REG - Anglo American PLC - Anglo American Full Year Results 2014 <Origin Href="QuoteRef">AAL.L</Origin> - Part 2
13/02/2015 07:01
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billion to $12.9 billion (2013: $10.7 billion) and
total capital expenditure remained broadly flat at $6.0 billion (2013: $6.1
billion).
Operational performance (production/costs)
In contrast to the financial performance, operational performance across the
majority of our commodities improved compared with the prior year. Production
at Kumba increased by 14%, with a strong performance at both Kolomela and
Sishen, and metallurgical coal production at Coal - Australia and Canada
increased by 12% driven by improved operating equipment efficiencies at
Grasstree. In addition, Minas-Rio produced 0.7 Mt (wet basis) in 2014 after
commencing operations in the fourth quarter and reaching first ore on ship on
25 October. Platinum production (equivalent refined) was down 21%, largely
driven by the 532,000 ounces lost as a result of the strike affecting three
sites in South Africa.
Costs at Coal - Australia and Canada were down 8% largely in relation to
labour, contractors and maintenance, while at Nickel lower electricity tariffs
resulted in a 5% decrease in production costs. Costs at our South African
operations increased as a result of inflationary pressures in the country,
although underlying cost reduction initiatives, specifically in relation to
corporate restructuring, have made progress.
Platinum unit costs increased by 20% from 2013, owing to the continued
incurrence of costs during the strike in the first half of the year. However,
during the strike, lower variable costs as a result of the 'no work, no pay
policy' resulted in cost savings of $300 million.
(1) Excludes De Beers volume/price and impact of the strike at Platinum.
Income Statement
Underlying EBIT
$ million Year ended31 Dec 2014 Year ended31 Dec 2013
Iron Ore and Manganese 1,957 3,119
Coal(1) 458 587
Copper 1,193 1,739
Nickel 21 (44)
Niobium(1) 67 82
Phosphates(1) 57 68
Platinum 32 464
De Beers 1,363 1,003
Corporate and other(1) (215) (398)
Total 4,933 6,620
(1) Refer to note 4 in the Condensed financial statements for changes in
reporting segments. Comparatives have been reclassified to align with current
year presentation.
Underlying Earnings
Group underlying earnings were $2.2 billion, a 17% decrease (2013: $2.7
billion).
Year ended 31 Dec 2014
$ million Underlying EBIT Net finance costs and income tax expense Non-controlling interests Underlying earnings
Iron Ore and Manganese 1,957 (583) (657) 717
Coal(1) 458 (154) (8) 296
Copper 1,193 (482) (218) 493
Nickel 21 (15) - 6
Niobium(1) 67 (37) - 30
Phosphates(1) 57 (22) - 35
Platinum 32 (14) 7 25
De Beers 1,363 (264) (176) 923
Corporate and other(1) (215) (111) 18 (308)
Total 4,933 (1,682) (1,034) 2,217
(1) Refer to note 4 in the Condensed financial statements for changes in
reporting segments. Comparatives have been reclassified to align with current
year presentation.
Net finance costs
Net finance costs, before special items and remeasurements, excluding
associates and joint ventures, were $256 million (2013: $276 million). The
decrease was due to lower average LIBOR rates on borrowings and increased
capitalised interest, offset by lower interest income.
Tax
The effective rate of tax, before special items and remeasurements including
attributable share of associates' and joint ventures' tax, decreased from
32.0% in 2013 to 29.8%. This lower rate was due to the impact of certain prior
year adjustments, the remeasurement of withholding tax provisions across the
Group, and the recognition of previously unrecognised losses. In future
periods, it is expected that the effective tax rate will remain above the
United Kingdom statutory tax rate.
Reconciliation to loss for the period from underlying earnings
$ million Year ended31 Dec 2014 Year ended31 Dec 2013
Underlying earnings 2,217 2,673
Operating special items (4,374) (3,211)
Operating remeasurements (1) (550)
Non-operating special items (385) (469)
Financing special items and remeasurements 36 (130)
Special items and remeasurements tax 2 587
Non-controlling interests on special items and remeasurements 38 214
Share of associates' and joint ventures' special items and remeasurements (46) (75)
Loss for the financial period attributable to equity shareholders of the Company (2,513) (961)
Underlying earnings per share (US$) 1.73 2.09
Special items and remeasurements
Special items and remeasurements, after tax and non-controlling interests,
primarily relate to impairments in respect of the Minas-Rio iron ore project
($3.5 billion, post-tax), Peace River Coal and other operations within the
Coal segment ($0.3 billion, post-tax), and costs in respect of the closure of
the Drayton coal mine in Australia ($0.2 billion, post-tax). Full details of
the special items and remeasurements charges are to be found in note 7 to the
Condensed financial statements.
