Anglo American Plc · LSE:AAL
Anglo American — FY2014 Earnings Presentation
49 slides from Anglo American's earnings presentation, Feb 13, 2015
Slide 1: Preliminary Results Year Ended 31 December 2014
PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2014 13 February 2015 Copper, Los Bronces
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: Agenda
AGENDA Performance Financials Conclusions and looking forward Appendix
Slide 4: Performance
PERFORMANCE Mark Cutifani ae: - one , Su 4 f > ae. be AaY, , tf . Ly 4 Ay my” ’ * he y
Slide 5: Financial Highlights
FINANCIAL HIGHLIGHTS Despite commodity headwinds our operational improvement continues… Group underlying EBIT $4.9 bn down 25%, impacted by lower prices and Platinum strike Underlying earnings $2.2 bn (EPS $1.73) down 17% Operating cash flow $6.1 bn, continuing operational improvements underpin soli
Slide 6: Delivering on Commitments
DELIVERING ON COMMITMENTS We have delivered on our immediate restructuring milestones… Sishen exceeds 35Mt production target • Waste on track for 2015 & 16 ore targets. Minas-Rio • FOOS delivered ahead of schedule and budget. • Final capex expected $400m lower than forecast. Platinum restructu
Slide 7: Operating Performance – Safety
OPERATING PERFORMANCE – SAFETY We have seen a significant reduction in fatalities and injuries… Loss of life (by business) Performance Notes 15 17 15 We deeply regret the loss of six colleagues to 13 incidents in Australia and South Africa. 12 6 If we normalise for the Platinum strike 8 7 6 impr
Slide 8: Operating Performance – Environmental
OPERATING PERFORMANCE – ENVIRONMENTAL Major reduction in environmental emissions and spills reflects focus… Environmental incidents (levels 3 to 5) Performance Notes 30 Focus on hazards and management disciplines reflects alignment with safety approach. 27 22 AA: Sustainable Work Practices One o
Slide 9: Operating Performance – Production
OPERATING PERFORMANCE – PRODUCTION Underlying performance improvements in all commodities… 2014 versus 2013 (% change) +14% +12% +8% +5% +5% +4% +3% (3)% Iron Ore Australia Met Nickel De Beers Export Platinum(2) Copper Group (Kumba) Coal (Export) Thermal Coal(1) (Cu equ.) (3) …+3% increase if tonnes
Slide 10: Operating Performance – Unit Costs
OPERATING PERFORMANCE – UNIT COSTS Productivity improvements and cost reductions across the business… SA mining inflation remains high… …driving SA unit cost increases… …with FX helping lower USD costs. 2014 Group: +5% 2014 Group Cu equivalent: 2014 Group Cu equivalent: (2013: +5%) (local currency b
Slide 11: Underlying EBIT – Diversity Mitigates Pricing
UNDERLYING EBIT – DIVERSITY MITIGATES PRICING Earnings impacted by lower commodity prices... $m 2014 2013 Change Basket commodity price movements(1) Iron Ore and Manganese 1,957 q 3,119 (37)% 1.1 Coal 458 q 587 (22)% Copper 1,193 q 1,739 (31)% 1.0 (9)%(2) Nickel 21 p (44) +148% 0.9 Niobium and Phosp
Slide 12: Kumba
KUMBA Dramatically falling prices and higher waste stripping volumes… FOB unit Underlying Production Realised price Capex ROCE Sishen waste Export sales cost(1) EBIT 2014 48.2 Mt $91/t $34/t $1,911m $763m 60% 187 Mt 40.5 Mt vs. 2013 +14% (27)% (7)% (37)% +16% (39)pp +12% +4% Underlying EBIT ($m) Per
Slide 13: Coal
COAL Despite lower metallurgical and thermal coal pricing… Export prod. FOB price Unit cost Underlying SA UG – OEE(2) Grasstree Capex ROCE met / thermal met / thermal met / thermal(1) EBIT benchmark LW cutting hrs 2014 21Mt & 35Mt $111/t & $69/t $71/t & $45/t $458m $1,045m 7% 59% 92 vs. 2013 +12% &
Slide 14: Copper
