Anglo American plc · LSE:AAL
Anglo American — H1 2007 Earnings Presentation
46 slides from Anglo American's earnings presentation, Aug 3, 2007
Slide 1: H1 2007 Highlights
H1 2007 Highlights Interim Results 3 August 2007 Cynthia Carroll This presentation is being made only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Prom
Slide 2: Agenda
Agenda H1 2007 Highlights Financial Performance Results Outlook 2 2007 Interim Results
Slide 3: H1 2007 Financial Highlights
H1 2007 Financial Highlights • Record financial performance – Operating profit up 19% at $5.5bn – Cost savings and efficiencies of $257m – Underlying earnings up 22% at $3.1bn – Cash generation (EBITDA) up 12% at $6.6bn • Significant cash returned to investors – Interim dividend up 15% to 38 cents p
Slide 4: H1 2007 Financial Highlights
H1 2007 Financial Highlights Group operating profit ($m) BU operating profit ($m) 5,452 2,165 1,853 4,563 1,517 934 719 644 356 320 331 293 266 257 208 152 Base Platinum Ferrous Coal Diamonds Tarmac Other* H1 2006 H1 2007 *Other includes Mondi, AGA, Exploration and Corporate 4 2007 Interim Results
Slide 5: H1 2007 Strategic Highlights
H1 2007 Strategic Highlights • Significant restructuring progress – Mondi successfully demerged – Sale of remaining 29% of Highveld completed – Unbundling of Hulamin from Tongaat-Hulett Group – Sale of Tarmac announced • Delivering new profitable growth – Advanced stages for multiple projects in Coa
Slide 6: Base Metals
Base Metals • Record operating profit of $2.2bn on the back of increased prices & copper production • Ongoing cost pressures in energy, labour and key consumables continue • Challenging labour environment but 2,165 1,853 minimal impact on performance • Michiquillay privatisation auction in Peru won
Slide 7: Platinum
Platinum • Operating profit up 62% to record $1.5bn driven by higher metal prices • Temporary closure of Rustenburg mine due to fatalities • Significant progress towards major BEE deals 1,517 • Strong future demand expected for 934 Platinum • PPRust North and Amandelbult UG2 projects on schedule H1
Slide 8: Ferrous Metals
Ferrous Metals • Operating profit up to $719m due to higher iron ore prices and sales volumes • Iron ore contribution of $409m • Sishen expansion project scheduled to commence commercial production 719 Q4 2007 644 • Acquired 49% of MMX Minas-Rio iron Core 471 546 ore project in Brazil for $1.15bn Hi
Slide 9: Coal
Coal • Operating profit down to $320m on the back of lower coking coal prices and logistics constraints in Australia • Countermeasures implemented to mitigate H1 performance shortfall in Australia • South African operating profit up 20% 356 320 driven by higher prices and sales volumes • Mafube, Daw
Slide 10: Diamonds
Diamonds • Operating profit down to $266m due to pricing pressure • Total production 6% up on last year’s record • Snap Lake and Victor projects progressing • Pricing increases now coming 293 266 through and stockpiles decreasing H1 2006 H1 2007 10 2007 Interim Results
Slide 11: Industrial Minerals
Industrial Minerals • Tarmac operating profit up 37% at $208m due to benefits from restructuring, tight cost control and favourable demand • Cost savings of $41m achieved • Tarmac International profit nearly doubled due to portfolio and business 208 improvements 152 • Decision reached that Tarmac is
Slide 12: Other Businesses
