Anglo American Plc · LSE:AAL
Anglo American — H1 2014 Earnings Presentation
59 slides from Anglo American's earnings presentation, Jul 25, 2014
Slide 1: Interim Results, Six Months Ended 30 June 2014
INTERIM RESULTS SIX MONTHS ENDED 30 JUNE 2014 25 July 2014
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American plc (“Anglo American”) and comprises the written materials/slides for a presentation concerning Anglo American. By attending this presentation and/or reviewing the slides you agree to be bound by the following con
Slide 3: Report Card
REPORT CARD We are making progress on our key issues… BUSINESS BASICS Safety………………………………….………..31% reduction in injury frequency rate(1) Environment…………………..…………………....60% reduction in Level 3(2) incidents Production……………………..……………….....…7% increase in production volumes Costs…………………………..………
Slide 4: Progress Towards Our ROCE Target
PROGRESS TOWARDS OUR ROCE TARGET Improved operational performance… $bn H1 2014 vs. H1 2013 Controllable Non-controllable (1) ROCE 14% (1) (1) ROCE ROCE 13% 11% ROCE 10% 3.9 3.5 3.3 2.9 (2) (5) H1 2013 Volume Cash (3) Platinum (4) Controllable Price Exchange Inflation (6) H1 2014 operating costs stri
Slide 5: Performance - Mark Cutifani
PERFORMANCE MARK CUTIFANI
Slide 6: Safety & Health
SAFETY & HEALTH Focus on achieving zero harm… Fatal Injuries SAFETY 20 H2 H1 17 • We deeply regret the loss of three colleagues 6 15 15 13 to incidents in Australia and South Africa 7 7 6 5 14 • The total recordable case frequency rate 8 10 8 9 3 (TRCFR), at 0.74, continues to improve on record leve
Slide 7: Environment
ENVIRONMENT We are working on our processes… Environmental incidents (1) MANAGING OUR PROCESS 30 H2 H1 26 21 12 • 2013 reflects abnormal number of weather 11 (rainfall) and related incidents (water releases) 16 7 15 18 • Focus on management, reporting and sharing 5 of learnings around environmental
Slide 8: Financial Highlights
FINANCIAL HIGHLIGHTS Operational improvement continues… Underlying EPS H2 PERFORMANCE US $ per share 5.06 H1 4.13 • Operations performance continues to improve with 2.48 volumes up and costs down 2.29 2.28 2.09 • Group operating profit(1) down 10% to $2.9bn, 0.87 1.11 2.58 1.00 impacted by lower com
Slide 9: Iron Ore and Manganese
IRON ORE AND MANGANESE Sishen and Kolomela improvements more than offset by price drop… Sishen production Sishen waste mining RESULTS Mt 37 Mt ~270 • Kumba Iron Ore operating profit $1,182m, down 26%; 35 36 ~250 40% of Group total; attributable ROCE 80% 31 ~220 • Manganese operating profit $99m; 3%
Slide 10: Sishen Mine Production Recovery Plan
SISHEN MINE PRODUCTION RECOVERY PLAN Key actions already taken… Strategic redesign of the western pushbacks complete - improved ore exposure and • To achieve production of 37 Mt by 2016: reduction of ~600 Mt waste in LoM plan – New mine design incorporated in mining schedules – significant waste r
Slide 11: Minas-Rio 95% Complete for FOOS 2014
MINAS-RIO 95% COMPLETE FOR FOOS 2014 Overall Project Progress - 92% complete Commissioning – under way Mine and beneficiation plant Mine 100% 100% of Pre-stripping completed Primary & secondary crusher Beneficiation Ball mill Plant 91% Flotation circuit – on track for August Pipeline Pip
Slide 12: Minas-Rio Video
MINAS-RIO VIDEO 12
Slide 13: Coal Australia and Canada
COAL AUSTRALIA AND CANADA Strong productivity improvements in a weak price environment… Grasstree Longwall RESULTS ktpd • Operating profit of $18m, down 86%; <1% of Group 50 ROM Average total; attributable ROCE 0% 40 PERFORMANCE 30 Met coal production up 21% with record UG 20 performance driven by
