Anglo American Plc · LSE:AAL
Anglo American — H1 2015 Earnings Presentation
54 slides from Anglo American's earnings presentation, Jul 24, 2015
Slide 1: Interim Results Six Months Ended 30 June 2015
INTERIM RESULTS SIX MONTHS ENDED 30 JUNE 2015 24 July 2015 Kolomela mine – Kumba Iron Ore
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: Financial Highlights
FINANCIAL HIGHLIGHTS A solid set of results despite significant commodity headwinds… …prices down...offset by improved Underlying EBIT $1.9bn -36% production and costs. EPS $0.70/share -30% Capital expenditure $2.1bn -22% …actions taken to reduce capex. Net debt $13.5bn Net debt …post asse
Slide 4: Focus on Delivery
FOCUS ON DELIVERY We are delivering on our Driving Value initiatives… Delivered 2013, 2014 & H1 2015 MAJOR PROJECTS…on track and below budget Minas-Rio commissioning on track. $1.7bn Grosvenor ahead of schedule. Barro Alto furnaces ahead of schedule. Gahcho Kué on schedule and budget. 1.1 OP
Slide 5: EBITDA Margin Preservation
EBITDA MARGIN PRESERVATION Commodity basket price has fallen 25%… EBITDA margin (%) versus indexed basket price 120 60% EBITDA Margin (%) Indexed Performance 100 45% 80 75 30% 60 29% 15% 27% 25% 25% 40 0% 2012 2013 2014 H1 2015 Commodity Basket Price Index EBITDA Margin (incl. Assoc & JVs) …but EBIT
Slide 6: EBITDA Margin Preservation
EBITDA MARGIN PRESERVATION Stability in EBITDA margins reflects volume growth… EBITDA margin (%) versus indexed basket price and unit cost performance 120 60% 109 Indexed Performance EBITDA Margin (%) 100 100 45% 78 80 30% 75 60 29% 15% 27% 25% 25% 40 0% 2012 2013 2014 H1 2015 Cu Equiv Production In
Slide 7: Focus on the Controllables
FOCUS ON THE CONTROLLABLES We are accelerating our turnaround work with focus on costs… NEXT 18 MONTHS…improvements accelerated Target H2 2015 & 2016 $800m operating cost reduction. $1.5bn $300m support cost reduction. $400m production driven volume benefits. Capex guidance reduced by up to
Slide 8: Support Cost Reduction of $300m by End of 2016
SUPPORT COST REDUCTION OF $300M BY END OF 2016 Right-sizing the business for the current operating environment… Employee and contractor numbers -7% = $500m saving 162,000 ($300m by end 2016) Support -31% 151,000 Operations 13,000 11,500 10,000 9,000 98,000 7,000 2013 2014 2014 In progress 2016 2017
Slide 9: Financials
FINANCIALS René Médori
Slide 10: 2015 Results
2015 RESULTS Price declines have driven revenues lower… Key financials Price variance 1 Jan to 30 Jun 2015 $bn H1 2015 H1 2014 Change Underlying EBITDA 3.3 4.3 -24% Underlying EBIT 1.9 2.9 -36% -5%(4) Effective tax rate 28.0% 31.5% -7%(3) -8% Underlying earnings 0.9 1.3 -30% -10% -11% Earning per sh
Slide 11: H1 2015 EBIT Variance
H1 2015 EBIT VARIANCE Improved operational performance… H1 2015 vs. H1 2014 ($bn) Bulks (1.3) (0.3) 0.6 (0.1) (0.3) Base & 0.1 2.9 0.7 Precious (0.6) 1.9 1.5 11% H1 2014 Price(1) Currency Inflation(2) Sales Cash De Beers Other H1 2015 Volume(3) costs(4) volume (1) Price variance calculated as increa
Slide 12: Group Capital Expenditure
GROUP CAPITAL EXPENDITURE Continued focus on reduction in committed spend and optimisation of SIB capex… Capital expenditure ($bn) Guidance ($bn)(1) 2015 2016 Capex excludes operating cash profits and losses capitalised Capital expenditure 4.5 3.6 - 3.9 -1.7 Previous guidance 5.2 3.9 6.2 6.3 6.2 4.5
