3rd Feb 2005 07:30
Anglo American PLC03 February 2005 News Release 3 February 2005 De Beers Societe Anonyme ("Dbsa") today reported headline earnings for the yearended 31 December 2004 of US$652 million. Anglo American plc ("AA plc") arrives at its headline earnings in respect of DeBeers by accounting for the interests arising from the ordinary shares and the10% preference shares it holds in DB Investments ("DBI"). AA plc will therefore report headline earnings of US$381 million for the yearended 31 December 2004 from its investment in DBI, as reconciled in the tablebelow: Reconciliation of headline earnings for the year ended 31 December 2004 Ordinary Preference US$ million Total shares shares (3) • DBI headline earnings - IFRS (100%) 652 - - • GAAP adjustments (1) 65 - - • DBI headline earnings - UK GAAP (100%) 717 622 95 • AA plc's 45% ordinary share interest 280 280 - • Additional 3.65% ordinary share interest (2) 23 23 - • AA plc's portion of the preference shares (3) 78 - 78 • AA plc headline earnings 381 303 78 (1) The GAAP adjustments include the reclassification of the US$75 million preference dividends which are finance charges to Dbsa under IFRS, but are not treated as finance charges under UK GAAP. The GAAP adjustments also include -US$31 million relating to the mark-to-market of interest rate hedging contracts referred to in Dbsa's 2003 year end press release. Whereas in Dbsa's earnings, the full amount of US$70 million was charged against earnings in 2003, under UK GAAP US$31 million is charged against earnings in 2004, being the portion that was realised in the period. (2) As a result of De Beers' partial interest in Debswana Diamond Company (Proprietary) Limited (one of the shareholders in DBI), AA plc accounts for an additional 3.65% of DBI's post-tax earnings attributable to ordinary shares. As previously announced, the Debswana interest in DBI was ceded to the Government of the Republic of Botswana as part of a renewal of De Beers' mining licences in Botswana, signed on 20th December 2004. Accordingly, from this date AA plc no longer accounts for this additional 3.65% interest. (3) AA plc grosses up its preference share income to the operating profit level and accounts for its preference share interest in operating profit, exceptional items, investment income and net interest, tax and minorities, in the same way as it accounts for its ordinary share interest in these balances. This treatment is in accordance with FRS9, paragraph 33, which indicates that where preference shares are an integral part of the investor's long-term interest, it is appropriate to include the preference share interest with the ordinary share interest in determining the investor's overall share of an associate's results. The headline earnings attributable to AA plc's US$61 million preference share income are arrived at by adjusting for a proportion of exceptional items (-US$2 million) and goodwill amortisation (+US$19 million) in the same way as the ordinary share interest is calculated. On 30 June 2004, Dbsa redeemed 25% of its preference shares and on that date AAplc received US$175 million, representing 25% of its US$701 million preferenceshare interest. In the year ended 31 December 2004, AA plc received a total of US$250 million individends from DBI, consisting of US$68 million dividends on ordinary sharesrelating to FY 2003, a US$112 million interim dividend on ordinary shares for2004, US$35 million dividends representing the second US$35 million payment onpreference shares for 2003, and interim dividends totalling US$35 million onpreference shares for 2004. A US$90 million final dividend on ordinary sharesrelating to FY 2004 and the second US$26 million payment on preference sharesfor 2004 are expected to be received in early 2005. In the year ended 31 December 2003, AA plc received a total of US$238 million individends from DBI, consisting of US$56 million dividends on ordinary sharesrelating to FY 2002, a US$112 million interim dividend on ordinary shares for2003, US$35 million dividends representing the second US$35 million payment onpreference shares for 2002, and a US$35 million interim dividend on preferenceshares for 2003. Reconciliation of headline earnings for the year ended 31 December 2003 (4) Ordinary Preference US$ million Total shares shares • DBI headline earnings (100%) - restated (4) 590 - - • GAAP