Anglo American is back in the black with its first profit in years due to rebounding commodity prices. The global mining giant also confirmed today it will resume dividend payments by the end of 2017.
For the full-year, the miner posted profit before tax of $2.6bn (£2.1bn) up from a loss of $5.5bn the previous year while revenue essentially stayed flat, increasing one per cent to $23.1bn.
The group's underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 25 per cent to $6.1bn despite a three per cent drop in average prices
Net debt fell by 34 per cent to $8.5bn, well below Anglo American's target of reducing debt to $10bn by the end of 2016.
Shares in the FTSE 100-listed miner lifted about one per cent at the market open but are now down 0.81 per cent at 1,349p.
Why it's interesting
Anglo American said it will resume dividend payments by the end of 2017. In late 2015, the miner scrapped its dividend to conserve cash during a commodities rout, but now metals prices are back on the rise.
The firm has also changed its tune on asset disposals. Anglo planned to condense its portfolio of assets to focus on core commodities of platinum, copper and diamonds.
Cheif executive Mark Cutifani said "asset disposals for the purposes of deleveraging are no longer required".
He added: "We therefore retain Moranbah, Grosvenor and our nickel assets, ensuring that they continue to be optimised operationally to contribute cash and returns, while being allocated capital to both protect and enhance value." It will also keep its Kumba Iron Ore site, which was under review.
Anglo had previously said it would cut its assets to just 16 core commodities, but now the plan is to reduce its portfolio from about 40 assets to 30.
"If any assets go from here, it will be on the basis of cleaning up as we continue to improve the quality of the overall portfolio and ensuring we're robust," Cutifani told reporters.
Yesterday, reports said Anglo American bosses are set to lose out on millions in share awards as they plan to redraft remuneration rules following a shareholder revolt last year.
What Anglo American said
Cheif executive Mark Cutifani said
"Despite our significant progress, it is critical that the lessons of recent years are applied and, although there is confidence in the long-term outlook for our products, the balance sheet must be able to withstand expected price volatility in the short to medium term.
"We will continue to refine our asset portfolio over time to ensure our capital is deployed effectively to generate enhanced returns. Our priority for 2017 is to deliver further productivity improvements while maintaining capital and cost discipline in order to be in a position to resume dividend payments for the end of 2017, and to restore an investment grade credit rating.
What analysts said
City Index analyst Ken Odeluga said shares fell today while investors wait for more details on the group's intention to upgrade its mining asset portfolio.
Odeluga said: "The question in shareholders minds is ‘how sustainable is the pace of improvement?’ particularly with low hanging fruit in terms of costs and debt now largely out of the way."
George Salmon, equity analyst at Hargreaves Lansdown said the company is "definitely looking more stable", but some investors would have been hoping it would show more commitment to its plans to become a leaner organisation focused on just three core assets.