Slide 13: Net Debt Profile
NET DEBT PROFILE Despite lower prices… Net debt ($bn) Net debt profile ($bn) Opening net debt – 1 January 2015 12.9 -0.5 Cash flow from operations (2.8) 13.5 13.0 - 13.5 10.0 - 12.0 Capital expenditure(1) 2.1 Cash tax paid 0.3 Net interest(2) 0.3 H1 2015 2015 guidance Long term target Dividends paid
Slide 14: Impairments
IMPAIRMENTS Impairments to Minas-Rio and Coal assets… $ bn Impairment(1) Iron Ore ($/t CFR China 62% Fe)(2) Minas-Rio 2.5 100 Coal Australia 0.6 -36% Peace River Coal 0.2 Total 3.3 80 The first six months of 2015 have seen significant further weakness in bulk commodity prices. Commodity price as
Slide 15: Operational Performance
OPERATIONAL PERFORMANCE Mark Cutifani
Slide 16: Operating Performance – Safety
OPERATING PERFORMANCE – SAFETY We continue to target zero harm in safety and health… Loss of life (by business) We deeply regret the loss of five colleagues to 17 incidents in Australia, Brazil and South Africa. 15 13 6 Focus on adherence to critical controls has 12 5 been the area identified fo
Slide 17: Operating Performance – Environment & Social
OPERATING PERFORMANCE – ENVIRONMENT & SOCIAL Major reduction in emissions and spills reflects focus… Environmental incidents (levels 3 to 5) (1) Leadership standards have set new expectations around how we run the business. 30 27 Focus on a new way of working, risk management and effective risk
Slide 18: Operating Performance – Production
OPERATING PERFORMANCE – PRODUCTION Strong recovery in Platinum, solid Thermal Coal and ramp-up at Minas-Rio… H1 2015 versus H1 2014 (% change) +55% +11% +8% +2% -3% -6% -10% -34% Platinum Iron Ore Coal Export De Beers Coal Aus/Can Copper Nickel Group (equivalent (Kumba & Thermal Export Met (copper r
Slide 19: Operating Performance – Unit Costs
OPERATING PERFORMANCE – UNIT COSTS Productivity improvements and cost reductions across the business… Local currency unit cost decreases… …with FX helping lower US$ unit costs. (Local currency) (US$) +8% +9% +4% -1% -3% -4% -5% average Cu equiv.(1) -10% -13% -13% -14% average -26% Cu equiv.(1) -30%
Slide 20: Kumba
KUMBA Lower prices and higher waste stripping… Realised price Unit cost Underlying Production Capex ROCE Sishen waste Export sales (FOB) (FOB) EBIT H1 2015 22.6 Mt $61/t $33/t $513m $274m 32% 108 Mt 23.2 Mt vs. -1% -41% -4% -57% -10% (46)pp +24% +18% H1 2014 Underlying EBIT ($m) Performance 1,182
Slide 21: Kumba Delivered Cash Cost 22% Lower
KUMBA DELIVERED CASH COST 22% LOWER Kumba reconfigured to operate in a $45/tonne environment… Operations reconfigured to achieve Kumba delivered full cash cost including SIB ($/t) lower cost of production: • Material revision to Sishen mine -22% schedule and stripping profile. 72 (7) • Waste reduc
Slide 22: Minas-Rio
MINAS-RIO Solid ramp-up performance to date… Realised price Unit cost Underlying Production Capex ROCE Sales Ramp-up (FOB) (FOB) EBIT H1 15 3.0Mt $50/wmt $97/wmt $(11)m $555m (1)% 2.6Mt 33% complete vs. H1 14 nm nm nm -22% -45% (1)pp nm Product - (Mt - wet) Performance Solid operational performanc
Slide 23: 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 rate H1 2015 10.2Mt / 17.3Mt $100/t / $60/t $58/t & $42/t $267m $416m 10% 62% 201kt/wk vs.