Other Businesses Mondi Gold 324 303 212 172¹ 138 H1 H1 H1 H1 2006 2007 2006 2007 • Operating profit up 53% to $324m • Operating profit of $138m • Price increases achieved across • Average price received increased by all paper grades 5.4% but total cash costs up 8.5% to • Demerger of Mondi completed
Slide 13: Recap of Highlights
Recap of Highlights • Record financial performance • Significant cash returned to investors • Portfolio restructuring on-track with sale of Tarmac announced • Capitalising on attractive profitable growth opportunities 13 2007 Interim Results
Slide 14: Financial Results
Financial Results Interim Results 3 August 2007 René Médori This presentation is being made only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion
Slide 15: Financial Performance
Financial Performance H1 H1 $bn 2007 2006 change Underlying EPS ($) Operating profit 5.5 4.6 +19% +28% Effective tax rate (%) 31.9 33.9 2.18 2.03 Underlying earnings 3.1 2.5 +22% 1.70 Capex 1.8 1.5 +22% EBITDA 6.6 5.9 +12% ROCE (%) 37.3 21.7 H1 2006 H2 2006 H1 2007 Net debt 5.3 2.7 DPS ($) 0.38 0.33
Slide 16: Operating profit variances
Operating profit variances $m 7,000 296 32 1,325 +3.3% 6,000 (269) 86 (403) (41) (137) 5,452 5,000 4,563 4,000 3,000 2,000 1,000 0 H1 2006 Price Exchange Volume Inflation Cash cost Non-cash Associates Other H1 2007 cost 16 2007 Interim Results
Slide 17: Operating profit variances – Price
Operating profit variances – Price Commodity price performance (indexed) $m 200 H1 2006 H1 2007 7,000 180 Copper 1,325 6,000 160 Avg: $3.07/Ib 140 Platinum 5,000 120 Avg: $1,238/oz 4,563 4,000 100 Jan 06 May 06 Sep 06 Jan 07 May 07 3,000 $m Price variance breakdown 2,000 2,000 1,500 131 73 150 1,000
Slide 18: Operating profit variances - FX
Operating profit variances - FX $m Currency performance 7,000 Rand 296 8 1,325 H1 2006 H1 2007 6,000 7.5 5,000 Rand 7 4,563 4,000 avg: 7.23 avg: 7.16 6.5 avg: 6.31 3,000 6 2,000 5.5 1,000 0 5 H1 2006 Price Exchange Jan 06 May 06 Sep 06 Jan 07 May 07 Sensitivity reflects the impact of a R0.10 change
Slide 19: Operating profit variances - Volume
Operating profit variances - Volume $m 7,000 32 Production increases 296 1,325 6,000 5% 5,000 4,563 4,000 3% 3,000 2% 2,000 1% 1,000 0 H1 2006 Price Exchange Volume Platinum Coal Copper Iron ore (mined) 19 2007 Interim Results
Slide 20: Operating profit variances - Cost
Operating profit variances - Cost $m Cost and efficiency savings of $257m 7,000 Cash cost increase: $m 296 32 +3.3% 1,325 141 6,000 (269) (403) 5,000 108 4,563 4,000 Other 3,000 Admin Maintenance Energy Labour 2,000 Materials 1,000 8 0 H1 2006 Price Exchange Volume Inflation Cash cost Operating Proc
Slide 21: Net cashflow/net debt
Net cashflow/net debt $bn H1 2007 Capital expenditure Opening net debt 3.3 1,411 Cashflow from operations (5.1) $m 177 Capital expenditure 1.8 148 Cash tax paid 1.6 827 Sale of Highveld (0.3) 150 643 Proceeds on sale of Exxaro (0.2) 548 111 Ferrous Metals 79 Dividends paid 1.5 Base 100 276 ONGOING M
Slide 22: Evolution of net debt
Evolution of net debt Jun-06 Dec-06 Jun-07 Gearing¹ 11.0% 12.9% 20.1% 5.3 Post 30 June • MMX acquisition completed (-$1.15bn) Net debt $bn • Mondi demerged (+$2.1bn) 3.3 • Outstanding share buyback 2.7 (-$1.4bn) Jun-06 Dec-06 Jun-07 Net (Acq)/Disposals 1.1 1.4 0.3 Share buyback (1.6) (3.9) (3.1) Cap
Slide 23: Capital return
Capital return Ordinary dividend evolution Share reconciliation since Jan 2006 $m Million Unweighted 1800 CAGR 2002-06: 21% Shares at 01 Jan 2006 1,456 1600 Convertible Bond 48 75cps¹ 1400 Share Buyback (91) 1200 62cps Share Awards 18 Shares at 31 Dec 2006 1,431 1000 51cps Share buyback (58) 800 39c
