20th Apr 2005 13:00
Anglo American PLC20 April 2005 News Release 20 April 2005 Anglo American plc - Annual General Meeting 2005 Address to shareholders by the Chairman and Chief Executive At Anglo American plc's Annual General Meeting for shareholders in London today(20 April 2005), Sir Mark Moody-Stuart, Chairman, and Tony Trahar, ChiefExecutive, made the following remarks: Sir Mark Moody-Stuart: "Ladies and Gentlemen, 2004 was the best year of growth in the global economyfor over 20 years. This recovery underpinned strong commodity prices with thematerial-intensive growth in China being a key determinant. Nonetheless, thesestrong US dollar prices were partially offset for Anglo American by thecontinued weakness of the dollar, especially relative to the South Africa rand,the Euro and the Australian dollar. Against this background, and at a point inthe cycle when the greatest beneficiaries tend to be producers of bulkcommodities, the board were pleased with the record, 59%, increase in AngloAmerican's headline earnings for 2004. Taking into account the record results, and in line with the board's policy ofprogressively increasing dividends, the board is recommending an increase in thefinal dividend of 12 cents from 39 cents to 51 cents a share. If approved byshareholders, this will result in a 30% increase in the total dividend for 2004to 70 cents a share, covered 2.7 times by earnings. I should also say that whilst commodity prices and exchange rates will alwayshave a crucial influence over our results, the undoubted benefits of the cyclewere amplified by: the substantial changes engineered in our portfolio over thelast five years; by the strong internal growth opportunities which the Group hasgenerated; and by an ambitious programme of cost savings. As the Chief Executive will outline, the results reflect our improvedgeographical diversity - with the Americas contributing over 40% of headlineearnings - and the value-adding enhancements made to our asset base. Managementhave shown restraint in their acquisition strategy and they have realised strongvalue creation, for example, from the De Beers transaction; from the acquisitionof the former Disputada copper assets in Chile and the purchase of stakes inCerrejon Coal and Kumba Resources and from paper and packaging assets such asthe Syktyvkar mill in Russia. I do not doubt the commitment of management toacquisitive opportunism - but equally in such a cyclical business we are wise tobe cautious about not over-paying now and repenting at leisure. Although we will be addressing elections to the board in detail a little later,I should like to pay tribute to three retiring Directors and to explain thethinking behind the nominations that have been put before you. First, I shouldlike to thank Bill Nairn, who retired as Group Technical Director at the end of2004. He played a key role in reshaping our technical disciplines and has givenleadership to our unrelenting drive to improve our safety performance. Amongstour Non-Executive Directors, two have decided not to seek re-election - SirDavid Scholey and Goran Lindahl - both of whom have brought their significantinternational business experience to our deliberations and made an importantcontribution to the work of the board. I thank them both for their insights. Tony Lea, our Finance Director, will retire from the board at the end of 2005after long and distinguished service with the Group. I will say more about himat next year's meeting and he will continue to be available as a consultant. Hewill hand over as Finance Director to Rene Medori in September. Subject toapproval, Rene will join the board in June from his current role as FinanceDirector of BOC plc. Barry Davison will also retire from the board in December,but will continue for a further period as Chairman of Anglo Platinum and adirector of a number of Group companies. As part of our development of our senior executives we have also proposed thattwo new Executive Directors should join the board: Simon Thompson and DavidHathorn. Simon Thompson has been the architect of the re-shaping of our BaseMetals business unit - which became by far the biggest contributor to earningsin 2004 - and is now the Chairman of Base Metals, Industrial Minerals and of theExploration Council. David Hathorn is the Chairman and Chief Executive of ourPaper and Packaging businesses and has been the strategist behind its rapidexpansion, especially in Europe. We are also proposing an additional independentNon-Executive for election to the board - Ralph Alexander. He is an Americancitizen who currently Heads BP Petrochemicals and brings with him extensiveexperience of international energy businesses. Ladies and Gentlemen, during 2004 I visited Anglo American operations incountries as disparate as South Africa, Mozambique, Russia and China - andcovering almost all of our business units. I was very impressed by theprofessionalism of the people whom I met, the consistent emphasis on safety, thezest for innovation and problem solving and their commitment to improving ourimpacts on local communities. We increasingly expect our managers not only to uphold high standards oftechnical and commercial performance, but also to be adaptable and to embracethe new skills that are implied by our commitment to sustainable development.We have made significant strides in improving the management and development ofour employees. We must ensure that we bring the same rigour andprofessionalism to managing our human resources as we do to managing our bigcapital assets. Hence there is an increasing emphasis, throughout theorganisation, on entrenching a performance culture and a focus - at leastannually - on personal development and