25th Jul 2005 07:30
Anglo American PLC25 July 2005 News Release 25 July 2005 De Beers Societe Anonyme ("Dbsa") today reported headline earnings for the sixmonths ended 30 June 2005 of US$336 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$270 million for the sixmonths ended 30 June 2005 from its investment in DBI, as reconciled in the tablebelow: Reconciliation of headline earnings for the six months ended 30 June 2005 US$ million Total• DBI headline earnings (100%) 336• Adjustments (1) 5• DBI headline earnings - AA plc basis (100%) 341• AA plc's 45% ordinary share interest 153• Income from preference shares 26• Exchange gains related to preference shares 91• AA plc headline earnings 270 (1) Adjustments include the reclassification of the actuarial gains and lossesbooked to the income statement by Dbsa under the corridor mechanism of IAS19.As AA plc has early adopted the amended version of IAS19, this charge has beenincluded in the deficit booked to reserves in prior years. On 30 June 2005, Dbsa redeemed a second 25% of the preference shares originallyin issue and on that date AA plc received US$175 million, representing 25% ofits original US$701 million preference share interest. In the six months ended 30 June 2005, AA plc received from DBI a US$90 millionfinal dividend on ordinary shares relating to FY 2004, US$26 million dividendsrepresenting the second payment on preference shares for 2004, and US$9 millionrepresenting the first dividend for 2005 on the redeemed preference shares. AUS$17 million first dividend for 2005 on the remaining preference shares and aUS$68 million interim dividend on ordinary shares relating to FY 2005 arescheduled for payment on 1 August 2005. In the six months ended 30 June 2004, AA plc received from DBI a US$68 millionfinal dividend on ordinary shares relating to FY 2003, US$35 million dividendsrepresenting the second US$35 million payment on preference shares for 2003, andUS$9 million representing the first dividend for 2004 on the redeemed preferenceshares. A US$26 million first dividend for 2004 on the remaining preferenceshares and a US$112 million interim dividend on ordinary shares relating to FY2004 were received from DBI during the second half of 2004. Reconciliation of headline earnings for the six months ended 30 June 2004 US$ million Total• DBI headline earnings (100%) 424• Adjustments (1) (48)• DBI headline earnings - AA plc basis (100%) 376• AA plc's 48.65% ordinary share interest (2) 183• Income from preference shares 35• Exchange losses related to preference shares (49)• AA plc headline earnings 169 (1) Adjustments include the impact of IAS32 and IAS39 which applied to Dbsa in2004, but have only been adopted by AA plc in 2005. (2) As a result of De Beers' partial interest in Debswana Diamond Company(Proprietary) Limited (one of the shareholders in DBI), AA plc accounted for anadditional 3.65% of DBI's post-tax earnings attributable to ordinary shares. Aspreviously announced, the Debswana interest in DBI was ceded to the Governmentof the Republic of Botswana as part of a renewal of De Beers' mining licences inBotswana, agreed on 20 December 2004. Accordingly, from this date AA plc nolonger accounts for this additional 3.65% interest. The above figures are unaudited. De Beers Societe Anonyme (incorporated under the laws of Luxembourg) Monday, 25 July 2005 INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 DIRECTORS' COMMENT Results Own earnings at US$345 million were 8% lower than the equivalent period in 2004,and headline earnings were 21% lower at US$336 million. The decrease in ownearnings was mostly due to the impact of a weaker dollar and to tighter marginsarising largely from a significant reduction in stockpile realisations. Headlineearnings were further impacted by the negative swing of US$46 million in thegroup's share of retained earnings of joint ventures. This was because of therelease last year, as the diamond stockpile was being run down, of higherprovisions for unearned profits in diamond stocks purchased from the group'sjoint venture partners. Operating cash flow fell to US$158 million from US$871 million in the first halfof 2004 when there was a draw down of stocks of nearly US$500 million. Inaddition there was a substantial increase in other working capital in 2005. In line with the lower earnings and cashflow, the Board has declared a reducedinterim dividend of US$150 million (2004: US$250 million) payable on 1st August2005. Production Group production for the period was 23.7 million carats, an increase of 23% overthe same period in 2004. As a result of the increased production, stock levelshave risen by about $400 million compared with June 2004. Sales and marketing Despite mixed economic data it is estimated that the demand for diamondjewellery in the United States is up by 6% in the first half over the sameperiod last year. Larger chains and high-end independents have shown thestrongest results and polished prices have started to edge up at the consumerlevel. Performance in other markets was mixed. The local currency value ofglobal diamond jewellery sales is estimated to be higher by 5% than theequivalent period in 