Anglo Shelves Asset Sales After Profit Doubles on Cost CutsBy and
Nickel, Australia coking coal among mines no longer for sale
Net debt of $8.5 billion is below company’s previous target
Anglo American Plc canceled a plan to sell several assets after earnings doubled last year on cost cuts and rising metal prices.
Nickel mines in Brazil and coking coal assets in Australia will no longer be sold, Chief Executive Officer Mark Cutifani said in an interview on Bloomberg Television on Tuesday. The company is “happy to stick with” its iron ore and export coal mines in South Africa, he said.
During the depths of the commodities crisis, when investors were questioning whether Anglo could survive, the company unveiled a dramatic turnaround plan to unload assets and pay down debt. As raw material prices steadily climb higher, those fears are long gone and the company is now dialing back its restructuring plans.
“We do not need to sell assets to address the balance sheet issues, it’s done,” Cutifani said. “If any assets go from here, it will be on the basis of a portfolio adjustment.”
The stock dropped 0.7 percent to 1,350.50 pence as of 11:10 a.m. in London.
Bigger profits and a stock price that tripled last year show Anglo’s turnaround program has worked. Costs dropped by a third in the past three years and revenue per employee has increased 41 percent, Cutifani said.
The company reported underlying earnings of $1.72 a share in the year ended Dec. 31, compared with 0.64 cents a year earlier. That exceeded the average analyst estimate of $1.39 a share.
Net debt was reduced to $8.5 billion, well below its $10 billion target. Anglo plans to keep reducing debt, with a new goal of below $7 billion this year, Cutifani said.
Anglo also aims to return to an investment-grade credit rating this year and pay a dividend in 2018, he said.
To stay afloat in 2016, Anglo pledged to shrink its business to a fraction of its former size by reducing exposure to bulk commodities. With iron ore up 80 percent in the past year and thermal coal up 66 percent, the two commodities were the biggest contributor to Anglo’s profit last year.
Anglo is aiming for a portfolio of 30 core assets, down from 40 today. Last year, the company said it would focus on only 16 core mines.
While Anglo has no immediate plans to sell major South African assets, including an almost 70 percent stake in Kumba Iron Ore Ltd., it will listen to proposals from potential suitors, Cutifani said. The company plans to continue working to sell coal assets that supply state power utility Eskom Holdings SOC Ltd.