Anglo Said to Plan Dividend Cut to Combat Commodities Slump

Updated on
  • Anouncement could be made as soon as Tuesday's investor day
  • Anglo is second-worst performer this year in FTSE 100 Index

Anglo American Plc plans to reduce its full-year dividend after metals prices fell to the lowest in about six years, according to two people with knowledge of the company’s plans.

The producer may announce the cut as soon as Tuesday, when it hosts an investor day in London to update shareholders on plans to combat the China-led commodities downturn, said the people, who asked not to be identified because the plans haven’t been announced.

The London-based miner also plans to move its dividend to a ratio-based payout, said the people. A dividend payout ratio allows companies to adjust payments as profits rise or fall. It differs from the current approach of the world’s two biggest miners, BHP Billiton Ltd. and Rio Tinto Group, which have pledged to keep increasing their dividends.

Speculation that Anglo may follow rival Glencore Plc in cutting its dividend has increased as the largest mining companies contend with the rout in raw-material prices. Anglo’s stock slid 25 percent last month on investor concerns about its ability to weather the slump in all the commodities it mines, from iron ore to platinum and copper to diamonds.

An Anglo spokesman declined to comment on the dividend plans. The Wall Street Journal earlier reported that Anglo plans to cut the dividend and change to a ratio-based payout, citing unidentified people familiar with the matter.

Divided Outlook

Banks including HSBC Holdings Plc and Investec Plc have said they expect the company to scrap or cut its dividend. Anglo could go further with a new round of cost cuts or asset sales, according to HSBC.

Chief Executive Officer Mark Cutifani has met with investors to make sure there’s no repeat of 2009, when his predecessor, Cynthia Carroll, surprised the market by scrapping Anglo’s dividend for the first time since World War II. That sent the shares tumbling 17 percent that day.

Anglo’s biggest investor, South Africa’s Public Investment Corp., said in September that it would back any initiatives by the company to ensure a sustainable future. Anglo surprised investors by maintaining its interim dividend in July, when Cutifani said the annual payout was under review.

Cutifani’s attempts to turn around Anglo’s fortunes have failed to stem the company’s slide. It has tumbled 67 percent this year, the second-worst performer in the U.K.’s FTSE 100 Index, after Glencore. The shares rose 1.5 percent to 392.65 pence by 10:36 a.m. in London.

Anglo is seeking to raise $3 billion by selling assets and is cutting jobs to trim costs. It has already raised almost $2 billion this year by selling its tarmac business and two copper mines in Chile. Net debt totals $11.9 billion and it has a long-term borrowing target of $10 billion to $12 billion. The dividend costs the company more than $1 billion a year.