Slide 24: Coal Unit Cost Reduction
COAL UNIT COST REDUCTION Productivity led unit cost reductions in Australia… Coal Australia: FOB unit cost (ex royalties) – A$/tonne SA: export mines FOR unit cost (ex royalties) – R/tonne 95 87 -13% -7% 85 357 (5) (13) (12) 332 (6) 324 74 307 FY 2012 FY 2013 H1 2014 Improved Lower H1 2015 FY 2012 F
Slide 25: Copper
COPPER Lower prices and water restrictions impact H1 earnings… Underlying Production Realised price C1 unit cost Capex ROCE Material mined Sales EBIT H1 15 356 kt 253c/lb 166c/lb $174m $309m 5% 199 Mt 344 kt vs. H1 14 -10% -18% +4% -77% -1% (17)pp +5% -11% Underlying EBIT ($m) Performance 760 Prod
Slide 26: Nickel
NICKEL Furnace rebuilds ahead of schedule…with first furnace now operating at design… Underlying Barro Alto Production (1) Realised price C1 unit cost (2) Capex ROCE Sales (1) EBIT re-build (3) H1 15 13.0kt 568c/lb 494c/lb $0m $(17)m 0% 16.1kt 96% complete vs. H1 14 -34% -18% +1% -100% -32% (3)pp -1
Slide 27: Platinum
PLATINUM Operational recovery, post prolonged strike… Equ. ref. Realised Underlying Unit cost Capex ROCE Pt sales Headcount production Basket price EBIT H1 15 1,108 koz $2,157/oz $1,627/oz $272m $179m 7% 1,159 k/oz 47,548 vs. H1 14 +55% -13% -37% nm -27% +7pp +11% -4% Underlying EBIT ($m) Performanc
Slide 28: Platinum Performance Improvement
PLATINUM PERFORMANCE IMPROVEMENT Cash operating margin reaches 54% at Mogalakwena, with minimal capital invested… Mogalakwena cash operating margin (%) (1) Rustenburg - headcount -31% 1,532 24,000 1,485 1,386 16,500 1,160 2012 H1 2015 49% 54% 46% Rustenburg - free cash flow (Rm) (2) (3) (4) 39% 670
Slide 29: De Beers
DE BEERS Solid operating and cost performance… Underlying (3) Average index Production(1) Realised price Unit cost(2) Capex ROCE Sales (Cons.) EBIT price H1 15 15.6Mct $206/ct $103/ct $576m $363m 12% 13.3Mct 139 vs. H1 14 -3% +7% -10% -25% +17% +1pp -27% -4% Underlying EBIT ($m) Performance Lower
Slide 30: Diamond Sector Challenges
DIAMOND SECTOR CHALLENGES Several issues have impacted the diamond pipeline… Market observations Polished inventories: higher than normal at the start of the year, weaker Q4 2014 and grading lab suffered a major backlog. Consumer demand: reduced growth in diamond jewellery demand in 2015 due to
Slide 31: A Slimmed Down High Quality Diversified Portfolio
A SLIMMED DOWN HIGH QUALITY DIVERSIFIED PORTFOLIO Focus on larger, higher margin operations… Number of operations(1) Total labour force (‘000)(2) Production (Cu eq. tonnes ‘000)(1)(2)(3) -27% +3% -35% 55 4,629 151 4,495 40 98 Before After Before After Before After Platinum Copper Nickel Iron Ore Coa
Slide 32: Portfolio Quality…Competitive Positions
PORTFOLIO QUALITY…COMPETITIVE POSITIONS Reflecting current project completions and portfolio restructure… Aggregate Business Unit cost curve position - 2014 De Beers Jwaneng With After With Before Copper Quellavecodisposals Quellaveco(1) Quellaveco After Barro Alto Before re-build Nickel After dispo
Slide 33: Higher Margin Business Post Change
HIGHER MARGIN BUSINESS POST CHANGE Like-for-like EBITDA margins increase to 29% post divestments… EBITDA margin (%) 35% Further 6% EBITDA improvement 27% 25% 29% Post divestments 2014 H1 2015 H1 2015 (like-for-like basis & EBITDA improvement) …and further enhanced with additional business improvemen
