Anglo American's share price falls as it unveils turnaround plan as earnings, revenues slump against challenging commodities environment

 
Catherine Neilan
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Cutifani said the plans would "create the new Anglo American" (Source: Getty)

Anglo American's share price fell more than 6.7 per cent this morning as the miner unveiled a major turnaround plan that it claims will create a "new" business, in light of some pretty dismal full year results.

The figures

Underlying EBIT fell 55 per cent to $2.2bn for the year to 31 December, while underlying earnings slumped an even greater 63 per cent to $827m. Underlying EBITDA dropped 38 per cent to $4.85bn.

Group revenues dropped 26 per cent to $23bn, and the group made a pre-tax loss of $5.45n, widening hugely from last year's $259m loss.

The group is still recommending a dividend, albeit far reduced from last year, of 32 cents per share, down from 85 cents for the 2014 financial year.

Anglo American Anglo American | mobile image

Why it's interesting

Anglo American - which is facing a possible demotion from the FTSE 100 - is under pressure to tackle these problems and today's announced a series of measures to show that it is not standing still.

Chief executive Mark Cutifani has announced "detailed and wide-ranging measures to sustainably improve cash flows and materially reduce net debt, while focusing on our most competitive assets to create the new Anglo American, positioned to deliver robust profitability and cash flows through the cycle."

That includes ramping up its asset disposal programme to $5bn-$6bn by the end of this year - from which it will raise $3bn-4bn, on top of the $2.5bn raised last year. Assets under review include Kumba Iron Ore, which could either be spun out from the business or exited entirely.

Anglo wants to reduce the number of assets it owns from 55 at the end of 2014 to 16, refocusing around three core areas: diamonds, platinum and copper.

The miner also wants to reduce net debt to less than $10bn (pro forma) by end of 2016 and generate $1.9bn of EBIT benefit this year from additional cost and productivity improvements, up from the original target of $800m.

Capex is also being slashed by 25 per cent to less than $3bn: this will be further reduced by $500m in 2015.

What Anglo American said

Chief executive Mark Cutifani said: "The global economic environment and its impact on prices have presented the industry with significant challenges during 2015.

"Against the strong headwinds of a 24 per cent decrease in the basket price of our products for the year as a whole, our ongoing intense focus on operational costs and productivity delivered a $1.3bn EBIT benefit in the year, providing some mitigation. Overall, our copper equivalent unit costs reduced by a further 16 per cent in US dollar terms, representing a 27 per cent total reduction since 2012.

"Our portfolio transformation is well on track, from c.65 assets in 2013 to 45 today... Together with operational and cost improvements, significant capex reductions and making the tough decisions with some of our more marginal assets, we have been able to maintain our net debt and liquidity levels at $12.9bn and $14.8bn respectively, despite our $4bn of capital commitments for 2015 and the $2.4bn net EBIT erosion from lower prices and weaker producer country exchange rates.

"We have made significant progress, albeit in an environment that has been deteriorating at a faster pace. Today we are announcing detailed and wide-ranging measures to sustainably improve cash flows and materially reduce net debt, while focusing on our most competitive assets to create the new Anglo American, positioned to deliver robust profitability and cash flows through the cycle."

In short

Investors are already piling pressure on the business to act and will want to see results from these measures.

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