Anglo American's full-year revenue rose 5% to $18.5bn, with underlying cash profit (EBITDA) up 2% to $6.4bn ($6.5bn expected). Performance was driven by higher copper and iron ore prices and cost controls, which offset lower volumes.
Not included in underlying profit figures was a $2.3bn non-cash write-down of the De Beers diamond business.
Free cash flow swung to an inflow of $0.8bn from an outflow of $0.2bn, supported by lower capital expenditure. Net debt fell by $2.1bn to $8.6bn.
The year saw the demerger of Valterra Platinum and sale of the residual stake. The nickel and steelmaking coal sales are both progressing, and a separation of De Beers is underway.
A final dividend of $0.16 was announced, bringing the full-year total to $0.23, down 64% year on year.
The shares fell 2.3% in early trading.
Our view
Anglo delivered a solid set of full-year results, although performance is currently clouded by a wide-ranging portfolio overhaul. The proposed merger between Anglo American and Teck Resources, alongside the disposals of its platinum business and planned sales/separation of the nickel, steelmaking coal and diamond businesses, means the group is in the process of reshaping itself into a very different company.
The combined group is set to become the world’s second-largest publicly listed copper producer, with the red metal expected to account for around 70% of output. This represents a material departure from the diversified mining model Anglo has historically followed.
We see the appeal; copper has a strong track record of structural demand growth. Themes such as electrification and the expansion of artificial intelligence infrastructure are already underpinning higher prices. At the same time, many of the world’s highest‑quality ore bodies have been depleted, raising questions over whether supply can keep pace - a dynamic that should remain supportive for prices.
Anglo’s copper production has dipped recently, largely due to operational challenges in Chile, particularly lower grades and recoveries at Collahuasi. Teck’s output has been more resilient, supported by the ramp‑up at Quebrada Blanca. With further assets coming on stream and mine lives being extended, the combined group’s copper outlook is improving, though significant execution risk remains.
While copper is the main focus, the enlarged group will not be wholly reliant on a single commodity, with diversification coming from iron ore and zinc. The Woodsmith crop nutrients project also offers longer-term optionality, where bringing in development partners still appears the most likely path forward.
The scale of the merger has the potential to create value. Owning two major copper operations in close proximity should open the door to material efficiency gains, including shared ore processing and site management. Realising these benefits, however, will depend on a smooth and disciplined integration.
If the deal is approved, Anglo shareholders are set to receive a one-off payment of $4.19 per share, with the possibility of a further distribution if the De Beers spin-off proves successful. Beyond that, we expect the group to continue paying modest dividends. A step‑change in payouts looks unlikely, and, as ever, there are no guarantees.
Anglo’s progress on portfolio optimisation and production growth has helped restore investor confidence. We are broadly supportive of a combined Anglo/Teck with large copper exposure, but remain mindful that there’s a lot to execute on. In the meantime, we think upside is limited given the valuation has already recovered to a level that looks fair.
Environmental, social and governance (ESG) risk
Mining companies tend to come with relatively high ESG risk. Emissions, effluences and waste and community relations are key risk drivers in this sector. Carbon emissions, resource use, health and safety and bribery and corruption are also contributors to ESG risk.
According to Sustainalytics, Anglo American’s management of material ESG issues is strong.
Climate targets include carbon neutrality across operations by 2040. There are also targets for a 30% improvement in energy efficiency and a 50% reduction in freshwater withdrawal against 2016 levels in water scarce areas by 2030. There is a strong renewable energy programme, which is expected to fully meet energy needs in Chile, Brazil, Peru and South Africa. The merger with Teck potentially brings exposure to additional ESG risk but we’re pleased that Sustainalytics views Teck’s management of the issues as amongst the strongest in the industry.
Anglo American key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. 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.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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.