Slide 24: “New Anglo” post restructuring
“New Anglo” post restructuring H1 2005 H1 2007 $3.0bn Pro forma¹ $4.7bn 57% Diamonds Mondi Gold 7% Coal 5% AIM 5% Base Metals 7% 6% 23% 39% Ferrous 18% Base (29%¹) 12% Diamonds Metals 9% 45% Platinum 17% 13% (23%¹) Coal 12% Platinum 31% Margin ROCE Ferrous Margin ROCE 25% H1 2005 H1 2007 pro forma O
Slide 25: Outlook
Outlook Interim Results 3 August 2007 Cynthia Carroll This presentation is being made only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Orde
Slide 26: Our Ambition
Our Ambition To be the leading global mining company of choice • Deliver consistently superior value for our shareholders by Shareholders outperforming our peers Market & • Own & operate a world-class asset portfolio that is cost Operating advantaged and in the most attractive market segments Positi
Slide 27: Near-term Priorities
Near-term Priorities 1. Achieving production, cost and productivity improvements 2. Aggressively pursuing identified growth opportunities 3. Embedding a stronger performance culture & streamlined management model 4. Ensuring a sharper focus on safety 27 2007 Interim Results
Slide 28: Positive Commodity Outlook
Positive Commodity Outlook • Global growth continues to be supportive for key metals • Chinese demand to continue to underpin prospects • Generally low inventory levels, supply side disruptions • PGM demand to remain robust • Fundamentals for Asian coal markets to remain strong • Base Metal inventor
Slide 29: Core Organic Growth Opportunities
Core Organic Growth Opportunities Unapproved projects $7-8bn • Over $20bn in brownfield & greenfield projects – many $5-6bn forecast to be in 1st or 2nd quartile of cost curve • Potential to increase market $2-3bn $2-3bn share in core segments • Strong track-record of delivering Base Metals Platinum
Slide 30: New Business Development
New Business Development Minas-Rio Michiquillay Pebble • 49% of MMX Minas-Rio • 150,000 tpa production • 50% partnership with iron ore project in Brazil capacity with upside Northern Dynasty • Phase 1 to produce potential Minerals 26.5Mtpa of pellets with • Complimentary to • World class copper ramp
Slide 31: Summary
Summary • A record first half • Additional $4bn buyback programme • Positive outlook for commodity markets • Increased focus on operational excellence • Organisational changes initiated to create an integrated, cohesive company – “One Anglo” 31 2007 Interim Results
Slide 32: Unlocking our potential
Unlocking our potential Interim Results 3 August 2007 This presentation is being made only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Orde
Slide 33: Key Dates
Key Dates • Currency Conversion (US$:Rand) 3 August 2007 • Currency Conversion (US$:£/€) 29 August 2007 • Ex-dividend (JSE) 20 August 2007 • Ex-dividend (LSE) 22 August 2007 • Record Date 24 August 2007 • Payment of Interim Dividend 20 September 2007 • Annual Results 20 February 2008 33 2007 Interim
Slide 34: Market Prices
Market Prices Average Price H1 2007 H1 2006 Platinum - $/oz 1238 1111 Palladium - $/oz 355 318 Rhodium - $/oz 6064 4222 Copper – cents/lb 307 275 Nickel – cents/lb 2024 787 Zinc – cents/lb 162 125 Coal: thermal (RSA - API 4 index average) - $/t 52.6 50.9 34 2007 Interim Results
Slide 35: Underlying Earnings Sensitivities