Slide 14: Coal South Africa and Colombia
COAL SOUTH AFRICA AND COLOMBIA Strong returns continue… Goedehoop UG (1) RESULTS ktpd • Coal SA: operating profit of $178m, up 4%; 6% of 70 ROM Average Group total; attributable ROCE 28% 60 • Coal Colombia: operating profit $95m, down 1%; 3% 50 of Group total; attributable ROCE 19% 40 30 PERFORMANCE
Slide 15: Copper
COPPER Achieving operational stability at key assets… Los Bronces materials mined up 21% (1) RESULTS ktpd 600 • Operating profit of $760m, up 20%; 26% of Group total; ROM Average attributable ROCE 22% 500 400 PERFORMANCE 300 Winter Production of 396 Kt, 12% increase, driven by weather 200 throughp
Slide 16: Nickel
NICKEL Barro Alto improving stability…. Barro Alto total furnace throughput RESULTS • Operating profit of $26m(1); 1% of Group total; tpd Total throughput EF1 & EF2 Average 7,000 attributable ROCE 2% 6,000 PERFORMANCE 5,000 Sustained operational performance improvement at 4,000 Barro Alto: 3,000
Slide 17: Niobium and Phosphates
NIOBIUM AND PHOSPHATES Results have been impacted by lower pricing and cost escalation… Niobium production growth RESULTS tonnes +51% • Niobium: Operating profit of $34m, down 19%; 1% of Group total; Attributable ROCE 16% ~6,800 ~6,800 • Phosphates: Operating profit of $9m, down 81%; 0% of Group tot
Slide 18: Platinum
PLATINUM Platinum strike finally resolved… Mogalakwena material mined up 34% RESULTS ktpd Operating loss of $1m; Attributable ROCE 0% 400 tonnes mined Average 350 PERFORMANCE 300 • Production hit by 5-month strike, 60% of production 250 maintained, c. 440 Koz production lost 200 • Sales of 1.04 Mo
Slide 19: De Beers
DE BEERS Improved demand, cost and favourable FX drove performance… Rough diamond sales Closing index price change $bn RESULTS +15% • Operating profit of $765m, up 34%; 26% of Group total; 6% 7% 3.5 attributable ROCE 13%; total sales of $3.8bn (+15%) 3.0 3.0 2.8 0% 2.6 PERFORMANCE (4%) Strong US d
Slide 20: De Beers
DE BEERS Strong industry fundamentals... • De Beers has an attractive market position (>30% market share) • Globally recognised brand • De Beers’ success is driven by consumer desire. Consumption very much on an upward trend… • …growing Chinese and Indian middle classes play into this consumption ph
Slide 21: Financials - Rene Medori
FINANCIALS RENE MEDORI
Slide 22: H1 2014 Results
H1 2014 RESULTS Underlying EPS ($/share) Key financials H1 H1 1.41 $bn Change 2014 2013 Underlying EBITDA 4.3 4.7 (8)% 1.11 0.16 0.98 Underlying operating profit 2.9 3.3 (10)% 33% 0.87 Effective tax rate 31.5% 32.7% Underlying earnings 1.3 1.3 3% 1.00 Capital expenditure 2.8 2.4 15% 11% Net debt 11.
Slide 23: H1 2014 Operating Profit Variance
H1 2014 OPERATING PROFIT VARIANCE H1 2014 vs. H1 2013 ($bn) 3.3 (1.0) 0.1 (0.4) 2.9 (0.7) (0.4) 0.5 2.7 Bulks 0.8 (0.2) Base & 2% reduction in cash precious costs in real terms 11% H1 2013 Price(1) Exchange Inflation(2) Volume(3) Cash Platinum H1 2014 costs(4) strike impact(5) (1) Price variance cal
Slide 24: Price Variance
PRICE VARIANCE H1 2014 vs. H1 2013 ($m) Indexed commodity price (1st Jan 2013 = 1) Variance Base & Precious since 1 De Beers (60) Realised price Jan 2014 down 4% due 1.2 to lower Platinum (112) product mix Mark-to-market De Beers +7% Copper (68) 1.1 loss of $64m Nickel +25% Platinum +8% Coal 1.0 (25
Slide 25: Exchange Variance
EXCHANGE VARIANCE H1 2014 vs. H1 2013 ($m) Rand stabilised during H1 2014 ZAR / USD 755 11.5 11.0 +1% Other(1) 51 10.5 CLP 95 10.0 9.5 83 9.0 AUD 8.5 H1 2013 average: 9.22 H2 2013 average: 10.08 H1 2014 average: 10.70 33% 8.0 Jan 2013 Apr 2013 Jun 2013 Oct 2013 Dec 2013 Apr 2014 Jun 2014 AUD appreci
