Anglo American Plc · LSE:AAL
Anglo American — FY2005 Earnings Presentation
54 slides from Anglo American's earnings presentation, Feb 22, 2006
Slide 1: Anglo American: Creating Long Term Shareholder Value
ANGLO AMERICAN CREATING LONG TERM SHAREHOLDER VALUE 22 February 2006 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
Slide 2: Strategy and growth
Strategy and growth • Operational delivery today • Development of core businesses to deliver growth • Strategic evolution • Rewarding shareholders 2 2005 Annual Results
Slide 3: Highlights
Highlights Strong performance - underlying earnings up 39% at $3,736m Record production results for nickel, zinc, coal, diamonds and refined platinum group metals Cash generation (EBITDA) up 27% at $8,959m Record cost savings and efficiencies up 32% at $730m Total dividend up 29% to 90c pe
Slide 4: Strong earnings and dividends
Strong earnings and dividends EPS CAGR (99-05): 21% 2.58 US$ 1.87 1.23 1.14 1.25 1.20 0.84 Underlying EPS up 38% Rebased normal dividend up 1999 2000 2001 2002 2003 2004 2005 29% Dividends Special dividend: 33cps USc 33.0 Special CAGR (99-05): 16% 90.0 70.0 49.0 51.0 54.0 Ordinary 47.5 37.5 19
Slide 5: Margins and returns rising
Margins and returns rising EBIT margin EBITDA return on capital 18.5% 26.0% 14.7% 21.3% 11.6% 13.2% 2003¹ 2004 2005 2003¹ 2004 2005 ¹2003 figures are UK GAAP 5 2005 Annual Results
Slide 6: Underlying earnings
Underlying earnings Business unit 2004 2005 9% 8% 13% 14% 5% 3% 20% 14% 12% 18% 13% 7% 11% 19% 33% 39% Platinum Base Metals Gold Industrial Minerals Diamonds Paper and Packaging Coal Ferrous and Industries 6 2005 Annual Results
Slide 7: Metals and Minerals: highlights
Metals and Minerals: highlights Base Metals Ferrous Metals Operating profit Operating profit $1,678m $1,456m $1,276m $887m 2004 2005 2004 2005 • Record operating profit, up 32% on 2004 due to higher • Record operating profit, up 64% on the back of higher production (nickel and zinc) and record price
Slide 8: Metals and Minerals: highlights
Metals and Minerals: highlights Coal Industrial Minerals Operating profit Operating profit $1,019m $421m $370m $497m 2004 2005 2004 2005 • Record operating profit up 105% on 2004 due to higher • Operating profit down 12% due to challenging UK market production and improved export prices conditions a
Slide 9: Precious: highlights
Precious: highlights Platinum Diamonds Operating profit Operating profit $854m $573m $583m $536m 2004 2005 2004 2005 • Operating profit up 59% on the back of increased sales • Operating profit increases to $583m despite lower volumes and higher prices shareholding • Refined PGM production up 5% • Re
Slide 10: Paper and Packaging and Gold highlights
Paper and Packaging and Gold highlights Gold Paper and Packaging Operating profit Operating profit $569m $332m $495m $296m 2004 2005 2004 2005 • Operating profit down 13%, impacted by difficult trading • Operating profit up 12% on 2004 conditions across most key markets • Production increased by 6%
Slide 11: Financial Review
ANGLO AMERICAN CREATING LONG TERM SHAREHOLDER VALUE René Médori Financial Review 11 2005 Annual Results
Slide 12: Financial Performance
Financial Performance $m 2005 2004 %ch Revenue 34,472 31,938 8% Operating profit 6,376 4,697 36% Net finance costs (479) (355) (35%) Profit before tax 5,897 4,342 36% Tax (1,564) (1,201) (30%) Tax rate (%) 26.5% 27.7% Underlying earnings 3,736 2,684 39% Results shown before special items and remeasu
Slide 13: Operating profit variances
Operating profit variances $m Overall cash cost increase: 9,000 +5.8% 3,178 100 8,000 (77) 7,000 (459) (768) 6,000 (257) (19) (19) 6,376 5,000 4,697 4,000 3,000 2,000 1,000 0 2004 Price Exchange Volume Inflation Cash cost Non-cash Associates Other 2005 cost 13 2005 Annual Results
Slide 14: Operating profit variance: Price
