Anglo American Plc · LSE:AAL
Anglo American — H1 2017 Earnings Presentation
46 slides from Anglo American's earnings presentation, Jul 27, 2017
Slide 1: Interim Results: Six Months Ended 30 June 2017
INTERIM RESULTS SIX MONTHS ENDED 30 JUNE 2017 27 July 2017
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: H1 2017 Results: Business Performance
H1 2017 RESULTS BUSINESS PERFORMANCE Mark Cutifani De Beers Diamond Jewellery
Slide 4: Delivering on Our Commitments
DELIVERING ON OUR COMMITMENTS Operating • Self-help drives operating margins. performance • Further productivity improvements – supports 9% increase in volumes. • EBITDA of $4.1bn and free cash flow of $2.7bn. Financials robust • Balance sheet flexibility restored – allowing early resumption of divi
Slide 5: Safety & Environment
SAFETY & ENVIRONMENT Safety: Loss of life and TRCFR1 Safety 1.29 Group TRCFR • Fatal incidents reducing – focus on critical controls. 1.08 0.93 • Q1 TRCFR was disappointing – improvement 0.80 trends evident in Q2 but more to be done. 0.71 0.68 15 13 11 • Consolidating and improving practices across
Slide 6: Strong Performance – Production Up 9%
STRONG PERFORMANCE – PRODUCTION UP 9% H1 Business Production3 De Beers 16.1Mct Market recovery supporting production outlook. Copper 283kt El Soldado permits in place and Los Bronces recovery on track. Platinum 1.2Moz Focus remains on cost reductions and profitable ounces. Iron ore 30.5Mt St
Slide 7: Productivity – Continuing to Improve
PRODUCTIVITY – CONTINUING TO IMPROVE Copper Equivalent production and productivity4 Index 180 169 160 141 140 120 100 110 108 110 108 80 2012 2013 2014 2015 2016 H1 2017 Copper Equivalent Production Index5 Copper Equivalent Productivity Index (tonnes/full time equivalent) 7
Slide 8: Margins Continue to Improve
MARGINS CONTINUE TO IMPROVE EBITDA margins Margin Focus 6 EBITDA margin See-through EBITDA margin 40% Improvement driven by self-help: 34% • Improved productivity and costs. 26% • Portfolio upgrading. • Marketing activities contributing to higher realised prices. 31% 26% Stronger prices, partly
Slide 9: H1 2017 Results: Financials
H1 2017 RESULTS FINANCIALS Stephen Pearce Mafube Colliery, Load and haul operations
Slide 10: Strong Results Allow Early Dividend Resumption
STRONG RESULTS ALLOW EARLY DIVIDEND RESUMPTION • EBITDA of $4.1bn and underlying EPS of $1.19/share. Earnings • Cost and volume improvement of $0.6bn in H1 2017. • Capex reduced to $0.8bn, supporting free cash flow generation. Cash flow • Attributable free cash flow of $2.7bn. Balance sheet • Net de
Slide 11: Results – Strong Free Cash Flow Generation
RESULTS – STRONG FREE CASH FLOW GENERATION Key financials7 ($bn) H1 2017 H1 2016 Change EBITDA 4.1 2.5 68% Earnings per share ($/share) 1.19 0.54 120% Capital expenditure8 0.8 1.2 (31)% Attributable free cash flow9 2.7 1.1 155% Net debt10 6.2 8.5 (27)% Net debt / EBITDA10 0.8x 1.4x nm 11
Slide 12: Self-Help Underpins Stronger Price Environment
SELF-HELP UNDERPINS STRONGER PRICE ENVIRONMENT EBITDA variance: H1 2017 vs. H1 2016 ($bn) 1.5 0.3 Met Coal (0.5) 0.6 (0.2) Copper SA Coal 4.1 Platinum Rand Iron Ore 3.3 Other Diamonds (mix) 2.5 H1 2016 Price11 Currency Inflation12 Cost & volume13 Other14 H1 2017 12
Slide 13: Self-Help Continues with More to Come
SELF-HELP CONTINUES WITH MORE TO COME 2017 EBITDA cost and volume improvements ($bn) 0.4 1.0 $0.6 billion delivered • Sishen productivity improvements driven by operating model. • De Beers efficiencies and structural 0.4 Other improvements. De Beers • Los Bronces productivity and cost savings. IOB •
Slide 14: Prices and Self-Help Drive Higher Earnings
PRICES AND SELF-HELP DRIVE HIGHER EARNINGS EBITDA ($bn) Underlying earnings15 ($bn) +68% +120% 4.1 1.5 2.5 0.7 H1 2016 H1 2017 H1 2016 H1 2017 14
Slide 15: Continued Capital Discipline
CONTINUED CAPITAL DISCIPLINE Capex16 ($bn) Capex guidance17 ($bn) • 2017 guidance reduced by $0.2bn; 2018 unchanged. 4.0 • H2 2017 capex expected to be higher than H1 2017. 1.9 ~2.5 2.5 ~2.3 1.0 0.7 -31% 0.6 1.2 0.5 0.8 1.4 0.1 1.0 0.3 0.3 0.3 0.4 2015 2016 H1 2016 H1 2017 2017F 2018F SIB Stripping
Slide 16: Improved Cash Flow and Returns
IMPROVED CASH FLOW AND RETURNS Attributable free cash flow9 ($bn) Attributable ROCE18 (%) +155% 10pp 2.7 18% 8% 1.1 H1 2016 H1 2017 H1 2016 H1 2017 16
Slide 17: Balance Sheet Flexibility Restored