Slide 26: Sales Volume Variance
SALES VOLUME VARIANCE(1) H1 2014 vs. H1 2013 ($m) Sales volume performance (% change vs. H1 2013) 507 20% 17% 15% Increase in copper equivalent production 6% +7%(5) Copper 177 2% (3)% De Beers Coal Au/Ca(3) Copper Palladium KIO(4) Platinum Platinum 171 Platinum strike impact on sales limited due to
Slide 27: Cash Costs Variance
CASH COSTS VARIANCE South Africa mining inflation …driving up South African However, Group real cash remains high business’s unit costs costs(6) are down, driven by volume and cost savings South Africa cost inflation 13% 8% 8% 7% 12% 10% H1 2014 Group: 5% (H1 2013: 5%) 4% × Increase in 3% unit cost
Slide 28: Group Capital Expenditure
GROUP CAPITAL EXPENDITURE Capital expenditure ($bn) Expansionary capital expenditure ($bn) Expansionary(1) Development & Stripping(2) Stay in Business (SIB)(3) 2.8 H1 2014 H1 2013 2.4 Minas-Rio 1.0 0.6 Grosvenor 0.2 0.2 1.6 1.2 Platinum projects 0.1 0.1 Others(4) 0.3 0.3 Total 1.6 1.2 0.4 0.4 Guidan
Slide 29: Net Debt Profile
NET DEBT PROFILE Net debt ($bn) Net debt profile ($bn) 16.0 Opening net debt – 1 January 2014 10.7 14.0 15.0 13.5 Cash flow from operations (4.0) 11.5 10.7 Capital expenditure(1) 2.8 2013 H1 2014 2014 guidance(3) 2015 guidance(3) Cash tax paid 0.7 Long term net debt target is $10bn to $12bn Net inte
Slide 30: Lafarge Tarmac Divestment Update
LAFARGE TARMAC DIVESTMENT UPDATE • Sale and purchase agreement now signed with Lafarge for our 50% interest in the Lafarge Tarmac JV • Subject to a number of conditions including: – Completion of the Lafarge/Holcim merger – Divestment of Lafarge Tarmac being accepted as a suitable remedy • Minimum p
Slide 31: Approach to Improvements - Mark Cutifani
APPROACH TO IMPROVEMENTS MARK CUTIFANI
Slide 32: Strategic Context
STRATEGIC CONTEXT We are clear on where we are going… KEY STRATEGY POINTS Diversified mining portfolio…..commodities, assets, geographies and markets: Best assets deliver sustainable returns Focus capital on upstream value drivers….highest margin impact points Portfolio management: Priority
Slide 33: Our Journey: Organisation
OUR JOURNEY Our “change model” has been developed in 3 parts … 1 ORGANISATION…at commodity level (1) As-is structure by band Proposed to -be structure LoW Band 3 Exec Head / CFO LoW 5 Business Leader KEY STEPS Band 4 Exec Head / GM / Head of / Head of / CFO / GM / Lead The approach LoW 4 Manager C
Slide 34: Our Journey: Mining & Operating Approach
OUR JOURNEY Our “change model” has been developed in 3 parts… 2 MINING & OPERATING APPROACH Mogalakwena - Original Design The Approach Identify short term opportunities - 12 months impact Develop optimal mining and process configuration • Resource potential • Mine design • Process optimisation
Slide 35: Our Journey: Business Process
OUR JOURNEY Our “change model” has been developed in 3 parts… 3 BUSINESS PROCESS Control Charter Q2-13 to Q2-14 Throughput (tms) Nickel Q 2-13 Q 3-13 Q 4-13 Q 1-14 Q 2-14 The Approach 7000 1 1 1 2 22 1 1 2 222 2 22 2 2 2 2 222 2 Analyse and design work flow 2 3 2 2 2 2 22 2 3 2 22 2 Plan at leve
Slide 36: We Could Have Produced $2.6bn Additional Operating Profit in 2013
WE COULD HAVE PRODUCED $2.6BN ADDITIONAL OPERATING PROFIT IN 2013* * If all operations were capable, stable and operated 24/7…but does not include headwinds. $bn +43% 0.2 8.6 1.8 +2.6 0.6 6.1 2013 Operating Improved Stability Improved Capability Operating 24/7 Operating Profit Possible Profit (est.)
