24th Jul 2015 09:48
LONDON (Alliance News) - Anglo American PLC on Friday said it swung to a pretax loss in the first half of 2015 after recording a substantial USD3.5 billion impairment, driven by the fall in commodity prices, and said it is aiming to cut 35% of its workforce as part of its cost-saving initiative.
Anglo American shares were up 2.5% to 826.80 pence per share, the second best performer of the FTSE 100 after it dropped to a near 13-year low of 804.9 pence at the close on Wednesday.
The FTSE 100-listed multi-commodity miner reported a USD1.9 billion pretax loss in the six months ended June 30, swinging from a USD2.94 billion profit a year earlier, as revenue tanked 17% to USD13.34 billion from USD16.14 billion due to falling commodity prices.
Earnings before interest, tax, depreciation and amortisation came in at USD3.28 billion, a drop of 24% from USD4.32 billion a year before.
Anglo American declared an unchanged interim dividend of 32 cents per share.
The pretax loss was caused by "commodity price-driven impairments" totalling USD3.5 billion, of which USD2.9 billion was attributable to Minas-Rio mine in Brazil. That impairment was in line with expectations as it warned of a significant impairment earlier in July.
The Minas-Rio mine has been plagued by delays and cost overruns since the company purchased it in the financial year that ended in 2008.
"The first six months of 2015 have seen significant further weakness and ongoing volatility in the prices of the bulk commodities, particularly iron ore and metallurgical coal," said the company.
Anglo American said it is aiming to make USD1.5 billion worth of operating and indirect cost reductions and productivity gains between June 2015 and the end of 2016.
The company said it would reduce costs "through the reduction" of its 6,000 overhead and indirect job roles. It said it will cut those jobs by 46%, some of which will come as a result of it selling its assets.
"Post asset sales, we expect to have reduced our number of assets from 55 to 40 and reduced total employees by 35%, while maintaining copper equivalent production. As a result, and following the asset disposals and further business improvement, our underlying Ebitda margin of 25% in the first half of 2015 would increase to 35% on a like-for-like basis, representing a 40% improvement off a substantially lower cost base," said Chief Executive Mark Cufitani.
Net debt increased to USD13.5 billion at the end of June from USD12.9 billion at the end of December. However following the completion of the sale of its 50% stake in Lafarge Tarmac Holdings Ltd, which sells construction products in the UK, net debt has now fallen to USD11.9 billion.
The USD1.6 billion sale of the Lafarge Tarmac stake, completed this month, pushes Anglo American over the halfway mark toward its target of raising a total of USD3.0 billion from asset sales. Anglo American sold its stake to French partner Lafarge SA, which in turn will sell the entire business to CRH PLC as part of the regulatory remedies for Lafarge's merger with Switzerland's Holcim Ltd.
Anglo American said the proceeds from asset sales, when combined with the planned USD1.0 billion reduction in capital expenditure in 2016, will result in the company further lowering its net debt, which it is aiming to lie between USD10.0 to USD12.0 billion.
Operationally, Anglo American said its performance was "encouraging across the majority of businesses".
Total coal production from Australia and Canada increased 4% year-on-year despite losing around 900,000 tonnes from the Peace River coal mine after it was placed on care and maintenance. The Minas-Rio mine produced 3.0 million tonnes of coal on a wet basis in the period after commencing production in the fourth quarter of 2014.
Total equivalent refined platinum production increased by 55%, primarily due to the non-recurrence of the industrial action which took place in 2014.
However, nickel production decreased by 34% as a result of the furnace rebuild at Barro Alto in Brazil, whilst copper production decreased by 10% largely as a result of the shutdowns of the processing plants at Los Bronces in Chile to manage water reserve levels.
Anglo American spent GBP71 million on exploration expenditure in the first half, representing a decrease of 5%, following reductions in diamonds, iron ore and nickel exploration costs. Decreases are mainly attributable to an overall reduction in drilling activities.
By Joshua Warner; [email protected]; @JoshAlliance
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