Operating profit variance: Price Group total = +$3,178m Commodity price performance 200 2004 2005 Copper 180 Zinc 160 140 Gold 120 Platinum 100 $m 80 4,000 3,500 265 130 3,178 418 3,000 (147) 699 2,500 2,000 895 1,500 918 1,000 500 0 Ferrous Base Coal Platinum Gold Industrial Paper and Total Metals
Slide 15: Record cost and efficiency savings: $730m
Record cost and efficiency savings: $730m • Cost and efficiency savings of $730m in 2005 contributing to the limited cost increases Cost and efficiency savings $730m $m 500 $462m 400 Other Energy 300 $268m Materials & supplies Labour Admin & overhead 200 Maintenance 100 0 Procurement Operating effic
Slide 16: Cash flow analysis
Cash flow analysis EBITDA 9.0 Share of 1.2 EBITDA of associates 7.0 7.8 $bn 1.3 4.6 4.7 4.8 5.7 0.8 1.0 1.2 3.8 3.7 3.6 2001 2002 2003 2004 2005 16 2005 Annual Results
Slide 17: Cash flow analysis
Cash flow analysis 2005 2004 EBITDA 8,959 7,031 Share of EBITDA of associates (1,174) (1,283) Increase in working capital (514) (610) Provisions & other non-cash (6) 153 Cash inflow from operations 7,265 5,291 Dividends from associates and other investments 470 396 Taxation (954) (500) Net cash infl
Slide 18: Evolution of net debt
Evolution of net debt Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Gearing¹ 14.4% 27.9% 32.0% 25.4% 17.0% EBITDA interest cover² 58.4x 50.5x 9.3x 18.5x 20.0x 8.6 8.2 5.6 $bn 5.0 2.0 Net Debt 2001 2002 2003 2004 2005 Net (Acq)/Disposals 1.7 (3.7) (0.7) 1.1 0.5 Capex (1.8) (2.1) (3.0) (3.2) (3.3) Fx impact on d
Slide 19: Strategy and Growth
ANGLO AMERICAN CREATING LONG TERM SHAREHOLDER VALUE Tony Trahar Strategy and Growth 19 2005 Annual Results
Slide 20: Strategy and growth
Strategy and growth • Operational delivery today • Development of core businesses to deliver growth • Strategic evolution • Rewarding shareholders 20 2005 Annual Results
Slide 21: Strategic review: Mondi
Strategic review: Mondi Mondi to be listed in 2006/7 on LSE Financial, legal and other preparatory work underway Support for growth options to be continued 21 2005 Annual Results
Slide 22: Strategic review: Tarmac
Strategic review: Tarmac New structure and strengthened management team to drive improvements Focus on scale and leadership positions to deliver performance Intensive review well underway, phase one complete Growth and turnaround opportunities identified Sales of underperforming and non co
Slide 23: Strategic review: Highveld Steel
Strategic review: Highveld Steel Sale process proceeding Indicative non-binding bids received Short listed buyers currently completing due diligence 23 2005 Annual Results
Slide 24: Strategic review: Tongaat Hulett
Strategic review: Tongaat Hulett Tongaat Hulett operating profit up 90% Tongaat Hulett Board announced: 50% interest in Hulamin to be unbundled and listed BEE equity participation to be introduced in both Tongaat-Hulett and Hulamin 24 2005 Annual Results
Slide 25: Confidence in Anglo's future growth
Confidence in Anglo’s future growth Cost containment Control of Growing Focus on operations/ shareholder mining cashflows value Capital efficiency 25 2005 Annual Results
Slide 26: Project pipeline
Project pipeline Project pipeline $6.7bn of approved projects $10 -15bn of future projects MEREBANK SASA marine COLLAHUASI SADDLER’S OBUASI DEEPS $174m CREEK $52m CERREJÓN 2 EXPANSION Gold Copper Coal ISIBONELO $43m INYANDA $65m SOUTH AFRICA MAFUBE MONASH ENERGY $30m TICOR 2 SISHEN SOUTH EXPANSION $
Slide 27: Base Metal projects
Base Metal projects 5 yr production growth (including acquisitions and disposals) • 2000-2005:copper production increased by 19% zinc production increased by 105% Projects under development • Collahuasi Moly project entered production in Nov, one month ahead of schedule and under budget • Chagres co
Slide 28: Platinum projects
Platinum projects 5 yr production growth Platinum: volume growth ahead • 2000-2005 (refined pt): production increased by 31% (CAGR – m oz of demand 5.5%) 3.4 3.2 Projects under development 3 2.8 • Kroondal ($138m) 2.6 2.4 • Mototolo ($100m) and Marikana ($18m) JVs concluded 2.2 2 • Lebowa Merensky r