COPPER Improved plant throughput performance and benefit of currency weakness… Underlying Production Realised price C1 unit cost Capex ROCE Material mined Sales EBIT 2014 748 kt 300c/lb 169c/lb $1,193m $728m 18% 373 Mt 755 kt vs. 2013 (4)% (8)% +4% (31)% (24)% (7)pp +3% (2)% Underlying EBIT ($m) Per
Slide 15: Platinum
PLATINUM Earnings impacted by five month strike and cost inflation… Equ. ref. Realised Underlying Unit cost Capex ROCE Pt sales Headcount(1) production Basket price EBIT 2014 1,842 koz $2,428/oz $2,112/oz $32m $576m 0% 2,115 k/oz 42,100 vs. 2013 (21)% +3% +20% (93)% (4)% (5)pp (9)% (12)% Underlying
Slide 16: De Beers
DE BEERS Strong sales and operating performance… Underlying Production(1) Realised price Unit cost Capex ROCE Sales (Cons.)(1) Index price EBIT 2014 32.6Mct $198/ct $68/ct $1,363m $689m 15% 32.7Mct +7% vs. 2013 +5% 0% (5)% +36% +45% +4pp +12% Underlying EBIT ($m) Performance notes 1,363 Sales volu
Slide 17: Minas-Rio
MINAS-RIO Successfully shipped first ore on 25 October 2014… Delivered project at $8.4 billion capex Performance notes 0.4 Iron ore production volume of 0.7 Mt (wet basis) in 1.0 2014. 8.8 8.4 7.4 8.4 Three shipments made in 2014, representing sales volumes of 0.2 Mt pellet feed. $7.4bn total
Slide 18: Key Projects in Execution or Ramping to Capacity
KEY PROJECTS IN EXECUTION OR RAMPING TO CAPACITY Major projects are approaching completion… Met Coal - Grosvenor (100% ownership) Niobium - Boa Vista Fresh Rock (100% ownership) Project remains on target for first longwall production in late 2016 Delivered first production in November 2014 Inf
Slide 19: Financials
FINANCIALS René Medori
Slide 20: 2014 Results
2014 RESULTS Despite weaker pricing environment… Dividends per share (cents/share) Key financials 53 53 53 $bn 2014 2013 Change Underlying EBITDA 7.8 9.5 (18)% Underlying EBIT 4.9 6.6 (25)% 32 33% 32 32 Effective tax rate 29.8% 32.0% Underlying earnings 2.2 2.7 (17)% Earning per share 1.73 2.09 (17)
Slide 21: Price Variance
PRICE VARIANCE Whilst our diversified portfolio has provided an element of protection… 2014 vs. 2013 EBIT variance ($m) Indexed commodity prices (1 Jan 2014 = 1) 1.5 Platinum (60) precious Base & 1.4 Copper (365) Variance 1 Jan 1.3 to 31 Dec 2014 Coal 1.2 Aus/Can (528) 1.1 Nickel +7% Coal Diamonds +
Slide 22: 2014 EBIT Variance
2014 EBIT VARIANCE Improved operational performance… 2014 vs. 2013 ($bn) 6.6 (2.4) (2.0) 0.1 (0.8) 0.7 (0.8) 4.9 Bulks 1.3 4.8 0.2 (0.4) Base & Precious 11% 2013 Price(1) FX Inflation(2) Volume(3) Cash Platinum Other 2014 costs(4) strike impact(5) …offset by weaker prices and platinum strike. 22
Slide 23: Group Capital Expenditure
GROUP CAPITAL EXPENDITURE Continued focus on reduction in committed spend and optimisation of SIB capex… Capital expenditure ($bn) Expansionary capital expenditure ($bn) Expansionary(1) Development & stripping Stay in Business (SIB) ($bn) 2013 2014 Proceeds from disposal of property, plant and equip
Slide 24: Net Debt Profile
NET DEBT PROFILE Lower prices are impacting our net debt position… Net debt ($bn) Net debt profile ($bn) Long term net debt target $10bn to $12bn 14.0 Opening net debt – 1 January 2014 10.7 12.9 13.5 Cash flow from operations (6.9) Capital expenditure(1) 6.0 10.7 Cash tax paid 1.3 2013 2014 2015 gui
Slide 25: Progressing on Our Divestment Programme
PROGRESSING ON OUR DIVESTMENT PROGRAMME It’s our strategic intent to focus the portfolio… Lafarge Tarmac 2015 sale on track (£885m) • Conditional on Holcim/Lafarge merger. • Lafarge and Holcim to sell assets, including Lafarge Tarmac(1) to CRH. Platinum • Union: shortlisted parties commenced due
Slide 26: Conclusion & Looking Forward
CONCLUSION & LOOKING FORWARD Mark Cutifani
Slide 27: Driving Value – $1.7bn Run Rate Savings Achieved
