Anglo rides the commodity rally
Anglo rides the commodity rally
Published Date: 2021-03-01 | Source: Stephen Gunnion | Author: Stephen Gunnion
The diversified resources group says strong performances from Minas-Rio and Collahuasi helped offset the impact of Covid-19.
Anglo American has reported better-than-expected annual earnings after a rally in the price of metals including platinum group metals (PGMs) and iron ore made up for weakness in coal and diamonds. Its shares rose close to 8% at their best.
Releasing results for the year to end-December, the diversified resources group said continued strong performances from its Minas-Rio iron ore operation in Brazil and its Collahuasi copper joint venture in Chile helped partly offset the impacts of Covid-19, leading to an overall decrease in production of 10%, on a copper equivalent basis. While PGM output declined, it benefitted from a strong rise in prices.
Covid-19 lockdowns across southern Africa in the first half of the year impacted production at subsidiaries Anglo American Platinum, Kumba and De Beers, as well as its Thermal Coal operations. In response to the pandemic, comprehensive safeguarding measures were put in place at operations and in partnership with local communities across the business, enabling a return to more normal operating levels in the second half of the year.
Production was also affected by operational issues at Metallurgical Coal and strike action at the Cerrejón thermal coal operation in Colombia. Refined production of PGMs was impacted by an outage at Amplats' converter plant in the first half of the year. In the second six months, copper equivalent production improved by 13% compared with the first half, as lockdowns and restrictions eased and operations were able to sustain around 95% of normal capacity while maintaining Covid-19-related safeguarding measures.
De Beers' rough diamond production decreased by 18% to 25.1 million carats, in response to lower demand due to the pandemic and Covid-19 restrictions in southern Africa during the first half of the year. Diamond demand from cutters and polishers of rough diamonds was affected throughout the year by Covid-19 lockdowns, travel restrictions and retail store closures.
For the group as a whole, revenue rose 3% to $30.9 billion and it generated underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $9.8 billion, slightly down from $10 billion in 2019. Net profit came in 40% lower at $2.1 billion and basic headline earnings per share declined by 10% to $2.47. It declared a final dividend of 72 US cents, consistent with its 40% payout policy. That takes its total dividend for the year to $1 per share, down from $1.09 in 2019.
So Anglo American is a ten bagger in 5 years. Another stock the "smart money" wouldn't touch with a barge pole in 2015-- Piet Viljoen (@pietviljoen) February 25, 2021
Amplats. Implants. Anglo American.-- Thobelani Maphumulo (@mapsthobs) February 25, 2021
Beneficiaries of buoyant commodity prices. Strong balance sheets and earnings growth upside. Attractive valuations.
Anglo American says "making good progress" to prepare its thermal #coal operations in South Africa as a standalone business. Demerger is preferred exit option, with a primary listing on the Johannesburg Stock Exchange for the demerged business. Also considering other options-- Andrea Hotter (@AndreaHotter) February 25, 2021
Today feels like we are back in the good old 2004-2007 commodity bull market. Gotta love Resource stocks (if you own it). Risky, Cyclical and Volatile, but almost 10% in one trading day...thanks Sibanye-Stillwater, Implats, Anglo. Tomorrow will certainly bring something Els-- Roeloff Horne (@RoeloffHorne) February 25, 2021