Slide 29: Coal: significant project growth
Coal:significant project growth 5 yr production growth Coal: strong volume growth • 2000-2005: production increased by 45% mt 115 Projects under development 110 • Metallurgical coal capacity to increase by 50% in next three years 105 100 • $835 million Dawson expansion on track 95 90 - Increases cok
Slide 30: Diamond project growth
Diamond project growth De Beers 5 yr production growth • 2000-2005: production increased by 36% Projects under development • $791m Victor project approved in August 2005 - 6m carats over the life of mine - Full production in 2009 • $513m Snap Lake project - 19m carats over the life of mine - Full pr
Slide 31: Iron ore expansions
Iron ore expansions Projects under development • Sishen expansion project ($559m - 10mtpa) approved in March Future projects • Potential to increase iron ore production from 31mtpa to 56mtpa • 2 major projects: Sishen South Project – 3mtpa Faleme (Senegal) – 12mtpa 31 2005 Annual Results
Slide 32: Summary
Summary • Record performance • Continued investment in strong growth pipeline • $1.5bn capital return to shareholders • Significant progress on strategic restructuring • Outlook for global economy encouraging: strong demand for our metals well underpinned 32 2005 Annual Results
Slide 33: Anglo American: Creating Long Term Shareholder Value
ANGLO AMERICAN CREATING LONG TERM SHAREHOLDER VALUE 22 February 2006 This presentation is being made only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial
Slide 34: Additional Information
ADDITIONAL INFORMATION Handout only 34 2005 Annual Results
Slide 35: Key Dates
Key Dates • Currency Conversion (US$:Rand) 23 February 2006 • Currency Conversion (US$:£/€) 13 March 2006 • Ex-dividend (JSE) 6 March 2006 • Ex-dividend (LSE) 8 March 2006 • Record date 10 March 2006 • Payment of Final Dividend 3 May 2006 • Interim Results 4 August 2006 35 2005 Annual Results
Slide 36: Market Prices
Market Prices 2005 2004 Gold 445 409 Platinum 897 847 Palladium 201 231 Rhodium 2,056 991 Copper 167 130 Nickel 668 628 Zinc 63 48 Coal: thermal (RSA - API 4 index average) 46.0 54.4 Ferrovanadium 59 20 36 2005 Annual Results
Slide 37: Underlying Earnings Sensitivities
Underlying Earnings Sensitivities US$m 10% change in gold price ± 120 10% change in platinum price ± 119 10% change in palladium price ± 14 10% change in coal price ±193 10% change in copper price ±168 10% change in nickel price ± 26 10% change in zinc price ± 48 10% change in iron ore price ± 34 10
Slide 38: Approved projects
Approved projects Additional Production Approved Project name production Full production capex ($m) (attributable) commences (attributable) Grasstree Maintain production 2006 2006 107 Dawson 2.9mtpa coking 2005 2007 426 Bundoora Maintain production 2006 2006 49 Cerrejon 1 2mtpa 2004 2007 50 Cerrejon
Slide 39: Approved projects
Approved projects Additional Production Approved Project name production Full production capex ($m) (attributable) commences (attributable) Finsch 17m carats over LOM 2004 2007 130 SASA marine 2007 52 Voorspoed 2007 2009 80 Snap Lake 1.5m carats pa 2007 2008 230 Victor 0.6m carats pa 2008 2009 356 M
Slide 40: Analysis of Underlying Earnings
Analysis of Underlying Earnings $m 2005 2004 Platinum 483 240 Gold 105 139 Diamonds 430 380 Coal 724 357 Base Metals 1,240 1,036 Industrial Minerals 267 288 Paper and Packaging 296 367 Ferrous Metals and Industries 757 476 Exploration (115) (91) Corporate Activities (451) (508) Underlying Earnings 3
Slide 41: Analysis of 2005 Underlying Earnings
Analysis of 2005 Underlying Earnings $m Jan-Jun Jul-Dec Platinum 256 227 Gold 69 36 Diamonds 188 242 Coal 263 461 Base Metals 525 715 Industrial Minerals 140 127 Paper and Packaging 133 163 Ferrous Metals and Industries 413 344 Exploration (50) (65) Corporate Activities (238) (213) Underlying Earnin
Slide 42: Analysis of Operating Profit