talent management. You will also havenoted, from our recently published 'Report to Society', our strong emphasis onimproving communication with employees, on training and the big increase in thenumber of apprentices and bursars whom we are supporting. Taken together theyamount to a substantial investment in our talent pipeline. In a year ofexceptional performance I should also like to record the thanks of the Board toour employees at all levels for their work and commitment. A key attribute that we look for from our managers is leadership. I saw this inmany places but most notably at our Goedehoop colliery in South Africa. This isa strong performer in relation to production and profitability but it is also aleader in the battle against HIV/AIDS and - in particular - to get employees toconfront their HIV status through Voluntary Counselling and Testing - or VCT.By the end of 2004, the level of participation in VCT at Goedehoop stood at over90% and of those on anti-retroviral therapies all were able to do normal workand to continue supporting their families. Moreover, I understand that at thebeginning of the year they turned the testing counter back to zero and already,in the first quarter, one third of employees have come forward to repeat theirtest. I also understand that such is the focus on the HIV issue, the level ofinfection at Goedehoop seems to be being contained. We need to spread thislevel of performance to our other operations in Southern Africa. AngloAmerican's leadership role on HIV is not only part of our commitment to making adifference to the societies in which we work but also a prudent investment inthe preservation of the human capital within our business. The natural resources and mining businesses have a significant operationalenvironmental and social 'footprint'. This carries with it a responsibility tominimise our negative impacts on the societies around us and to accentuate ourpositive impacts. At last year's meeting I spoke about the ExtractiveIndustries Review and the role of mining as a trigger for wider development. TheWorld Bank has shown considerable skill in using the outcomes of the Review as astarting point basis for the revision of its Performance Standards, whilstrejecting some of the more extreme options contained in the Salim Report. Butduring the rest of this year, with the focus of the G8 Summit being on povertyalleviation in Africa and the UN Review Conference of the Millennium DevelopmentGoals taking place in September, there will be continuing scrutiny of business'role in development. There are undoubtedly dangers of some groups seeking topush onto the shoulders of companies, responsibilities that are more properlymatters for governments. But we also have a clear interest in the healthydevelopment of the countries and communities where we do business and in showingthat the responsible exploitation of natural resources is an opportunity ratherthan a curse. Thus at an international level we have been strong supporters of the ExtractiveIndustries Transparency Initiative - to help ensure that the tax revenues thatwe generate find their way to legitimate purposes. At a national level withinSouth Africa we are playing an active and committed role in the transformationprocess required to address the continuing legacies of the apartheid era. Thisinvolves not only opening up equity participation for black economic empowermentcompanies but also seeking to spread opportunities through our purchasingstrategies, local business development and social investment. This work is beingably led by Lazarus Zim, the newly-appointed Chief Executive of Anglo AmericanSouth Africa. Moreover, at a community level, our innovative Socio-Economic Assessment Toolbox- or SEAT - process is making a big difference in ensuring that our operationshave a rounded understanding of the concerns and priorities of the communitiesaround them. SEAT assessments are in the field at about 35 locations around theglobe in nine countries. Earlier this month, together with Karel van Miert andDavid Challen, I visited our paper and packaging plant at Syktyvkar in Russia tobe briefed on their application of the methodology. What has resulted is abetter understanding of risk and an action plan in areas like health monitoring,local business development and greater transparency in tendering processes. Ishould emphasise that this is not window dressing - understanding the social andpolitical dynamics of the societies where we operate is fundamental tomaintaining our licences to operate and our future access to resources. I should like at this point to thank on your behalf those who chair committeesof the board, David Challen - audit committee, Rob Margetts - remuneration, FredPhaswana - nomination and Chris Fay - Safety and Sustainable Development. Theirwork and comprehensive reports to the full board are a significant contributionto the effectiveness of your board. But all the non-executive directors areinvolved during the year in working visits to sites. Apart from the Russianvisit just mentioned, the Safety and SD committee and other members of the boardvisited Mondi operations at Richards Bay and Kumba operations at the Sishen minein conjunction with our annual board strategy meeting in South Africa, as wellas a Safety and SD committee visit to operations in Chile and Brazil. GoranLindahl also visited our operations in Zimbabwe. These visits, normally combinedwith other travel, are an excellent way of directors becoming acquainted notonly with our operations, but with the people who run them. We also find thatthe visits contribute greatly to corporate cohesion and morale in the sites. I will now ask the Chief Executive to report on the