Anglo American plc · LSE:AAL
Anglo American — FY2008 Earnings Presentation
46 slides from Anglo American's earnings presentation, Feb 20, 2009
Slide 1: 2008 Annual Results
2008 Annual Results 20 February 2009 1
Slide 2: Agenda
Agenda • Cynthia Carroll, CEO: – Operational review of 2008 – Positioning Anglo American through the cycle • René Médori, FD: – Financial review of 2008 • Cynthia Carroll: – Outlook • Question and Answer session 2
Slide 3: 2008 Review
2008 Review Cynthia Carroll 3
Slide 4: Summary
Summary • Strong performance in 2008 – Major improvement in safety record – Record operating profit from core operations – Secured new order mining rights across Anglo American’s businesses in South Africa • Substantial progress on our key strategic initiatives – New $1 billion operating profit targ
Slide 5: Safety
Safety • Continued downward trend in fatalities Fatality Rate 40 27 • 17% improvement in Lost Time Injury Frequency Rate Anglo Managed Operations • Virtually all major divisions progressed towards eliminating fatalities and improved lost time injury rate performance LTIFR 1.27 • Examples of outstand
Slide 6: Record core operating profit
Record core operating profit 2008 Split of Operating Profit(1) • More than tripling of operating profit in Coal with record production in all major locations Diamonds 5% Base Metals Coal 24% 22% • Doubling of operating profit in Ferrous Metals Ferrous Platinum and Industries with record production o
Slide 7: Precious
Precious Platinum Diamonds • Refined platinum production of 2.39m oz, • Production of 48.1 m carats, 6% lower than despite flooding at Amandelbult, Eskom load 2007 shedding and safety stoppages • Operating profit (Anglo share) up 5% to $508m • Improved H2 08: refined production of 1.39m oz; • Three
Slide 8: Base Metals and Industrial Minerals
Base Metals and Industrial Minerals Base Metals Industrial Minerals • Record production volumes at Los Bronces, • Held market share in difficult UK markets Mantoverde; higher production at Collahuasi • Successfully maintained Tarmac • Sharply lower H2 demand and pricing International’s operating pro
Slide 9: Bulks
Bulks Coal Ferrous Metals and Industries • Record operating profit of $2.2bn • Record operating profit of $2.9bn – Higher met coal production and higher met and – Higher iron ore production, up 13% to 36.7mtpa thermal coal prices, partially offset by higher at Kumba Iron Ore; higher iron ore and roy
Slide 10: Positioning Anglo American through the cycle
Positioning Anglo American through the cycle Cynthia Carroll 10
Slide 11: Near-term market weakness
Near-term market weakness • Strong demand across core commodities in H1 08 has softened • Since mid-2008, markets characterised by deteriorating demand, increasing stocks and rapidly declining prices • Demand for commodities in 2009 is likely to remain weak Platinum price Copper price H1 08 H2 08 $/
Slide 12: Addressing near-term challenges
Addressing near-term challenges • Actions taken to deal with rapidly changing price environment and increased level of gearing • Ensuring cash preservation and maximising value for shareholders • Optimisation programmes continue to drive cost and efficiency improvements • Long term growth options pr
Slide 13: Actions taken (I) Conserving cash through capex reduction
Actions taken (I) Conserving cash through capex reduction • Completed a wide-ranging review of capital expenditure following the unprecedented decline in commodity prices • 2009 capital expenditure plans reduced more than 50% to $4.5bn, including $1.3bn stay-in-business capex (74% of depreciation) •
Slide 14: Actions taken (II) Production cuts
Actions taken (II) Production cuts • Reduced platinum output: target of 2.4 million ounces for FY09 • Plans to grow metallurgical coal production by 10% for FY09 halted; production to be marginally below FY08 • FY09 thermal coal production to decrease by 2 mt year-on-year • Significantly reduced dia
Slide 15: Actions taken (III) Reducing our cost base
Actions taken (III) Reducing our cost base • Group cost savings: $348 million achieved in 2008, including $217 million from Procurement • Headcount reductions: expected 19,000 reduction in 2009, in line with growth and development plans • Aggressive supply chain management to capture full benefits f
