Date: Friday 27 Jul 2012
First half profits plunged at Anglo American but that did not stop the mining colossus from bumping up the interim dividend.
Profit before tax in the six months to the end of June more than halved to $2,942m from $6,571m the year before, while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 31% to $4,942m from $7,112m.
"As a result of markedly weaker commodity prices experienced during the first half of the year, in addition to ongoing input cost pressures across the portfolio, Anglo American reported an operating profit of $3.7bn, a 38% decrease," said Cynthia Carroll, the Chief Executive Officer of Anglo American.
Adding to the company's woes, it has encountered legal hurdles on its Minas-Rio iron ore project in Brazil. Sorting out licensing issues with the project, which is forecast to produce 26.5m tonnes per annum in its first phase of development, is taking longer than anticipated, resulting in the opening date of the mine being pushed back.
"Despite being granted further major licences during the period, we continue to face legal challenges to those licences awarded by the various regulatory bodies," explained Carroll.
"We have deployed additional resources to strengthen the project management and permitting teams to resolve these issues but, until they are cleared, we cannot as yet with confidence determine the date for first production. As a guide, however, if we clear all the current impediments by the end of 2012 and experience no additional major unexpected interventions, we anticipate being in a position to ship our first ore in the second half of 2014," Carroll reported.
John Meyer at stockbroker Fairfax, said the delay would have an impact on 2013 numbers. Forecasts for 2013 have already been scaled back but may need to be trimmed some more, Meyer suggested.
Group revenue, including contributions from associate companies, fell by one-tenth to $16,408m from $18,294m in the first half of 2011.
Anglo American, which late last year upped its 40% stake in diamond miner De Beers to take majority control, saw net debt at the end of June rise to $3,124m, up $1,175m from the year-end figure but lower than the $3,670m net debt it had at the end of June 2011.
However, pro forma debt, which takes into account the $6.3bn acquisition of an additional 40% interest in De Beers and the $0.6bn acquisition, announced earlier this week, of a 58.9% interest in the Revuboè metallurgical coal project in Mozambique, came in at $10.0bn.
Underlying earnings per share fell 47% to $1.38 from $2.58 the year before. The interim dividend has been hiked 14% to 32 cents from 28 cents last year.
"Short term prospects for the world economy have deteriorated in recent months. Alongside continuing structural problems in the Eurozone, economic growth has slowed in the US and major emerging economies, such as China, India and Brazil, albeit from high levels. Yet we see more resilient trends in the medium to longer term. Long term supply constraints across many commodities, combined with continuing industrialisation and urbanisation trends in key growth markets should provide considerable support for prices," Carroll claimed.
The plunging profits, the weakness of commodities markets and the delays in Brazil all contributed to the shares falling sharply to 1,884.5p from 1,964p at Thursday's close.
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