged the
company--and most of its peers--into hot water two years ago.
Instead, Mr. Cutifani said, the company will focus on continuing to
reduce debt and return cash to shareholders.
"Growth has been a dirty word in our industry," Mr. Cutifani
said on a call with reporters.
Anglo's cautious stance is typical in today's mining industry.
Companies are hunkering down, focused on cutting debt, paying out
dividends and holding production in check.
The frugal mantras are novel in an industry once known for its
extravagant ways. Miners plunged about $1 trillion into
expansionary mining projects during the China-fueled commodity
supercycle that began about a decade ago, according to estimates by
Sanford C. Bernstein.
"The lessons of the last 10 years sit very comfortably with us,"
Mr. Cutifani said. He said the business is focusing on "small-scale
capital, quick-return projects" such as adding a new ship to its
underwater diamond-mining project offshore of Namibia.
Like other miners, Anglo American's fortunes have been tied to
rising commodity prices. Over the past 12 months, copper prices
have gained about 20% and coal has climbed about 12%, driven by
solid demand from China.
Anglo American's net profit for the year ended Dec. 31 was $3.17
billion, up from $1.59 billion in 2016. The company reported solid
gains across its commodity portfolio, including copper, platinum,
iron ore and coal.
However, despite the big jump, profit missed analyst forecasts
of $3.25 billion, according to data provider FactSet. Shares in the
company traded down about 4% in morning trading in London after
initially opening 3% higher.
Still, Anglo's strong cash returns gave it room to declare a
final dividend of 54 cents a share, making an annual payout of
$1.02 a share--its biggest since 2007.
Large miners have consistently rewarded shareholders with big
dividend payouts this year, rather than announcing eye-popping new
projects. BHP Billiton Ltd. declared a dividend of 55 cents a
share, up from 40 cents a year earlier. Rio Tinto PLC promised a
record full-year dividend of $2.90 a share, up from $1.70 in
2016.
The cautious stance even has deal mavens such as Glencore CEO
Ivan Glasenberg holding fire on the megamergers that were a
hallmark the previous commodity cycle. In 2013, Glencore merged
with Xstrata in an industry-record $29.5 billion deal.
"If nothing becomes available, if we don't get things at the
right price, we won't do it," Mr. Glasenberg said on an earnings
call this week.
Write to Scott Patterson at scott.patterson@wsj.com
(END) Dow Jones Newswires
February 22, 2018 07:20 ET (12:20 GMT)
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