Balance Sheet
Net assets of the Company totalled $32.2 billion at 31 December 2014 (31
December 2013: $37.4 billion). This decrease resulted from impairments of $3.9
billion, the impact of the weaker South African rand and Australian dollar of
$1.9 billion, depreciation of $2.8 billion and net drawdown of additional debt
of $1.8 billion. This was partially offset by capital expenditure for the year
of $6.0 billion, and capitalised interest of $0.4 billion.
Group ROCE
Attributable ROCE was 8% in 2014 (2013: 11%) as a consequence of weaker
commodity prices, alongside ongoing capital expenditure, primarily at
Minas-Rio and Grosvenor, partially offset by depreciating foreign exchange and
a lower proportion of post-tax earnings attributable to non-controlling
interests. The 8% in 2014 would have been 10% at 30 June 2013 exchange rates
and commodity prices. Average attributable capital employed increased from
$39.7 billion in 2013 to $40.4 billion in 2014. No improvement to ROCE has
been realised as a result of the impairments at Minas-Rio and Coal, in line
with the ROCE methodology as described on page 203 of the Annual Report.
Net debt $ million 2014 2013
Opening net debt (10,652) (8,510)
EBITDA(1) 7,104 8,806
Working capital movements 9 (1,121)
Other cash flows from operations (164) 44
Cash flows from operations 6,949 7,729
Capital expenditure including related derivatives(2) (6,018) (6,075)
Cash tax paid (1,298) (1,201)
Dividends from associates, joint ventures and financial asset investments 460 264
Net interest (473) (533)
Dividends paid to non-controlling interests (823) (1,159)
Attributable free cash flow (1,203) (975)
Dividends paid to Company shareholders (1,099) (1,078)
Tax on sale of non-controlling interest in Anglo American Sur - (395)
Disposals 44 112
Purchase of shares by subsidiaries for employee share schemes (111) (92)
Other net debt movements 150 286
Total movement in net debt (2,219) (2,142)
Closing net debt (12,871) (10,652)
(1) EBITDA is underlying EBITDA, as described in note 4 to the
Condensed financial statements, less EBITDA of associates and joint ventures.
(2) Please see note 11 to the Condensed financial statements for the
definition of capital expenditure.
Liquidity and funding
At 31 December 2014, the Group had undrawn committed bank facilities of $8.4
billion and cash of $6.7 billion. The Group's forecasts and projection, taking
account of reasonably possible changes in trading performance, indicate the
Group's ability to operate within the level of its current facilities for the
foreseeable future.
At 31 December 2014, Anglo American's ratings were Moody's Baa2 (negative
outlook) and Standard & Poor's BBB (negative outlook).
Net debt
Net debt is a measure of the Group's financial position. The Group uses net
debt to monitor the sources and uses of financial resources, the availability
of capital to invest or return to shareholders, and the resilience of the
balance sheet. Net debt is calculated as total borrowings less cash and cash
equivalents (including derivatives which provide an economic hedge of debt).
The reconciliation in the table above is the method by which management
reviews movements in net debt and comprises key movements in cash and any
significant non-cash movements on net debt items.
Net debt increased by $2.2 billion to $12.9 billion (2013: $10.7 billion) and
net debt to total capital at 31 December 2014 was 28.6%, compared with 22.2%
at 31 December 2013.
Cash flow from operations
In 2014, there was a cash reduction in working capital of $9 million compared
with 2013. This was mainly driven by a $576 million decrease in debtors,
reflecting the receipt of high year end 2013 debtors at Copper and Kumba
following a production outperformance at the end of the year. There was no
similar build in debtors at the end of that year. This reduction has been
offset by an increase in stock of $129 million, primarily due to rail and port
constraints at Kumba, as well as stock increases at De Beers, partially offset
by reductions in high stock levels due to strike action at Platinum. A
decrease in creditors of $438 million, driven by working capital requirements
at Cerrejón, offset the remaining year-on-year working capital movement.