Slide 37: Managing the Portfolio
MANAGING THE PORTFOLIO Focus on Priority 1 delivery and potential…Priority 2 consistency and potential… H1 2014 EBIT contribution in $bn Number of EBIT $bn operations 3.0 2.9bn -30 2.5 Increasing complexity with marginal benefit 2.0 -20 1.5 25 1.0 -10 19 15 0.5 0.2bn 0.0 (0.1)bn (0.5) Priority 1 – m
Slide 38: Focus on Returns - Attributable ROCE
FOCUS ON RETURNS - ATTRIBUTABLE ROCE TARGET IS 15% ROCE BY END OF 2016… (1) Attributable annualised Operating Profit $bn 0.5 7.3 Identified potential 1.3 Identified but not achieved 0.5 0.1 Achieved to date 1.2 0.7 0.3 0.9 0.9 $1.6bn pa of sustainable DV established 3.3 Valued at: Delivered in: 30th
Slide 39: Attributable ROCE: The Portfolio Focus
ATTRIBUTABLE ROCE.....THE PORTFOLIO FOCUS H1 2014 achieved H1 2013 achieved Business attributable ROCE(1) (2) attributable ROCE(1) (2) (%) (%) Kumba 80% 113% Iron Ore Brazil (Minas-Rio) 0% (1)% Manganese 23% 24% Coal Australia and Canada 0% 4% Coal South Africa and Colombia 24% 22% Copper 22% 17% Ni
Slide 40: Production Outlook
PRODUCTION OUTLOOK 2012 2013 2014 2015 2016 Copper (1) 660 Kt 775 Kt 725-740kt c.700kt c.700kt Previously 710-730kt Nickel(2) 31 Kt 34kt 32-35kt 20-25kt 35-38kt Previously 30-35 Kt Iron ore (Kumba)(3) 43 Mt 42Mt 44-46Mt 45-47Mt 46-48Mt Iron ore (Minas-Rio) (4) - - N.M. (5) 11-14Mt 24-26.5Mt Metallur
Slide 41: Summary and Wrap
SUMMARY AND WRAP We presented 2014 as a transition year… BACK TO BASICS FINANCIAL DELIVERY • Safety • Operating profit • Production • Attributable ROCE • Costs • Dividend KEY MILESTONES DIVESTMENT UPDATE • Platinum………………….. ON TRACK • Lafarge Tarmac • Rustenburg 3x shafts • Minas-Rio….....……………ON TR
Slide 42: The Diversified Miner
THE DIVERSIFIED MINER Our commodity diversification is unique… Consensus commodity prices (nominal) 150 Nickel 140 130 Diamonds Palladium 120 Platinum Thermal Coal 110 Hard Coking Coal 100 Copper Manganese 90 80 70 Iron Ore 60 50 2013e 2014e 2015e 2016e 2017e 2018e …and provide us with a range of in
Slide 43: The Diversified Miner
THE DIVERSIFIED MINER Our commodity diversification is unique… Consensus commodity prices (nominal) – weighted by revenue based on Anglo American 2013 production 150 140 130 Precious: • Platinum Consumables 120 • Palladium • Diamonds 110 Base metals: • Copper Infrastructure & consumables • Nickel 10
Slide 44: The Diversified Miner
THE DIVERSIFIED MINER And so if we run our businesses well… Consensus commodity prices (nominal) – weighted by revenue based on Anglo American 2013 production 150 140 Precious: 130 • Platinum Consumables • Palladium 120 • Diamonds Combined 110 Base metals: Infrastructure • Copper & consumables 100 •
Slide 45: Appendix
AngloAmerican APPENDIX
Slide 46: ROCE and Attributable ROCE – Definition
ROCE AND ATTRIBUTABLE ROCE – DEFINITION Return on capital employed (ROCE) is a ratio that measures the efficiency and profitability of a company’s capital investments. It indicates how effectively assets are generating profit for the size of invested capital. ROCE is calculated as underlying operati
Slide 47: Reconciliation of Total Capital Employed to Average Attributable Capital Employed
RECONCILIATION OF TOTAL CAPITAL EMPLOYED TO AVERAGE ATTRIBUTABLE CAPITAL EMPLOYED 30 Jun 31 Dec 30 Jun 31 Dec $bn 2014 2013(1) 2013(1) 2012(1) Net Assets 38 37 40 44 Less: Financial Asset Investments (1) (1) (2) (2) Add: Net Debt 12 11 10 9 Less: De Beers Fair value adjustment on 45% pre-existing st
Slide 48: Attributable ROCE
ATTRIBUTABLE ROCE H1 2014(1) H1 2013(1) Annualised Average Annualised Average Business Units Attributable Attributable attributable attributable attributable attributable ROCE(2) ROCE(2) Operating Profit(2) Capital Employed Operating Profit(2) Capital Employed (%) (%) ($bn) ($bn) ($bn) ($bn) Kumba 1