2004. De Beers is currently forecasting growth of 6% inlocal currency retail demand for the full year due to the level and quality ofdiamond marketing activity as well as regional macro-economic strength. Throughout the first half, demand for rough diamonds from the cutting centreswas strong. Sales by the DTC, the marketing arm of De Beers, for the first sixmonths totalled US$ 3.2 billion, 8% higher than the equivalent period in 2004.The DTC raised its rough diamond prices on two occasions. Projects De Beers recently announced the approval of C$636 million for the Snap Lakeproject in Canada with construction scheduled to commence in 2006. Furtherexpansion projects in Canada and Southern Africa are under evaluation. Agreement was reached with Endiama, the Angolan state mining company, for theestablishment of a joint venture for the exploration of diamonds. Regulatory In early June, the European Commission published a notice indicating itsintention to accept the commitments offered by De Beers and Alrosa in relationto the Alrosa Trade Agreement and allowed a 30 day period for public comment.The Commission is now considering any third party comments received. Outlook The market for rough diamonds remains firm and we expect that, unlike inprevious years, sales in the second half of 2005 will at least match those ofthe first half and that stocks will reduce. This should have a beneficial impacton both cash flow and earnings. De Beers announces interim results as follows: De Beers Societe Anonyme Consolidated Income Statement for the half-year ended 30 June 2005 (Abridged) US Dollar millions 6 Months to 6 Months to 12 Months to 30 June 2005 30 June 2004 31 December 2004Diamond sales -DTC 3 220 2 983 5 695 -Other 265 259 512Joint venture and other income 421 373 836 3 906 3 615 7 043Deduct:Cost of sales 2 810 2 507 4 825Depreciation and amortisation (Note 1) 104 88 201Sorting and marketing 199 230 543Exploration, research and development (Note 2) 106 99 239Corporate expenses 43 34 80Net diamond account 644 657 1 155 Deduct:Net finance charges (Note 3) 56 55 83Costs related to reorganisation and 12 17 39restructuringIncome before taxation 576 585 1 033Taxation 228 203 386Income after taxation 348 382 647 Attributable to outside shareholders in 3 9 26subsidiariesOwn earnings 345 373 621 Share of retained income of joint ventures (6) 40 21Total earnings 339 413 642 Amortisation of goodwill (Note 1) 72 144 Net earnings 339 341 498 Headline earnings reconciliation Net earnings 339 341 498 Adjusted for :Amortisation of goodwill (Note 1) 72 144 Amortisation of intangible fixed assets 15 31 After tax surplus on realisation of fixed assets (3) (4) (21)less provisionsHeadline earnings 336 424 652 Cash available from operating activities 158 871 985 Dividends in respect of: 2003 - Final 150 1502004 - Interim 2502004 - Final 2002005 - Interim 150 De Beers Societe Anonyme Consolidated Balance Sheet 30 June 2005 (Abridged) US Dollar millions 30 June 2005 30 June 2004 31 December 2004 Ordinary shareholders' interests 3 663 3 663 3 801Outside shareholders' interests 130 124 132Total shareholders' interests 3 793 3 787 3 933Net interest bearing debt (Notes 3 &4) 1 842 1 169 1 588Other liabilities 1 490 1 489 1 776 7 125 6 445 7 297 Fixed assets 5 196 5 001 5 360Investments and loans 76 87 81Diamond stocks and other assets 1 853 1 357 1 856 7 125 6 445 7 297Exchange rates US$ = Rand- average 6.17 6.58 6.43- period end 6.87 6.62 5.74 Notes and Comments 1. In terms of International Financial Reporting Standard 3(Business Combinations), with effect from 1 January 2005 it is no longerpermissible to amortise goodwill arising on consolidation. The standard does notrequire the restatement of prior periods, which include amortisation of goodwillamounting to US$72 million and US$144 million for June and December 2004respectively. 2. The costs of feasibility studies to prove the viability ofmineral resources, previously included in cost of sales, have now been includedwith exploration, research and development. Prior periods have been restatedaccordingly. 3. Preference share capital is included in net interest bearingdebt. Preference dividends, amounting to US$32 million (2004 : US$43 million andUS$75 million for June and December respectively) are included in financecharges in the respective income statements. On 30 June 2005, the Company took advantage, for the second time, of an earlyredemption clause attaching to its 10 per cent preference shares in issue andredeemed the maximum permissible amount of US$214 million, or 25 per cent of thetotal originally in issue. 4. The US$2.5 billion revolving credit facility was replacedon 31 March with a US$3 billion multicurrency revolving facility, on morefavourable terms, split into two equal tranches with tenors of five and sevenyears. Cash has been offset against interest bearing debt. Contacts: De Beers London:Lynette Hori +44 20 7430 3509/+44 7740 393260De Beers South AfricaNicola Wilson +27 11 374 7399/+27 83 299 5552 Visit the official De Beers group website for more information 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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