DRIVING VALUE – $1.7BN RUN RATE SAVINGS ACHIEVED We are rebuilding our portfolio and our performance engine… Attributable EBIT $bn @ 30 June 2013 prices and FX 1.5 $7.3bn 1.6 0.9 $5.0bn 0.9 0.9 $3.3bn $1.7bn of attributable EBIT Delivered in 2014 2012 Projects Asset Value Disposals and 2016 2016 at
Slide 28: Driving Value – Projects
DRIVING VALUE – PROJECTS…$0.9BN AT 30 JUNE 2013 PRICES We have established control of our major projects… 2014 2016 Project Comment delivered estimate $800m • Commissioned 2 months early Minas-Rio - • Forecast capex $400m below revised budget Boa Vista Fresh • Represents net impact as oxide reaches
Slide 29: Driving Value – Asset Review
DRIVING VALUE – ASSET REVIEW…$1.6BN AT 30 JUNE 2013 PRICES We are already seeing the benefits of our operational improvement initiatives… Business 2014 2016 Operation Comment Unit delivered estimate Coal Moranbah/Grasstree – UG $400m $550m • e.g. 2014: 49% increase in production vs. 2012 Australia C
Slide 30: Driving Value – Value Leakage
DRIVING VALUE – VALUE LEAKAGE…$1.5BN AT 30 JUNE 2013 PRICES We are restructuring our overhead and support cost base… Value leakage 2014 delivered 2016 estimate Comment • Low value projects stopped (Pebble etc.) Project expenditure $330m $300m • Other projects rescheduled or prioritised • Strategic c
Slide 31: Key Risks
KEY RISKS We are managing the business in difficult times… KEY RISKS Asset disposal…current price environment • Operating strategy developed for each asset • Sale for value • Continue to refine portfolio Water in Chile/Brazil…5th year of droughts • Alternate sources identified • Additional conti
Slide 32: 2015 Deliverables
2015 DELIVERABLES A clear set of deliverables… Minas-Rio Ramp up to ~80% capacity by year end. Portfolio Lafarge Tarmac completion targeted for 2015. Other assets in process. Roll-out of ‘Operating model’ to priority assets Sishen (remaining areas), Kolomela, Mogalakwena, Los Bronces and Min
Slide 33: Appendix
&S AngloAmerican APPENDIX
Slide 34: Production Outlook
PRODUCTION OUTLOOK(1) 2013 2014 2015 2016 2017 Copper (2) 775Kt 748kt 720-750kt 720-750kt 710-740kt Nickel(3) 34kt 37kt 20-25kt 40-45kt 42-45kt 49-51Mt 49-51Mt Iron ore (Kumba)(4) 42Mt 48Mt 47-48Mt Previously 48-50 Mt Previously 48-50 Mt Iron ore (Minas-Rio)(5) - 0.7Mt 11-14Mt 24-26.5Mt 26.5Mt Metal
Slide 35: Reconciliation of Total Capital Employed to Average Attributable Capital Employed
RECONCILIATION OF TOTAL CAPITAL EMPLOYED TO AVERAGE ATTRIBUTABLE CAPITAL EMPLOYED $bn 31 Dec 2014 31 Dec 2013(1) 31 Dec 2012(1) Net assets 32 37 44 Less: financial asset investments (1) (2) (2) Add: net debt 13 11 9 Less: De Beers fair value adjustment on 45% pre-existing stake(2) (1) (1) (2) Total
Slide 36: Attributable ROCE
ATTRIBUTABLE ROCE 2014 2013 Business units Average Average Attributable attributable capital Attributable Attributable attributable capital Attributable EBIT(1) ($bn) employed ($bn) ROCE (%) EBIT(1) ($bn) employed(2) ($bn) ROCE(2) (%) Kumba 1.0 1.6 60% 1.6 1.6 99% IOB (0.1) 8.4 (1)% (0.1) 6.5 (1)% M
Slide 37: Earnings Sensitivities
EARNINGS SENSITIVITIES(1) Impact of change Sensitivities analysis ($m) Commodity / Currency Movement Average EBIT Iron Ore (62% CFR China) $10/t 97 370 Hard Coking Coal (FOB Australia) $10/t 125 121 PCI $10/t 92 76 Thermal Coal (FOB South Africa) $10/t 72 188 Thermal Coal (FOB Australia) $10/t 71 55
Slide 38: Average Market Prices
AVERAGE MARKET PRICES 2014 2013 Change Iron ore (62% Fe CFR)(1) - $/t 97 135 (28)% Thermal coal (FOB South Africa) - $/t 72 80 (10)% Thermal coal (FOB Australia) - $/t 71 84 (15)% HCC (FOB Australia average quarterly benchmark) - $/t 125 159 (21)% Copper (LME) - cents/lb 311 332 (6)% Nickel (LME) -