Analysis of Operating Profit $m 2005 2004 Platinum 854 536 Gold 332 296 Diamonds 583 573 Coal 1,019 497 Base Metals 1,678 1,276 Industrial Minerals 370 421 Paper and Packaging 495 569 Ferrous Metals and Industries 1,456 887 Exploration (150) (120) Corporate Activities (261) (238) Operating Profit¹ 6
Slide 43: Capital Expenditure
Capital Expenditure $m 2005 2004 Platinum 616 633 Gold 722 585 Coal 331 218 Base Metals 271 367 Industrial Minerals 274 304 Paper and Packaging 691 758 Ferrous Metals and Industries 373 284 Other 28 17 Total 3,306 3,166 43 2005 Annual Results
Slide 44: Operating variance: Exchange
Operating variance: Exchange Group total = -$77m Corporate Ferrous $m Paper and Industrial Base & Metals and Packaging Gold Minerals Metals Coal Exploration Industries Platinum Total - (20) (40) (60) 91 (77) (65) (80) (100) (28) (120) (28) (140) (160) (26) (8) (7) (180) (6) 44 2005 Annual Results
Slide 45: Operating variance: Volume
Operating variance: Volume Group total = +$100m $m 160 16 3 17 140 19 120 46 100 (52) 100 80 51 60 40 20 0 Ferrous Paper and Platinum Gold Industrial Coal Base Total Metals and Packaging Minerals Metals Industries 45 2005 Annual Results
Slide 46: Underlying Earnings Variance
Underlying Earnings Variance $m 5,500 5,000 2,176 17 4,500 (88) (288) 4,000 106 (588) 3,500 (143) (54) (86) 3,736 3,000 2,500 2,684 2,000 1,500 1,000 500 2005 Price Exchange Inflation Volume Cash Cost Non-cash Interest Associates Structural & 2005 Cost other 46 2005 Annual Results
Slide 47: Regional Analysis
Regional Analysis Operating profit¹ $m 2005 2004 South Africa 2,868 1,387 Rest of Africa 531 400 Europe 741 949 Americas 1,948 1,720 Australasia 288 241 6,376 4,697 1 operating profit before special items and remeasurements. Includes share of associates. 47 2005 Annual Results
Slide 48: Operating Cost Reconciliation
Operating Cost Reconciliation $m 2004 Operating costs (subsidiaries and share of joint ventures) (22,627) Inflation (459) Exchange (136) Sales volume (404) Depreciation & amortisation (257) Price linked costs (140) Acquisitions, disposals and new operations 414 Structural and other1 287 Cash cost va
Slide 49: Anglo Platinum Reconciliation
Anglo Platinum Reconciliation $m IFRS headline earnings (US$ equivalent) 664 Exploration 21 Other adjustments (2) 683 Minority interest (173) Depreciation on assets fair valued on acquisition (net of tax) (51) Impact of change in South African corporate tax rate on assets fair valued on acquisition
Slide 50: AngloGold Ashanti Reconciliation
AngloGold Ashanti Reconciliation $m IFRS adjusted headline earnings (published) 200 Exploration 45 Other adjustments 1 246 Minority interest (121) Depreciation on assets fair valued on acquisition (net of tax) (20) Contribution to AA plc underlying earnings 105 50 2005 Annual Results
Slide 51: De Beers Reconciliation
De Beers Reconciliation $m DBI headline earnings before class action payment (100%) 824 Adjustments 34 DBI headline earnings before class action payment – AA plc basis (100%) 858 AA plc’s 45% ordinary share interest 386 Income from preference shares 44 Contribution to AA plc underlying earnings 430
Slide 52: EBITDA by Business: 2005
EBITDA by Business: 2005 Operating Profit Add Back Add Back Add Back $m (incl JVs Subsidiaries Subsidiaries Associates & Associates) Depreciation Amortisation Depr. & Amort. EBITDA Platinum 854 428 - - 1,282 Gold 332 536 2 1 871 Diamonds 583 - - 72 655 Coal 1,019 188 - 36 1,243 Base Metals 1,678 312
Slide 53: EBITDA by Business: 2004
EBITDA by Business: 2004 Operating Profit Add Back Add Back Add Back $m (incl JVs Subsidiaries Subsidiaries Associates & Associates) Depreciation Amortisation Depr. & Amort. EBITDA Platinum 536 313 - 4 853 Gold 296 396 2 - 694 Diamonds 573 - - 82 655 Coal 497 150 - 40 687 Base Metals 1,276 339 - 10
Slide 54: Anglo American: Creating Long Term Shareholder Value
ANGLO AMERICAN CREATING LONG TERM SHAREHOLDER VALUE 22 February 2006 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