Slide 34: Achievements in H1 2015
ACHIEVEMENTS IN H1 2015 We have focused on driving operations and reducing costs… PRODUCTION… Up 8%.....despite mine closures. OPERATING UNIT COSTS… Down 5% in local currencies…14% in USD. CAPITAL SPEND… Down 22%...driven by sustainable reductions in SIB. Expansion projects on budget…on sche
Slide 35: Creating the Anglo American of the Future
CREATING THE ANGLO AMERICAN OF THE FUTURE We are accelerating our restructuring initiatives… DELIVERY… Delivered $1.7bn EBIT improvement up to the end of June 2015. Production growth in H1’15 of 8% (Cu eq.) and USD unit costs reduced by 14%. ACCELERATING… We are targeting $1.5bn EBIT improveme
Slide 36: Appendix
S AngloAmerican APPENDIX
Slide 37: Production Outlook
PRODUCTION OUTLOOK(1) 2013 2014 2015 2016 2017 Copper (2) 775Kt 748kt 720-750kt 720-750kt 710-740kt 25-30kt Nickel 34kt 37kt 40-45kt 42-45kt Previously 20-25 Mt ~44Mt ~47Mt ~49Mt Iron ore (Kumba)(3) 42Mt 48Mt Previously 47-48Mt Previously 47-49Mt Previously 49-51Mt Iron ore (Minas-Rio)(4) - 0.7Mt 11
Slide 38: Price Variance
PRICE VARIANCE H1 2015 vs. H1 2014 EBIT variance ($m) Indexed commodity prices (1 Jan 2015 = 1) 1.1 Variance 1 Jan to 30 Jun 2015 Other 122 Platinum (365) (250) 1.0 precious Base & Diamonds (5)% (1) (7)% Copper (528)(452) Thermal Coal (8)% 0.9 Copper (10)% Platinum (11)% Coal (124) Met coal (14)% Au
Slide 39: Price Variance – Bulks
PRICE VARIANCE – BULKS Iron ore sales(1) (Mt) Metallurgical coal sales(2) (Mt) Export Met Coal Sales Export Coal Sales (Mt) (Mt) Realised Realised $104/t $61/t $117/t $100/t price(3) price(4) 9.2 8.8 11.1 11.6 28% 34% 23% 28% 61% 59% Coking 79% 76% Export sales 59% 55% volume 16% PCI 22% 21% 24% 17%
Slide 40: Exchange Variance
EXCHANGE VARIANCE H1 2015 vs. H1 2014 ($m) Rand weakened 10% compared to 2014 H1 2014 average H2 2014 average H1 2015 average 702 10.70 11.00 11.92 13.0 Other(1) 70 ZAR / USD 12.0 CLP 72 11.0 10.0 2014 average 10.85 H1 2015 average 11.92 AUD 181 9.0 Jan 2014 Apr 2014 Jul 2014 Oct 2014 Jan 2015 Apr 2
Slide 41: Sales Volume Variance
SALES VOLUME VARIANCE H1 2015 vs. H1 2014 ($m) Sales volume performance (% change vs. H1 2014) 16% 11% KIO 193 +8%(4) Coal RSA 53 Increase in Other copper equivalent production Copper (134) (5)% (11)% De Beers (311) (27)% (181)(1) De Beers Copper Coal Au/Ca(2) Platinum KIO(3) (1) Total Business Unit
Slide 42: Reconciliation of Total Capital Employed to Average Attributable Capital Employed
RECONCILIATION OF TOTAL CAPITAL EMPLOYED TO AVERAGE ATTRIBUTABLE CAPITAL EMPLOYED $bn 30 Jun 2015 31 Dec 2014 30 June 2014 31 Dec 2013 Net assets 27.7 32.2 38.4 37.4 Less: financial asset investments (1.3) (1.3) (1.5) (1.5) Add: net debt 13.5 12.9 11.5 10.7 Total capital employed 39.8 43.8 48.5 46.6
Slide 43: Attributable ROCE
ATTRIBUTABLE ROCE H1 2015 H1 2014 Business Unit Average Average Attributable Attributable Attributable Attributable attributable capital attributable capital EBIT(1) ($bn) ROCE(2) (%) EBIT(1) ($bn) ROCE(2) (%) employed ($bn) employed ($bn) Kumba 0.5 1.6 32% 1.2 1.5 78% IOB (0.0) 4.7 (1%) (0.0) 8.1 (
Slide 44: Earnings Sensitivities
EARNINGS SENSITIVITIES(1) Sensitivities analysis Impact of movement Commodity / Currency Movement H1 2015 average on EBIT ($m) Iron Ore (62% CFR China) +/- $10/t 60 230 Hard Coking Coal (FOB Australia) +/- $10/t 113 66 Pulverised Coal Injection (FOB) +/- $10/t 82 27 Thermal Coal (FOB South Africa) +