Slide 39: Capital Expenditure
CAPITAL EXPENDITURE(1) $m 2014 2013 Change Kumba Iron Ore 763 655 +16% Iron Ore Brazil 1,922 1,863 +3% Coal 1,005 1,263 (20)% Copper 728 959 (24)% Nickel 14 (28) n/a- Niobium and Phosphates 239 236 +1% Platinum 576 601 (4)% De Beers 689 476 +45% Corporate and other 42 50 (16)% Total capital expendit
Slide 40: Price and FX Assumptions for ROCE Target
PRICE AND FX ASSUMPTIONS FOR ROCE TARGET Commodity and currency 30 June 2013 31 December 2014(1) Iron Ore 62% Fe CFR(2) $116/t $72/t Thermal FOB South Africa $74/t $66/t Thermal FOB Australia $78/t $65/t HCC FOB Australia $145/t(3) $119/t Copper 306c/lb 288c/lb Nickel 619c/lb 677c/lb Platinum $1,317
Slide 41: Price Variance – Bulks
PRICE VARIANCE – BULKS Iron ore sales(1) (Mt) Metallurgical coal sales(2) (Mt) Higher-margin mix Realised Realised $125/t $91/t $140/t $111/t price(3) price(4) 16.5 17.8 22.8 23.7 21% 23% 28% 28% 54% 57% Coking Export 80% 78% sales volume 63% 58% 18% 18% PCI 28% 25% Export thermal 16% 20% 22% 14% 20
Slide 42: Exchange Variance
EXCHANGE VARIANCE 2014 vs. 2013 ($m) Rand weakend 12% compared to 2013 H1 2013 average H2 2013 average H1 2014 average H2 2014 average 9.21 10.08 10.70 11.00 1,318 +8% 12.0 Other(1) 162 ZAR / USD 11.0 CLP 185 10.0 9.0 2013 average 9.65 2014 average 10.85 AUD 143 8.0 Jan 2013 Apr 2013 Jul 2013 Oct 20
Slide 43: Sales Volume Variance
SALES VOLUME VARIANCE 2014 vs. 2013 ($m) Sales volume performance (% change vs. 2013) 678(1) 12% Platinum 367 8% (adjusted for strikes) Increase in copper De Beers 170 4% equivalent production KIO +4%(5) 2% Coal Aus 111 Other(2) 28 Copper (20) (2)% De Beers Coal Au/Ca(3) KIO(4) Platinum Copper (adj.
Slide 44: Debt Maturity Profile at 31 December 2014
DEBT MATURITY PROFILE AT 31 DECEMBER 2014 Debt repayments ($bn) at 31 December 2014 3.9 2.9 2.0 2.1 2.1 2.0 1.8 1.5 1.2 2015 2016 2017 2018 2019 2020 2021 2022 2023+ Corporate BNDES Other subs. Euro Bonds US$ Bonds A$ Bonds Other Bonds De Beers bank debt Financing bank debt % of portfolio 59% 22% 3%
Slide 45: De Beers: Key Financial Metrics
DE BEERS: KEY FINANCIAL METRICS H1 H2 FY H1 H2 FY US$bn 2014 2014 2014 2013 2013 2013 Revenue(1) 3.8 3.2 7.0 3.3 3.0 6.3 Rough diamond sales 3.5 3.0 6.5 3.0 2.8 5.8 Element Six and other 0.3 0.2 0.5 0.3 0.2 0.5 Production costs (0.7) (0.6) (1.3) (0.6) (0.6) (1.2) Purchases of diamonds (1.9) (1.6) (3
Slide 46: De Beers: Supplementary Data by Key Mine (1 of 2)
DE BEERS: SUPPLEMENTARY DATA BY KEY MINE (1 OF 2) H1 H2 FY H1 H2 FY 2014 2014 2014 2013 2013 2013 Jwaneng Waste mined (Mt) 58.5 56.7 115.2 45.9 58.0 103.9 5.0 5.6 10.6 3.5 4.6 8.1 (50%/19.2% economic interest) Ore mined (Mt) Material treated (Mt) 3.9 4.6 8.5 3.4 4.4 7.8 Grade (cpht)(2) 124 142 134 1
Slide 47: De Beers: Supplementary Data by Key Mine (2 of 2)
DE BEERS: SUPPLEMENTARY DATA BY KEY MINE (2 OF 2) H1 H2 FY H1 H2 FY 2014 2014 2014 2013 2013 2013 Venetia Waste mined (Mt) 21.7 19.9 41.6 17.4 12.4 29.8 Ore mined (Mt) 2.7 3.2 5.9 1.4 3.5 4.9 DBCM (74%) Material treated (Mt) 2.9 2.6 5.5 2.7 2.8 5.5 Grade (cpht)(2) 47 70 58 33 82 58 Carats recovered
Slide 48: 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 displays how effectively assets are generating profit for the size of invested capital. ROCE is calculated as underlying EBIT div
Slide 49: Footnotes
FOOTNOTES Slide 9 Slide 20 (1) Includes RSA trade and Cerrejón (1) Excludes non-controlling interest share of capital employed and operating profit, and De Beers fair value uplift on original 45% shareholding. See appendix for further detail around (2) Only including mines unaffected by the strike.