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Anglo American - Portfolio restructuring

Keith Bowman | 8 December 2015 | A A A
Anglo American - Portfolio restructuring

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Anglo American Ordinary USD0.54945

Sell: 1,972.20 | Buy: 1,972.80 | Change 10.20 (0.52%)
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Anglo American sets out radical portfolio restructuring and further material cost savings and capex reductions

Anglo American plc ("Anglo American" or "the Company") is today setting out an accelerated and more radical restructuring programme to redefine the focus of its asset portfolio to transform the Company's competitive position and create a more resilient business to deliver sustainable shareholder returns.

Mark Cutifani, Chief Executive of Anglo American, said: "Together with the additional material capital, cost saving and productivity measures announced today, we are setting out an accelerated and more aggressive strategic restructuring of the portfolio to focus it around our 'Priority 1' assets, being those assets that are best placed to deliver free cash flow through the cycle and that constitute the core long term value proposition of Anglo American. While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action. We will set out the detail of the future portfolio in February, with the aim of delivering a resilient Anglo American and a step change in the transformation of the Company".

Key highlights to be set out in the presentation include:

Radical portfolio restructuring

  • Focus on Priority 1 assets to deliver free cash flow and greater returns through the cycle - number of assets to be reduced by 60%
  • Corporate structures and overhead to be aligned to future portfolio
  • Consolidate from six to three businesses: De Beers, Industrial Metals, Bulk Commodities
  • London office co-locating with De Beers in 2017

Driving operational discipline

  • $3.7 billion of cost and productivity improvements targeted from 2013 to 2017
  • $1.6 billion delivered by end 2015, including $0.3 billion in 2H15
  • $1.1 billion in 2016
  • $1.0 billion in 2017, with potential to accelerate in part into 2016
  • Care & maintenance/closure of cash negative assets - Snap Lake C&M, Thabazimbi closure

Protecting the balance sheet

  • Capex reductions expected of a further c.$1 billion to the end of 2016
  • $2.9 billion aggregate capex reduction vs. original guidance for 2015-2017
  • $2.5 billion capex in 2017, a c.55% reduction vs. 2014
  • SIB & capitalised stripping capex reduction of 30% from 2014 to $2.0 billion in 2016
  • Disposals target increased to $4.0 billion - Phosphates and Niobium confirmed for sale
  • c.$2.0 billion asset disposals agreed to date
  • Dividend suspended in respect of 2H15 and 2016 - upon resumption, policy will change to pay-out ratio to provide flexibility through the cycle and clarity for shareholders
  • Net debt guidance at end 2015 unchanged at $13.0 - 13.5 billion, despite price deterioration c.$15 billion of liquidity maintained and limited refinancing required in 2016 of $1.6 billion
  • Expected impairments of $3.7 - $4.7 billion, largely due to weaker prices and asset closures

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.