Slide 16: Actions taken (IV) New Asset Optimisation target of $1 billion
Actions taken (IV) New Asset Optimisation target of $1 billion • Asset Optimisation and Procurement to deliver total benefits of $2 billion over three years • Significant progress made during year: – Roll out of AOS structures now complete across all business units – Appointed AOS managers in each d
Slide 17: Favourable cost positions across the group
Favourable cost positions across the group • Majority of production in lower half of cost curve: – 66% of our copper production is in the lower half of the industry C1 cost curve, improving to c. 80% post completion of Los Bronces expansion – Iron Ore production at Sishen in 1st quartile of cost cur
Slide 18: Recap of key messages
Recap of key messages • Record core operating profit • Major safety improvements • $1 billion three-year Asset Optimisation target set • Decisive actions taken to address market challenges 18
Slide 19: Financial Results
Financial Results René Médori 19
Slide 20: 2008 Financial Results
2008 Financial Results $bn 2008 2007 change Operating profit – core 9.8 8.9 +10% Underlying EPS ($) Total group financials: 2007 2008 Operating profit 10.1 10.1 $4.40 $4.36 (-1%) Effective tax rate (%) 33.4% 31.8% 2.90 Underlying earnings 5.2 5.8 -9% 2.18 2.22 Capex 5.2 4.1 1.46 EBITDA 11.8 12.1 ROC
Slide 21: Operating profit variances
Operating profit variances $ million 1,215 (919) 3,124 (740) (1,531) 988 (248) (802) (216) 9,765 8,894 2007 Price - Price - Exchange Volume Inflation Cash Non-cash Associates Other 2008 Traded Bulks Costs costs 21 Operating profit is stated for core operations: Base Metals, Platinum, Coal, Diamonds,
Slide 22: Operating profit variances: Price (Traded)
Operating profit variances: Price (Traded) Base Metals $(1,608)m $ million (491) 806 (484) 633 Traded (633) Metals 8,894 (802) Copper Nickel Zinc PGMs USc/lb LME - Copper 450 400 350 300 30/06/2008 31/12/2007 Provisional Pricing 250 389 USc/lb Provisional Pricing 200 302 USc/lb 150 Cu marked-to-mark
Slide 23: Operating profit variances: Price (Bulks)
Operating profit variances: Price (Bulks) Period 2007 2008 % change $ million 08/09 Japanese RSA API-4 Benchmark - Financial Year Thermal Coal ($/t) 63 120 +90% Bulks 08/09 Japanese Goonyella Benchmark – Financial Year Hard Coking Coal ($/t) 98 300 +206% 2008 Calendar Kumba Iron Ore Achieved Year Pr
Slide 24: Operating profit variances: FX and volume
Operating profit variances: FX and volume Key Exchange Rate Trend 11.00 AUD 1.70 $ million 08 Avg: 1.17 07 Avg 1.19 1.50 10.00 H2 +$1,119m 1.30 AUD/USD ZAR/USD 9.00 ZAR 1.10 08 Avg: 8.27 1,215 (919) 8.00 07 Avg 7.05 0.90 7.00 0.70 2,322 6.00 0.50 H1 +$96m Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Ju
Slide 25: Operating profit variances: Costs
Operating profit variances: Costs $ million 7.1% increase in 5.5% increase non controllable in controllable 1,215 (919) cash costs cash costs (740) 2,322 (310) (222) (144) (188) (667) ICE Brent Crude ($bbl)(1) 160 8,894 140 $110/bbl 120 $88/bbl 100 $82/bbl 80 $63/bbl 60 -$164m 40 20 -$21m 0 Jan-07 J
Slide 26: Capital expenditure and net debt
Capital expenditure and net debt Capex ($ million) $bn Gearing 2008 Opening net debt 5.2 20.0% 506 Operating cashflows (9.6) 500 Capital expenditure 5.1 459 489 Barro Alto 338 Cash tax paid 2.2 502 713 Minas-Rio Disposals (1.5) 549 Major Acquisitions(2) 8.6 Projects 960 1,928 Dividends paid 2.3 2,33
Slide 27: Debt evolution & gearing
Debt evolution & gearing External net debt: $3.55bn 12.0 37.8% 40% 35% 10.0 30% 8.0 25% 20.0% $bn 6.0 20% 11.0 12.9% 15% 4.0 10% 2.0 5.2 3.3 5% - 0% 2006 2007 2008 Net Debt Gearing % 27
Slide 28: Overview of committed financing
Overview of committed financing Summary of the Group’s bonds and committed bank facilities Undrawn committed facilities and cash Description Facility Utilisation at Maturity •At 31 December, the Group had over $7 billion amount 31Dec 08 undrawn committed facilities and cash, after GBP 300m Bond $0.4
Slide 29: Outlook
Outlook Cynthia Carroll 5) ANGLO AMERICAN
Slide 30: Market outlook
Market outlook • Markets are expected to remain weak and uncertain in the short term • However, medium-to-longer term market fundamentals remain attractive • We continue to invest in profitable growth with a bias towards copper, export bulks and platinum 30