Slide 45: Average Market Prices
AVERAGE MARKET PRICES H1 2015 H1 2014 Change Iron ore (62% Fe CFR)(1) - $/t 60 111 (46)% Thermal coal (FOB South Africa) - $/t 62 77 (19)% Thermal coal (FOB Australia) - $/t 63 76 (13)% HCC (FOB Australia average quarterly benchmark) - $/t 113 132 (14)% Copper (LME) - cents/lb 269 314 (14)% Nickel (
Slide 46: Price and FX Assumptions for ROCE Target
PRICE AND FX ASSUMPTIONS FOR ROCE TARGET Commodity and currency 30 June 2013 30 June 2015(1) Iron Ore 62% Fe CFR(2) $116/t $60/t Thermal FOB South Africa $74/t $59/t Thermal FOB Australia $78/t $63/t HCC FOB Australia $145/t(3) $110/t Copper 306c/lb 260c/lb Nickel 619c/lb 530c/lb Platinum $1,317/oz
Slide 47: Driving Value – $1.9bn Run Rate Savings Achieved
DRIVING VALUE – $1.9BN RUN RATE SAVINGS ACHIEVED Attributable EBIT $bn @ 30 June 2013 prices and FX 1.5 $7.3bn 1.6 1.0 $5.9bn 0.9 1.0 $3.3bn $1.9bn of attributable EBIT to be delivered in 2015 2012 Projects Asset Value Disposals and 2016 2016 at consensus reviews leakage capex reductions prices/FX A
Slide 48: Capital Expenditure
CAPITAL EXPENDITURE(1) $m H1 2015 H1 2014 Change Kumba Iron Ore 274 305 (10)% Iron Ore Brazil 555 1,007 (45)% Coal 416 436 (5)% Copper 309 312 (1)% Nickel (17) (25) 32% Niobium and Phosphates 25 107 (77)% Platinum 179 244 (27)% De Beers 363 311 17% Corporate and other 9 15 (40)% Total capital expend
Slide 49: Debt Maturity Profile at 30 June 2015
DEBT MATURITY PROFILE AT 30 JUNE 2015 Debt repayments ($bn) at 30 June 2015 4.3 3.6 2.9 1.9 2.0 1.9 1.7 1.8 0.1 H2 2015 2016 2017 2018 2019 2020 2021 2022 2023+ BNDES Subsidiary Euro Bonds US$ Bonds Other Bonds De Beers Financing Financing % of portfolio 48% 28% 8% 8% 7% 1% Capital markets 84% Bank
Slide 50: De Beers: Key Financial Metrics
DE BEERS: KEY FINANCIAL METRICS H1 H1 H2 FY US$bn 2015 2014 2014 2014 Revenue(1) 3.0 3.8 3.2 7.0 Rough diamond sales 2.7 3.5 3.0 6.5 Element Six and other 0.3 0.3 0.2 0.5 Production costs (0.6) (0.7) (0.6) (1.3) Purchases of diamonds (1.5) (1.9) (1.6) (3.5) Depreciation and amortisation(2) (0.2) (0.
Slide 51: De Beers: Supplementary Data by Key Mine (1 of 2)
DE BEERS: SUPPLEMENTARY DATA BY KEY MINE (1 OF 2) H1 H1 H2 FY 2015 2014 2014 2014 Jwaneng Waste mined (Mt) 55.1 58.5 56.7 115.2 (50%/19.2% economic interest) Ore mined (Mt) 4.2 5.0 5.6 10.6 Material treated (Mt) 4.3 3.9 4.6 8.5 Grade (cpht)(2) 132 124 142 134 Debswana Carats recovered (Mct)(3) 5.7 4
Slide 52: De Beers: Supplementary Data by Key Mine (2 of 2)
DE BEERS: SUPPLEMENTARY DATA BY KEY MINE (2 OF 2) H1 H1 H2 FY 2015 2014 2014 2014 Venetia Waste mined (Mt) 19.1 21.7 19.9 41.6 Ore mined (Mt) 2.0 2.7 3.2 5.9 DBCM (74%) Material treated (Mt) 2.9 2.9 2.6 5.5 Grade (cpht)(2) 48 47 70 58 Carats recovered (Mct)(3) 1.4 1.4 1.8 3.2 Average price (US$/ct)(
Slide 53: ROCE and Attributable ROCE – Definition
ROCE AND ATTRIBUTABLE ROCE – DEFINITION Return on capital employed (ROCE) 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 and is calculated as underlying EBIT
Slide 54: Investor Relations
INVESTOR RELATIONS London Paul Galloway Tel: +44 20 7968 8718 Ed Kite Tel: +44 20 7968 2178 Sarah McNally Tel: +44 20 7968 8747