performance of AngloAmerican's businesses during 2004 and on the prospects for the current year. Tony Trahar: "Thank you Chairman. In 2004, our Group experienced generally buoyant globaleconomic conditions, which were reinforced by burgeoning Chinese demand, andresulted in high US dollar prices for almost all our mining products, albeitoffset to some extent by the strength of the Rand and the Euro, which adverselyaffected our South African and European export businesses. The Group continuedwith its expansion programme and a number of new projects were commissionedsuccessfully during the year. Overall we were very pleased to report recordprofits of $2.69 billion and earnings per share up 57% to $1.88 per share. Cost savings and leveraging our knowledge At the time of our results announcement I said that 2004 was a year 'spent inthe engine room' - strengthening the efficient running of our asset base. Weachieved record cost and efficiency savings of $554 million and have set afurther target of $350 million for 2005. Management and structuralreorganisations have been implemented in the Platinum, Paper and Packaging andIndustrial Minerals businesses. We are also seeking to optimise the benefits ofbeing a global Group across all our operations, including the areas oftechnical, procurement, information technology and sustainable development. Overthe next 18 months we will, for example, be establishing a Group wideinformation Portal. This will not only improve communication but also provide aplatform for faster and easier sharing of information and best practice withinand between business units and will assist collaborative problem solving. Webelieve that there is significant value to be unlocked through the faster spreadof 'innovation' and 'best practice'. We are also improving talent managementacross the Group in order to create more attractive career paths for highpotential managers. Another cross-Group project will see a drive to improve energy efficiency. Weconsume energy equivalent to a medium-sized country like Chile or Finland and webelieve that there are cost, efficiency and environmental justifications for amajor focus on improving performance in this area. Acquisitions, Disposals and Projects During 2004, disposals worth $2.1 billion were completed. These included thesale of our 20% stake in Gold Fields for $1.2 billion - yielding a profit ofsome $464 million. Other disposals included the sale of Hudson Bay Mining andSmelting for $257 million and our 49% stake in Terra Industries for $255million. We continue to evaluate further disposals as part of optimising ourasset base. In terms of acquisitions, the $1.4 billion merger between AngloGold and AshantiGoldfields was completed, strengthening AngloGold Ashanti's resource base andproduction capacity. Anglo Paper and Packaging also acquired the 30% outstandinginterest in Frantschach and the Bauernfeind packaging businesses in CentralEurope for a combined cost of $822 million. Having spent $15 billion on some very attractive acquisitions over the last sixyears, we are cautious about pursuing an aggressive acquisitions strategy atcurrently high valuations in our precious commodities and metals and mineralsbusinesses. We are, however, fortunate in having one of the strongest projectpipelines in the industry. We have some $4.7 billion in approved and a further$8 billion in, as yet, unapproved projects across all our business units andgeographies. We have built a track record of value enhancing acquisitions over the last fiveyears and have also greatly improved the quality of our asset base. We havesignificant greenfield or brownfield expansions underway in most of ourbusinesses around the world. Moreover, we have a solid record of sound projectmanagement which last year involved ramping up the Skorpion zinc mine in Namibiato 95% of design capacity and successfully commissioning a number of projectsincluding the Collahuasi Rosario project in Chile, the new Buxton cement plantin the UK and the Ruzomberok pulp and paper project in Slovakia. New Geographies No one with an interest in commodity markets can fail to be aware of the pivotalrole of Chinese demand. Indeed changes in sentiment regarding the perceivedrobustness of Chinese growth were a source of significant volatility during2004. China is already a significant market for our commodities. We are alsoactively looking for investment opportunities within China. This has involvedlearning about how to do business effectively and in accordance with ourBusiness Principles through a number of relatively small investments inquarrying, manufacturing, paper making and zinc refining. We are looking atfurther opportunities in coal and platinum. In this context, we are particularlyencouraged by the increasing emphasis, on the part of the Chinese Government, onimproving mine safety and environmental standards. Turning to Russia, during 2004 we opened a representative office in Moscow andare looking to build upon our highly successful investment in the Syktyvkar millin the Komi Republic. We are also beginning to look for opportunities in India. Significant Business Unit Developments A major achievement of our strategy has been to achieve a good geographical andproduct balance. I believe this has been achieved and, in each of the last fouryears, a different business unit has been the major contributor to earnings andlast year, for the first time, South America was the largest contributor. Thetwo biggest sectoral contributors in 2004 - Base Metals and Ferrous Metals andIndustries were both poor performers only two years earlier. There is a great deal of information set out in our Annual Review, Annual Reportand Report to Society. I would like to