adjustments - restated (4) 126 - - • DBI headline earnings - UK GAAP (100%) 716 599 117 • AA plc's 45% ordinary share interest 269 269 - • Additional 3.65% ordinary share interest 22 22 - • AA plc's portion of the preference shares 95 - 95 • AA plc headline earnings 386 291 95 (4) Dbsa's headline earnings for the year ended 31 December 2003 have been restated to US$590 million (previously reported as US$676 million). The restatement does not affect the UK GAAP figures previously reported by AA plc, consequently the GAAP adjustment has also been restated accordingly. The above figures are unaudited. De Beers Societe Anonyme (Incorporated under the laws of Luxembourg) Thursday 3 February 2005 DIRECTORS' COMMENT 2004 was another good year for the diamond industry. Against the background ofaccelerating economic growth in the major diamond consuming countries, diamondjewellery sales performed well. Preliminary indications are that global retailsales of diamond jewellery for the year as a whole were about 6% higher than theprevious year in local currency and, because of the continued weakening of theUS dollar, about 8% higher in US dollars. Strong areas of growth wereAsia-Pacific, India and the Gulf region with Japan also recording modest growthfor the second year running. The USA, accounting for over 50% of world diamondjewellery sales, reports a solid Christmas season overall, despite concerns overhigh personal debt levels. During the year, levels of polished stocks in the cutting centres declined butcutting centre bank debt continued to climb in line with the increase in thevolume of trade. However, the lending banks seem reasonably comfortable with theability of the trade to finance the higher level of debt. There was strong demand for rough diamonds from the cutting centres throughoutthe year and full year sales by the Diamond Trading Company ("DTC"), themarketing arm of De Beers, were US$5,695 million, 3% higher than in 2003. Duringthe year, the DTC raised its rough diamond prices on three occasions, thecumulative effect of which was that sales by the DTC in 2004 were at prices, onaverage, 14% higher than in 2003. The DTC had a strong first sight in 2005 atwhich it raised its rough diamond prices by a further 3% on the evidence of theunderlying demand growth achieved in 2004 and anticipated in 2005. Despite De Beers Group diamond production being significantly below target inthe first half of the year, the deficit was more than made up in the secondhalf. Production for the year as a whole, inclusive of its joint ventures inBotswana and Namibia, totalled 47 million carats, 3 million carats (7%) morethan in 2003. Debswana produced a record 31.1 million carats, an increase of 2%over 2003, notwithstanding experiencing a number of operational difficulties andindustrial action. Namdeb's production of 1.86 million carats was 28% higherthan in 2003 and included record marine production of 865,000 carats. De Beers' South African mines produced a total of 13.7 million carats in 2004,an increase of 1.8 million carats (15%) on 2003. Mainly because of the newCombined Treatment Plant, Kimberley mines produced a record 2 million carats, aproduction level last achieved 90 years ago, in 1914. Although Rand mining costsper ton in 2004 were lower than in 2003, the weakness of the US Dollar, thecurrency in which diamonds are sold, has put De Beers' older and more marginalmines under continued pressure with five of its seven mines operating at a loss.Management continues to focus its efforts on further reducing costs anddriving efficiencies throughout its operations Headline earnings for the year ended 31 December 2004 were US$652 million, 11%higher than for 2003, and operating cash flow generated during the year wasUS$985 million. Net interest bearing debt reduced from US$1,762 million at 31December 2003 to US$1,588 million at 31 December 2004 and net gearing reducedfrom 29% to 25%. Diamond stocks at year end were at a similar level to thatreported at the end of 2003. The Board has recommended to the shareholders that a final ordinary dividend ofUS$200 million in respect of the year 2004 be declared at the forthcoming AnnualGeneral Meeting. Together with the interim ordinary dividend of US$250 millionpaid in August 2004, total ordinary dividends for the year amount to US$450million (2003:US$400 million). 