Underlying Earnings Sensitivities US$m 10% change in platinum price ± 97 10% change in palladium price ± 15 10% change in coal price ± 14 10% change in copper price ± 159 10% change in nickel price ± 67 10% change in zinc price ± 69 10% change in iron ore price ± 26 10% movement in SA rand/US$ ± 199
Slide 36: Approved projects
Approved projects Additional Production Approved Project name production Full production capex ($m) (attributable) commences (attributable) Dawson 2.9mtpa coking 2005 2007 426 Maccauvlei West 2.7mtpa for Eskom 2008 2009 44 Cerrejón 2 1mtpa 2005 2008 43 Lake Lindsay 2.8 mpta coking/thermal 2008 2008
Slide 37: Approved projects
Approved projects Additional Production Approved Project name production Full production capex ($m) (attributable) commences (attributable) Townlands ore Replacement 2014 139 Amandelbult UG2 100,000 oz pa 2012 224 Marikana JV 145,000 oz pa (100%) 2009 18 Mototolo JV 132,000 oz pa (100%) 2007 100 Unk
Slide 38: Analysis of Underlying Earnings
Analysis of Underlying Earnings $m H1 2007 H1 2006 Platinum 717 492 Diamonds 156 164 Coal 244 260 Base Metals 1,504 1,276 Industrial Minerals 179 113 Ferrous Metals and Industries 269 293 Paper and Packaging 189 120 Gold 65 102 Exploration (50) (53) Corporate Activities (215) (265) Underlying Earnin
Slide 39: Analysis of Operating Profit
Analysis of Operating Profit $m H1 2007 H1 2006 Platinum 1,517 934 Diamonds 266 293 Coal 320 356 Base Metals 2,165 1,853 Industrial Minerals 208 152 Ferrous Metals and Industries 719 644 Paper and Packaging 324 212 Gold 138 303 Exploration (55) (66) Corporate Activities (150) (118) Operating Profit¹
Slide 40: Capital Expenditure
Capital Expenditure $m H1 2007 H1 2006 Platinum 643 276 Coal 443 290 Base Metals 148 111 Industrial Minerals 105 108 Ferrous Metals and Industries 250 222 Paper and Packaging 186 254 Gold - 196* Other 15 9 Total 1,790 1,466 *2006 capex represents the Gold spend up to 20 April 2006 40 2007 Interim Re
Slide 41: Operating variance: Exchange
Operating variance: Exchange Group total = $296m $m 350 17 9 4 300 60 296 250 206 200 150 100 50 - Platinum Ferrous Metals Industrial Coal Base Metals Total Minerals 41 2007 Interim Results
Slide 42: Cash costs increase
Cash costs increase $m +3.3% 700 261 600 500 53 12 400 167 (28) (257) 403 300 195 200 100 - Labour & Materials TC/RC Energy Freight Other Cost Cash Costs Contractors Savings 42 2007 Interim Results
Slide 43: Underlying Earnings variance
Underlying Earnings variance $m 4,000 161 19 3,500 842 (133) 10 3,000 (287) (23) 30 (4) 3,058 2,500 2,502 2,000 1,500 1,000 500 0 H1 2006 Price Exchange Inflation Volume Cash Cost Non-cash Interest Associates Structural & H1 2007 Cost other 43 2007 Interim Results
Slide 44: Regional Analysis
Regional Analysis Operating profit¹ $m H1 2007 H1 2006 South Africa 2,497 1,810 Rest of Africa 417 314 Europe 472 475 Americas 1,978 1,805 Australia & Asia 88 159 5,452 4,563 1 Operating profit before special items and remeasurements. Includes share of associates. 44 2007 Interim Results
Slide 45: Operating Cost Reconciliation
Operating Cost Reconciliation $m 14,000 245 269 20 403 12,000 275 12,169 (49) 12,129 (1,203) 10,000 8,000 6,000 4,000 2,000 0 June 2006 Exchange Volume Inflation Depreciation Acqusitions Other Cash costs June 2007 YTD & Disposals YTD 45 2007 Interim Results
Slide 46: Unlocking our potential
Unlocking our potential Interim Results 3 August 2007 This presentation is being made only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Orde