Attributable free cash flow
Total capital expenditure remained broadly flat at $6.0 billion (2013: $6.1
billion). Capital expenditure is shown net of proceeds on the disposal of
property, plant and equipment (2014: $71 million, 2013: $140 million) and is
net of capital expenditure funded by the minority partner at Quellaveco (2014:
$42 million, 2013: $46 million). Prior year comparatives have been
re-presented to align with current year presentation.
Net debt is expected to continue to rise in 2015, as expenditure on the
Group's projects offsets cash generated from operations.
The majority of dividends paid to non-controlling interests of $823 million
(2013: $1,159 million) were to minority shareholders of Copper and Kumba,
where external dividends of $116 million and $674 million were paid
respectively (2013: $474 million and $663 million).
Disposals are mainly due to the receipt of deferred proceeds related to the
formation of the Lafarge Tarmac joint venture.
Dividends
Analysis of dividends US cents per share Year ended31 Dec 2014 Year ended31 Dec 2013
Interim dividend 32 32
Recommended final dividend 53 53
Total dividends 85 85
Anglo American's dividend policy is to provide a base dividend that will be
maintained or increased through the cycle. Consistent with the policy, the
Board has recommended to maintain the final dividend of 53 US cents per share,
giving a total dividend of 85 US cents per share for the year (2013: 85 US
cents per share), subject to shareholder approval at the Annual General
Meeting to be held on 23 April 2015.
The maintenance of the level of the dividend reflects the Board's confidence
in the underlying business. This recommendation is consistent with the
commitment to have a disciplined balance between the maintenance of a strong
investment grade rating, returns to shareholders and sequencing of future
investment in line with resulting funding capacity. From time to time any cash
surplus to requirements will be returned to shareholders.
Projects
In 2014, capital expenditure amounted to $6.0 billion, of which $3.2 billion
was committed to expansionary projects and $2.0 billion to sustaining our
existing business. Expansionary capex remains concentrated on the delivery of
our portfolio of major projects (Minas-Rio, Barro Alto, and Grosvenor). As
these projects transition into operational production, expansionary capital
will decrease, which will enable the Group to further align its level of
growth investment with prevailing commodity market conditions.
Projects in ramp up in 2014
In addition to delivering first ore on ship at Minas-Rio in October, the Group
also completed the Boa Vista Fresh Rock (BVFR) niobium and Cerrejón P40
thermal coal projects in 2014.
The BVFR project delivered first production in November, and is expected to
reach full nameplate capacity in 2017. When fully ramped up, production from
existing operations is expected to increase to 6,800 tonnes of niobium per
annum (2014: 4,700 tonnes).
The Cerrejón P40 project was also completed, increasing infrastructure
capacity for coal exports. Ramp up of capacity at the shiploaders will
continue in 2015, although production capacity is expected to be constrained
at 35 million tonnes per annum (Mtpa) owing to market and operational
constraints.
Projects advanced in 2014
The Grosvenor metallurgical coal project in Queensland advanced towards its
target of first longwall coal production in late 2016. Once complete, the
project is expected to deliver 5 Mtpa of high-quality metallurgical coal for
the seaborne market. The Group is also evaluating surface infrastructure
options to fully capture the value from the Moranbah - Grosvenor complex.
At Venetia in South Africa, De Beers continues to advance the development of
the underground project, with the expectation of first underground production
in 2021. In Nickel, the rebuild of the first of Barro Alto's two furnaces is
under way, with the expectation that the plant will reach nameplate capacity
during 2016.
Projects initiated in 2014
In line with its increased focus on capital discipline and responding to
market conditions, the Group approved
relatively few new projects in 2014.
At De Beers, the Gahcho Kué project commenced construction following receipt
of necessary permits and licences and is expected to deliver an estimated 52
million carats (100% basis) over its 13 year life from the second half of
2016. De Beers' 51% share of Gahcho Kué's capital expenditure is approximately
$0.5 billion. The Group also supported investment in a new treatment plant at
the Letlhakane diamond mine in Botswana, a low-risk, high-return project
designed to process the extensive tailings mineral resource that has been
deposited over 30 years. De Beers' 19.2% share of capital expenditure is less
than $0.1 billion.
Acquisition and disposal activity
In July, Anglo American announced that it had reached a binding agreement to
sell its 50% holding in Lafarge Tarmac to Lafarge SA (Lafarge) for a minimum
value of £885 million (approximately $1.35 billion at present) in cash, on a
debt- and cash-free basis, and subject to other customary working capital
adjustments. The sale is subject to a number of conditions including the
completion of the proposed merger of Lafarge and Holcim Limited.
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