highlight a few significant developments. In Base Metals, the performance of the Minera sur Andes operations in Chile hasbeen very pleasing, providing a cash flow return last year of some 48% on ourinvestment. I was in Chile last week and was most impressed by the progressbeing made by our teams in that country. At Los Bronces mine we have addedsignificantly to the measured and indicated resources and we intend to completea de-bottlenecking project at the Chagres Smelter before the end of the year.The $80 million El Soldado pit expansion project is also withinbudget and on time. Within Ferrous Metals, we continue to work with interested parties to establisha way forward for our involvement in Kumba Resources which meets our iron oreobjectives and produces significant black economic empowerment opportunities. Weare pleased by Kumba's agreement with Transnet on the expansion of rail links tofacilitate iron ore expansions in the Northern Cape. Turning to diamonds, 2004 saw significant developments that will underpin DeBeers' sustainable growth. Firstly, a settlement was reached with the USDepartment of Justice of a long-standing case in respect of industrial diamonds.This will normalise the way in which De Beers does business in the UnitedStates. Secondly, in December, De Beers reached agreement with the Government ofBotswana on a 25 year renewal of all four of its mining leases in Botswana. In relation to Coal, we are increasingly engaged in the debate around climatechange issues. I do not doubt that coal will continue to play an important partin meeting the energy needs of much of the developing world. We believe thatsuch growth will be increasingly dependent upon progress being made with cleancoal technologies and we are working together with our customers in this area. In December, Anglo American and Mitsui announced approval for the $653 millionDawson coal project in Australia. In September, agreement was reached betweenAnglo Coal and Kumba Resources that may lead to the development of a major newcoking coal mine in central Queensland while in South Africa new mines are beingdeveloped at Mafube and Isibonelo and we are jointly investigating, with BHPBilliton, the proposed expansion of coal resources in the Western Complex. In Platinum, progress is being made in addressing significant operationalchallenges against a background of tough currency conditions and rising costs.Action is also being taken to address the difficult geological conditions atAmandelbult and Modikwa - although the benefits of this are unlikely to beapparent before the second half of the year, a number of expansionary andmine-life extension projects are well underway. Safety Chairman, you have already spoken about a number of issues of relevance to thesustainable development of the countries and communities in which we work. Iwould like to focus specifically, however, on safety. We were deeplydisappointed that in 2004 there were 49 fatalities at our directly managedoperations - five more than in the previous year. This marks the first reversalin five years in an otherwise consistently improving trend. Whilst we wereencouraged by a 23% drop in our lost time injury frequency rate, the ExecutiveBoard is increasing the Group's efforts to improve safety. Tonight I will bepresenting safety awards to our best performing operations as a celebration ofsuccess and as a means of highlighting best practice. We also place a consistentemphasis on visible felt leadership in enforcing our safety 'Golden Rules' andon encouraging employees to take responsibility both for the safety ofthemselves and for those with whom they work. In addition this year there willbe a clear focus on 'near miss' incidents and on improving safety performanceamongst our contractors - who account for over half of our total fatalities. Outlook In closing I would like to update shareholders regarding the outlook for therest of 2005. The world economy is expected to continue growing, albeit at asomewhat slower rate. Although there are certainly grounds for concernregarding the volatility of currencies, the dollar prices for many of our miningproducts continue at high levels and these should more than offset the adverseimpact of the weak dollar on some of our export businesses. Although we areexperiencing upward pressure on costs in our operations every effort will bemade to contain these. The Group is generating substantial cash flows and isinvesting in a number of exciting projects which will generate attractivereturns. We also have a strong balance sheet, with considerable capacity topursue further opportunities when they arise. I believe that our geographic andproduct diversity, together with our expanding asset base, will continue tounderpin our results in 2005. Thank you." For further information: Anglo American - London Investor Relations Media RelationsCharles Gordon Kate AindowTel: +44 (0)20 7968 8933 Tel: +44 (0) 20 7968 8619 Anglo American - JohannesburgInvestor Relations Media RelationsAnne Dunn Marion DixonTel: +27 11 638 4730 Tel: +27 11 638 3001 Notes to Editors: Anglo American plc is one of the world's largest mining and natural resourcegroups. With its subsidiaries, joint ventures and associates, it is a globalleader in platinum group metals, gold and diamonds, with significant interestsin coal, base and ferrous metals, industrial minerals and paper and packaging.The group is geographically diverse, with operations in Africa, Europe, Southand North America, Australia and Asia. (www.angloamerican.co.uk) Pictures: High resolution images can be downloaded by the media at www.vismedia.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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