Charlotte Mathews
1 August 2008
Johannesburg — GLOBAL resources giant Anglo American had spent $1,4bn on acquisitions in the past six months, including about $600m on increasing its stake in Anglo Platinum to 77,8%, it said yesterday.
Anglo has been gradually increasing its stake in Angloplat in the past year from about 75% by buying shares on the open market, leading to suspicions it could eventually make an offer to buy out minority shareholders.
Asked at the group's results presentation whether it intended to buy out Angloplat minorities, CEO Cynthia Carroll said Anglo "continues to look at it as the share price moves".
Angloplat's shares have fallen almost a third, in line with other platinum counters, to just less than R1000 from R1440 in mid-June.
Anglo American has reported its highest interim underlying earnings yet of $3,5bn, a 14% improvement on the same period last year. Total group revenue including associates dropped 10% to $17,9bn but operating profit from core operations surged 30% to $5,9bn. On underlying earnings of $2,90 ($2,18) a share, an interim dividend 16% higher at US44c a share was declared.
Carroll said Anglo's ferrous metals, coal, base metals and diamond interests had all delivered strong performances owing to robust prices, with the coal division more than doubling operating profit to $731m.
She identified rising costs as Anglo's biggest challenge, which it would address through increasing volumes, asset optimisation and improved procurement.
In the six months to June the group's costs rose 32,5% to $7,4bn, reflecting inflation rates of about 10% in SA and Chile, the effect of higher energy prices and rising costs of material inputs such as sulphuric acid, said chief financial officer René Médori.
Simon Toyne, of London-based securities house Numis, said the results were in line with forecast and Numis expected the shares to continue trading at a discount to the rest of the sector.
But he said investors in the commodities sector could take some short-term comfort from Anglo's financial performance and positive outlook.
Médori said the group's share buyback programme had slowed in the first half because Anglo would be spending $5,5bn on buying out minorities in Brazilian iron-ore miner MMX and because of concern about credit markets. But it was committed to the remaining $2,7bn of share buybacks, and activity would increase to normal levels in the second half.
Carroll said commodity fundamentals were expected to remain strong despite the turmoil in credit markets, rising global inflation and the US slowdown. The continued industrialisation of Brazil, Russia, India and China and supply constraints held the potential for a sustained commodity up-cycle.
Anglo American had a $45bn project pipeline and would also pursue large, cost-efficient merger and acquisition opportunities.
It expected to become more geographically diverse in future, with growth in operations in Brazil, Peru and Chile.
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