2005 is likely to be a more challenging year for the diamond industry. However,with the transformation of the industry that has taken place over the last fewyears, there is now growing evidence that diamonds are competing favourably withother luxury products. De Beers is pleased to have recently reached agreement with the Government ofthe Republic of Botswana ("GRB") in relation to the renewal of the Jwanengmining licence for a further 25-year period from 1 August 2004 and the extensionof the Orapa, Damtshaa and Letlhakane mining licences for a similar period. DeBeers and the GRB have also agreed that the 15% holding in De Beers' ultimateholding company, DB Investments sa, previously owned by Debswana, be directlyowned by GRB. The agreement marks the long-term continuation of the unique andimportant partnership between the GRB and De Beers. De Beers has made a number of commitments to the European Commission regardingits proposed trade agreement with the Russian diamond producer, Alrosa. De Beersbelieves that it has now addressed the concerns raised by the Commission andlooks forward to having the commitments formally accepted by the Commission inthe near future. The reorganisation of De Beers' South African assets, which has involved focusand planning over the past year, is now in the process of being implemented.Accordingly, De Beers Consolidated Mines Limited should be in a position toimplement a Black Economic Empowerment transaction during 2005. De Beers Societe Anonyme Consolidated Income Statement for the year ended 31 December 2004 (Abridged) US Dollar millions Year to Year to 31 December 2004 31 December 2003 Diamond sales - DTC 5 695 5 518 - Other 512 397Trade investment and other income 836 656 7 043 6 571Deduct:Cost of sales 4 890 4 794Depreciation and amortisation (Note 1) 345 294Sorting and marketing 543 490Exploration and research 174 147Corporate expenses 80 52Net diamond account 1 011 794Deduct:Net finance charges (Note 2) 83 144Costs related to reorganisation and restructuring 39 22Income before taxation 889 628Taxation 386 239Income after taxation 503 389Attributable to outside shareholders in subsidiaries 26 10Own earnings 477 379Share of retained income of joint ventures 21 114Total earnings 498 493Costs of early debt redemption 95 Net earnings 498 398 Headline earnings reconciliationNet earnings 498 398 Adjusted for: Amortisation of intangible fixed assets 175 170 After tax surplus on realisation of fixed assets less provisions (21) (3) Facility fees 25 Headline earnings 652 590Cash available from operating activities 985 1 520 Dividends in respect of:-2002 - Final 1242003 - Interim 250 - Final 1502004 - Interim 250 De Beers Societe Anonyme Consolidated Balance Sheet 31 December 2004 (Abridged) US Dollar millions 31 December 2004 31 December 2003 3 801 3 549 Ordinary shareholders' interestsOutside shareholders' interests 132 115Total shareholders' interests 3 933 3 664Net interest bearing debt (Notes 2 and 3) 1 588 1 762Other liabilities 1 776 1 517 7 297 6 943 Fixed assets 5 391 5 145Investments and loans 50 53Diamond stocks and other assets 1 856 1 745 7 297 6 943 Exchange rates US$ = Rand- average 6.43 7.64- year end 5.74 6.38 Notes and Comments 1. Amortisation amounting to US$144 million in respect of the goodwill attributable to De Beers Consolidated Mines Limited and De Beers Centenary AG has been expensed in the current year (2003 : US$144 million). 2. On 30 June 2004, the Company took advantage of an early redemption clause attaching to its 10% preference shares in issue and redeemed the maximum permissible amount of US$214 million, or 25% of the total. As a result, the preference shares, with a value of US$642 million (2003: US$856 million) have been more appropriately reclassified as debt in the balance sheets. The preference dividends, amounting to US$75 million (2003: US$86 million) have accordingly been reclassified as finance charges in the respective income statements. 3. Cash has been offset against interest bearing debt. Contacts: De Beers London:Lynette Hori +44 20 7430 3509/+44 7740 393260 De Beers South AfricaNicola Wilson +27 11 374 7399/+27 83 299 5552 Visit the official De Beers group website for more in formation on the Companyand where you can view and download a selection of images - www.debeersgroup.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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