Slide 49: Driving Value Delivered $0.8bn in Operating Profit
DRIVING VALUE DELIVERED $0.8BN IN OPERATING PROFIT H1 2013 vs. H1 2014 Driving Value 11% Marketing initiatives 0.1 3.3 0.1 0.5 0.2 0.1 (0.1) (0.4) 2.9 0.4 0.1 0.0 (0.4) 2.7 Overheads (1.1) 0.8 Value Leakage H1 2013 Actual Price(1) Exchange Inflation(2) Volume(3) Cash Platinum Value Leakage Structura
Slide 50: Analysis of Underlying Operating Profit
ANALYSIS OF UNDERLYING OPERATING PROFIT(1)(2) $m H1 2014 H1 2013 Iron Ore and Manganese 1,229 1,653 Coal 260 345 Copper 760 635 Nickel 26 (11) Niobium 34 42 Phosphates 9 48 Platinum (1) 187 De Beers 765 571 Total underlying operating profit(3) 2,932 3,262 (1) Underlying operating pro
Slide 51: Reconciliation of Operating Profit to Underlying Earnings
RECONCILIATION OF OPERATING PROFIT TO UNDERLYING EARNINGS $m H1 2014 H1 2013 Total underlying operating profit 2,932 3,262 Net finance costs (112) (218) Income tax expense (888) (995) Non-controlling interests (648) (799) Total underlying earnings 1,284 1,250 51
Slide 52: Analysis of Underlying Earnings
ANALYSIS OF UNDERLYING EARNINGS $m H1 2014 H1 2013 Iron Ore and Manganese 443 609 Coal 161 273 Copper 309 207 Nickel 29 (17) Niobium 23 - 23 Phosphates 10 31 Platinum (1) 92 De Beers 469 295 Corporate and other (159) (263) Total underlying earnings 1,284 1,250 52
Slide 53: Underlying Earnings Sensitivities
UNDERLYING EARNINGS SENSITIVITIES(1) Commodity / Currency Change in price / exchange rates H1 2014 ($m) Iron Ore + $10/t 72 Metallurgical Coal + $10/t 64 Thermal Coal + $10/t 69 Copper(2) + 10c/lb 41 Nickel(3) + 10c/lb 2 Platinum + $100/oz 47 Palladium + $100/oz 28 Rhodium + $100/oz 5 ZAR / USD(4) +
Slide 54: Average Market Prices
AVERAGE MARKET PRICES H1 2014 H1 2013 Iron ore (62% Fe CFR) - $/t 111 137 Thermal coal (FOB South Africa) - $/t 77 83 Thermal coal (FOB Australia) - $/t 76 89 HCC (FOB Australia average quarterly benchmark) - $/t 132 169 Copper (LME) - cents/lb 314 342 Nickel (LME) - cents/lb 749 732 Pla
Slide 55: Price & FX Assumptions for ROCE Target
PRICE & FX ASSUMPTIONS FOR ROCE TARGET Commodity 30 June 2013 Current (24 June 2014) (2) Iron Ore FOB Australia $108/t (CFR $117) $86/t (CFR $94) Thermal FOB South Africa $74/t $70/t Thermal FOB Australia $78/t $68/t HCC FOB Australia $145/t(1) $111/t Copper 306c/lb 319/lb Nickel 619/lb 861/lb Plati
Slide 56: Price Variance – Bulks
PRICE VARIANCE – BULKS Iron ore sales(1) (Mt) Metallurgical coal sales(2) (Mt) Australian and Canada Moving to shorter term Coal Exports sales(2) (Mt) contracts Higher-margin mix Realised $125/t $104/t Realised $151/t $117/t price(3) price(4) 7.9 9.2 10.7 11.1 23% 28% 57% 61% Coking Export 79% sales
Slide 57: Regional Analysis – Revenue by Destination
REGIONAL ANALYSIS – REVENUE BY DESTINATION $m H1 2014 H1 2013 South Africa 1,395 1,288 Other Africa 877 623 South America 1,010 1,046 North America 596 589 Australia and Asia 8,126 7,964 Europe 4,140 4,683 Total Revenue 16,144 16,193 57
Slide 58: Capital Expenditure
CAPITAL EXPENDITURE(1) $m H1 2014 H1 2013 Kumba Iron Ore 305 248 Iron Ore Brazil 1,007 629 Coal Australia & Canada 403 420 Coal South Africa 54 56 Copper 333 472 Nickel (26)(2) (18)(2) Niobium 90 64 Phosphates 18 8 Platinum 245 235 De Beers 320 255 Corporate and other 15 28 Tot
Slide 59: Debt Maturity Profile at 30 June 2014
DEBT MATURITY PROFILE AT 30 JUNE 2014 Debt repayments(1) ($bn) at 30 June 2014 3.8 2.9 2.0 2.1 2.1 1.7 1.7 1.5 1.1 0.6 H2 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023+ US Bonds Euro Bonds Other Bonds Corporate bank debt De Beers Subsidiary financing other BNDES financing Corporate BNDES Other s