Slide 31: Future production growth is well-timed
Future production growth is well-timed 2009 2010 2011 2012 2013 Copper Los Bronces +173ktpa* Nickel Barro Alto 36ktpa Minas Rio Seaborne 26.5Mtpa Iron Ore Sishen South 9Mtpa Twickenham 180kozpa Platinum Full production Amandelbult 2016-2019 No. 4 Shaft** 271kozpa Note: Selected approved projects 31
Slide 32: Anglo American growth profile
Anglo American growth profile Mtpa Iron ore production growth Major growth projects in: 75 50 • Copper Well timed to enter • Iron ore production in 2011 40 • Coal 2008 2010 2012 Copper production growth Coal production growth Ktpa Mtpa 900 115 100 650 500 90 32 2008 2010 2012 2008 2010 2012
Slide 33: Outlook
Outlook • Weak current market conditions, but medium-to-longer term fundamentals remain attractive • Anglo well placed to create long term shareholder value 33
Slide 34: Question and Answer session
Question and Answer session 34
Slide 35: Appendix
Appendix 5) ANGLO AMERICAN
Slide 36: Market prices
Market prices Average Price 2008 2007 Platinum - $/oz 1,585 1,304 Palladium - $/oz 355 355 Copper – cents/lb 315 323 Nickel – cents/lb 953 1,686 Zinc – cents/lb 85 147 Coal: Thermal RSA API-4 index average - $/tonne 120 63 36
Slide 37: Underlying earnings sensitivities
Underlying earnings sensitivities US$m 10% change in platinum price + 144 10% change in palladium price + 22 10% change in coal price + 349 10% change in copper price + 275 10% change in nickel price + 50 10% change in zinc price + 45 10% change in iron ore price + 88 10% change in SA rand / US$ + 2
Slide 38: Analysis of underlying earnings
Analysis of underlying earnings $m 2008 2007 Base Metals 1,369 3,100 Platinum 1,313 1,299 Ferrous Metal & Industries 1,396 605 Coal 1,581 490 Diamonds 256 239 Industrial Minerals 173 384 Exploration (200) (145) Corporate Activities & Unallocated Costs (651) (495) Paper & Packaging - 189 Gold - 95 Un
Slide 39: Analysis of operating profit
Analysis of operating profit $m 2008 2007 Base Metals 2,505 4,338 Platinum 2,226 2,697 Ferrous Metal & Industries - core 2,843 1,210 Coal 2,240 614 Diamonds 508 484 Exploration (212) (157) Corporate Activities & Unallocated Costs (345) (292) Core 9,765 8,894 Ferrous Metal & Industries – non core 92
Slide 40: Regional analysis
Regional analysis Operating Profit $m 2008 2007 South Africa 5,107 4,291 Rest of Africa 467 693 Europe (183) 513 Americas 2,956 3,942 Australasia & Asia 1,738 151 Total 10,085 9,590 40 Operating profit prepared on a continuing business basis (excludes Paper & Packaging and AngloGold Ashanti in 2007)
Slide 41: Capital expenditure
Capital expenditure $m 2008 2007 Base Metals 1,494 610 Platinum 1,563 1,479 Ferrous Metal & Industries 831 470 Coal 933 1,052 Industrial Minerals 301 274 Paper & Packaging - 186 Other 24 46 Total 5,146 4,117 41 Capital Expenditure relates to cash expenditure on tangible assets
Slide 42: Operating profit variance: Exchange
Operating profit variance: Exchange $ million 204 29 36 1,215 264 682 Platinum Coal Base Ferrous Corporate Total 42 Variances are stated for core operations excluding associates: Base Metals, Platinum, Coal, Diamonds, Ferrous Metals (Kumba Iron Ore, Scaw Metals, Anglo Ferrous Brazil)
Slide 43: Operating profit variance: Price – PGMs
Operating profit variance: Price – PGMs $ million 201 (27) 52 806 580 Platinum Rhodium Ruthenium Other Total PGMs 43
Slide 44: Underlying earnings variance
Underlying earnings variance $ million 725 (778) 1,311 (546) (1,058) 636 (554) (128) (132) 5,761 5,237 2007 Price Volume Cash Costs Interest Associates 2008 Exchange Inflation Non Cash Structural & Costs Other 44
Slide 45: Operating profit variances: Costs
Operating profit variances: Costs 12.6% increase in cash costs Uncontrollable +7.1% Controllable +5.5% (110) 247 (162) (421) (1,531) (491) (263) 75 270 (144) (222) (125) (185) Fuel Electricity Sulphur / Royalties Freight & TC/RC Stock Labour & Consumables Maintenance Admin Cost Cash Cost Sulphuric A
Slide 46: Operating cost reconciliation
Operating cost reconciliation $ million 1,531 14,799 682 222 12,161 (872) 740 216 119 2007 Exchange Volume Inflation Non Cash Acquisitions & Other Cash Costs 2008 Disposals Variances are stated for core operations excluding associates: Base Metals, Platinum, Coal, Diamonds, Ferrous Metals (Kumba Iro