Anglo's full year revenue rose 3% to $30.9bn and underlying cash profits (EBITDA) fell 2% to $9.8bn. The miner saw significant operational disruption in the first half, but this was largely offset by stronger metal prices in the second.
The group declared a final dividend of $0.72 per share, in line with the policy to pay out 40% of profits. This brings total dividends for 2020 up to $1.00 per share, down from $1.09 in 2019.
The shares rose 4.6% in early trading.
2020 has been a tale of two halves for Anglo. The first half saw the bulk of COVID related disruption. But a rebound in commodity prices and a production ramp-up in the second half, means full year underlying cash profits were down just a whisker.
Anglo's strategy of diversifying between industrial and consumer products makes sense to us. Demand for industrial commodities, like iron ore and coal, is very economically sensitive because when conditions are tough plans for new factories and skyscrapers quickly get scrapped. Consumer demand is more reliable.
It looks like Anglo is well past the worst of the operational disruptions, but the bigger picture for its portfolio of assets is less clear. If the global economy recovers smoothly Anglo's industrial portfolio should stand to benefit, and commodities could provide a natural inflation hedge, should that become an issue. However, a global recession is still a possibility. If we enter a sustained recession, demand for Anglo's commodities, both industrial and consumer, is likely to take a hit. Prices and profits would likely follow suit.
That's why financial resilience remains key.
Anglo went into the crisis in better shape than it's been in previously. Improvements in cost control and productivity, along with better prices, has done wonders for profits and cash generation. Net debt was also on the way down from the lofty heights of $12.9bn in 2015. At $5.6bn today, it's risen over the year, but is still manageable- particularly if iron ore, copper and platinum prices stay where they are.
Over the long term Anglo's diversified approach remains sensible, but the near term remains uncertain. This is important to bear in mind because, with a policy to pay out 40% of profits, lower profits mean lower dividends.
Anglo American key facts
- 12m forward Price/Earnings ratio: 8.9
- Ten year average 12m forward Price/Earnings ratio: 10.4
- Prospective yield: 4.4%
Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.
Full Year Results (underlying results)
Iron Ore continues to be the biggest contributor to group profits. This year cash profits rose from $3.4bn to $4.6bn, reflecting increased prices and lower costs across the division. Cash profits from the Kumba operations increased 20% to $2.7bn despite lower sales volumes. This was mostly because average iron ore prices rose from $97 per tonne to $115, and unit costs fell from $33 per tonne to $31. Minas-Rio generated $1.9bn in cash profits, representing a 60% increase on 2019, as unit costs were stable while prices and volumes rose.
Platinum Group Metals delivered a 28% increase in cash profits to $2.6bn. This was primarily thanks to a 51% increase in average prices, and despite a fall in production volume caused by the pandemic.
Copper cash profits rose 15% to $1.9bn, reflecting an 10% increase in average prices and record low unit costs of $1.13 per pound. Production increased slightly to 647,400 tonnes thanks to record production at Collahuasi and a strong performance from Los Bronces, which offset the disruption caused by COVID.
Diamond division De Beers saw a 27% fall in sales to $3.4bn as jewellery stores closed around the world and polishing factories in India closed during lockdowns. Cash profits fell 25% to $417m as a result, despite a 10% fall in unit costs.
Coal cash profits fell from $1.8bn to $35m, primarily challenges in Metallurgical Coal. Prices fell 34%, volumes fell 25% and unit costs rose 37%. Volume and costs movements were primarily driven by "underground operational incidents" at Moranbah North and Grosvenor
Nickel & Manganese cash profits fell from $634m to $510m, reflecting a weak Manganese performance. Crop Nutrients made $1m in cash profits and the Woodsmith polyhalite project is progressing well following the acquisition of Sirius Minerals.
Free cash flow fell 47% to $1.2bn, reflecting lower cash generation and higher capital spending. Net debt rose from $4.6bn to $5.6bn over the year, in part reflecting a build up of inventory at PGM and De Beers.
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