Anglo American Beats Forecasts, Boosted by Higher Commodity Prices -- Update

By Alistair MacDonald and Oliver Griffin 

Mining giant Anglo American PLC reported a 12% rise in net profit for 2018 Thursday, a better than expected result which, helped by strong commodities prices, adds to the once-beleaguered firm's turnaround story.

The London-listed diversified mining company posted a profit of $3.56 billion ($4.6 billion) in the year-ended Dec. 31, compared with $3.17 billion in 2017. A consensus estimate from 18 analysts compiled by FactSet had forecast profit at $2.8 billion.

Revenue for the year rose 5% to $27.61 billion. Anglo American also reduced net debt to $2.85 billion from $4.5 billion the year before, which beat analysts' expectations.

This comes after the Minas-Rio iron ore project in Brazil has racked up large debts, costing Anglo American $11.3 billion in write-downs and weighing on its shares for five years.

Anglo American's shares were down by 0.2% Thursday after its results were out, following a recent run-up.

"We are still very much on a journey, we have made good progress, but there is a lot more to be done," Chief Executive Mark Cutifani said on a conference call.

The company's annual results were helped by an average rise of 4% in the price of the commodities it mines over the year, with particularly sharp rises in platinum, coal and nickel.

Anglo American also increased its productivity. For instance, it produced 10% more copper than in 2012, from half the number of assets it had then.

Anglo American's results were a "rock solid set of numbers as huge de-gearing continues," said Paul Gait, an analyst at Bernstein, in a research note.

Mr. Gait and other analysts the reduction in debt.

"Given that this is one of the major concerns surrounding Anglo as an investment opportunity, we feel that the new chair and CEO have given the market every reassurance of a sustainably healthy balance sheet," Mr. Gait said.

Still, the miner isn't free of problems.

Underlying earnings before interest, tax, depreciation and amortization from Anglo American's majority-owned diamond business De Beers fell 13% on the previous year to $1.25 billion. Anglo American said De Beers took on incremental expenditure on new initiatives including the launch of Lightbox Jewelry, a business that produces lab-grown diamonds.

The company said the 2019 outlook for diamond jewelry faces a number of challenges, including the risk of an intensification in U.S.-China trade tensions, concerns over the Chinese economy and further exchange-rate volatility.

And while Minas-Rio is now producing iron ore, the company took a $600 million hit on underlying Ebitda from a suspension of operations there in March following a leak in the 330-mile pipeline that carries watered-down iron ore to an export terminal.

Mining companies are also bracing for increased safety regulations for tailings dams following the bursting of a dam in Brazil that left at least 160 people dead in 2018.

Anglo American's Mr. Cutifani said that while his expects more regulation in Brazil, this won't make the country a less attractive investment destination.

The company declared a final dividend of 51 cents, taking the total dividend for the year to $1 a share. Last year, the total dividend was $1.02 a share.

Write to Alistair MacDonald at [e-mail]

(END) Dow Jones Newswires

February 21, 2019 05:32 ET (10:32 GMT)

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