Anglo-American Posts Steep First-Half Loss

LONDON—Anglo American on Thursday reported a steep first-half loss as the mining giant continues to suffer from weak commodity prices, though it showed some success in paring down its heavy debt load.

The U.K.-listed miner posted a net loss of $813 million for the first half of 2016, compared with an adjusted $3 billion loss for the same period last year.

The loss included a $1.2 billion impairment for some of Anglo's Australian coal assets, the company said.

Excluding some one-time items, Anglo posted a net profit of $698 million in the first half, down 23% from last year but better than forecasts for a gain of $340 million, according to a survey of six analysts by The Wall Street Journal. Anglo's shares rose 7% in early trading Thursday.

"The balance sheet is stronger and we're in a much better position than we were six months ago," Anglo American Chief Executive Mark Cutifani said on a media conference call Thursday.

Using a rugby metaphor, he said Anglo is "at half time, and we're in the lead, [but] we're facing off against the All Blacks," a reference to New Zealand's world-beating rugby team. Despite such a formidable obstacle, "I wouldn't bet against us," he said.

Soft commodity prices weighed on sales, however. Anglo's revenue fell 20% to $10.6 billion during the period from last year. Net debt fell to $11.7 billion as of June 30, down from $12.9 billion at the end of 2015, the result of asset sales and cash-flow, among other things.

The company earlier this year said it expects to sell $3 billion to $4 billion in assets this year it launches a sweeping restructuring plan. Anglo expects its net debt to fall to less than $10 billion by year-end, reflecting the $1.5 billion sale of its Brazilian niobium and phosphate assets earlier this year and other asset disposals.

Diamonds were a big driver of first-half earnings, accounting for 42% of earnings before interest and taxes. A 29% increase in volumes sold over the same period last year provided a boost to results at Anglo's De Beers unit. Mr. Cutifani cautioned that second-half results aren't likely to be as robust.

Cost cuts and favorable currency moves in countries such as South Africa, where De Beers has big mining operations, provided a boost to earnings, the company said. Bruce Cleaver, the newly appointed CEO of De Beers, said in an interview the company expects to be able to continue to trim costs while maintaining ambitious production, exploration and other investment goals.

"We've caused no structural damage to the business by cutting costs," he said. "We'll continue to work hard on that."

Still, Anglo continues to struggle with low prices for the other commodities it mines and sells amid ongoing soft demand from China. While earnings at De Beers were slightly higher than last year's first half, they fell in every other asset category, including platinum, copper, nickel, iron ore and coal. Overall earnings before interest and taxes slid 27% in the first half from last year.

In February, Anglo said it plans to exit coal entirely and to pare back its exposure to iron ore, even floating the potential sale of its massive Brazilian iron-ore mine Minas Rio. Mr. Cutifani said the company plans to reduce its mining businesses to 16 from 45, sales that will help cut its staff by more than half.

Anglo in 2015 reported a loss of $5.6 billion, the result of a steep dive in commodity prices in the second half of the year as well as $3.8 billion in impairment charges.

Write to Scott Patterson at [e-mail]

(END) Dow Jones Newswires

July 28, 2016 04:55 ET (08:55 GMT)

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