BALANCE SHEET FLEXIBILITY RESTORED Net debt19 ($bn) -47% 11.7 • Net debt position improved by $5.5bn in last 12 months, driven by self-help and continued capital discipline. • Continue to seek further balance sheet 8.5 flexibility. • Aim to extend debt maturity profile. 6.2 Net debt / (cash) by geog
Slide 18: Balance Sheet Metrics at Investment Grade Levels
BALANCE SHEET METRICS AT INVESTMENT GRADE LEVELS Net debt/EBITDA10 Gearing ratio (net debt / net assets + net debt) 2.7x 38% 26% 1.4x 19% 0.8x 2015 2016 H1 2017 2015 2016 H1 2017 18
Slide 19: Resumption of the Dividend
RESUMPTION OF THE DIVIDEND H1 2017 dividend Delivering cash to shareholders 48c/share $0.6bn • Strong cash generation has driven improvement in balance sheet metrics, allowing for dividend resumption. • New dividend policy − Targeting pay-out of 40% based on underlying earnings. − Additional returns
Slide 20: Strengthening Financial Position
STRENGTHENING FINANCIAL POSITION Capital allocation framework Focus on net debt reduction20 • Attributable free cash flow of $2.7bn 2.8 adjusted for $0.1bn of ‘discretionary capital’. Cash flow Discretionary after capital sustaining options capital • Reduction in net debt of $2.3bn (2.6) • Other adj
Slide 21: Positioning for the Future
POSITIONING FOR THE FUTURE Mark Cutifani Minas-Rio – First Ore on Ship (FOOS)Conveyors at Iron OreatTerminal, Sishen iron Portore of mine Açu,
Slide 22: Today…A Fundamentally Different Business
TODAY…A FUNDAMENTALLY DIFFERENT BUSINESS Number of assets21 Headcount22 A more Down 46% Down 45% efficient business… Unit costs22 Production22 …an improved Down 23% competitive position… Up 6% Attributable free cash flow9 ($bn) Attributable ROCE18 2.7 18% …generating more cash 11% and higher returns
Slide 23: Portfolio Streamlined – Focus on Quality
PORTFOLIO STREAMLINED – FOCUS ON QUALITY Number of assets23 -31 68 45 41 37 2013 2015 2016 2017 (current) Coal Platinum Copper De Beers Nickel Niobium & Phosphates Iron Ore & Manganese 23
Slide 24: Improving Our Competitive Position
IMPROVING OUR COMPETITIVE POSITION EBITDA margins24 Self-help focus Delivered ~$600m of volume/cost improvements in H1. Margin improvement driven by: • Portfolio upgrading focusing on low cost, high quality assets. • Operating model driving further productivity and cost reductions. • Bulks focus
Slide 25: A Uniquely Differentiated Portfolio
A UNIQUELY DIFFERENTIATED PORTFOLIO Revenue by product25 Capital employed by geography25 Other Other 5% PGMs 5% 15% Australia Thermal 8% coal South Africa 14% 25% Chile & other South America 19% Met Coal De Beers 16% 24% Other Southern Africa 18% Iron ore 14% Copper Brazil 12% 25% Asset focused st
Slide 26: South Africa
SOUTH AFRICA Our rights are secure, with existing mining licences having ~23 years remaining. Mining Industry and government must work together to create implementable policy Charter III framework. For our existing footprint in South Africa, focus on operational performance. Anglo Our most a
Slide 27: Focus on Asset Quality
FOCUS ON ASSET QUALITY Longer-term positioning Capital allocation considerations Exceptional resource endowment. Strong commodity fundamentals. Copper Focus onLong-term outlook long life, low cost assets. Long-term High quality growthoutlook opportunities. Industry leader with diversificat
Slide 28: Positioning for the Future
POSITIONING FOR THE FUTURE Focus on high quality asset mix. Portfolio Portfolio upgrading to support sustainable cash flow and returns. Organic low cost growth opportunities will continue to be developed. Operating model to focus on business improvement and margin growth. Capabilities Inno
Slide 29: Appendix
APPENDIX Platinum bars at the Precious Metals Refinery
Slide 30: Footnotes
FOOTNOTES 1. Total Recordable Cases Frequency Rate. 12. Inflation variance calculated using CPI on prior period cash operating costs that 2. Reflects level 3-5 incidents. Environmental incidents are classified in terms of have been impacted directly by inflation. a 5-level severity rating. Incidents
Slide 31: The Anglo American Investment Proposition
THE ANGLO AMERICAN INVESTMENT PROPOSITION Assets Capabilities Returns • High quality assets – provide • Operating model – to establish best in • Balance sheet strength – flexibility to earnings protection through the cycle. class operating credentials. invest through the cycle. • Portfolio upgrading
Slide 32: Unit Cost Performance by Business Unit (US$)
UNIT COST PERFORMANCE BY BUSINESS UNIT (US$) DE BEERS (US$/ct)1 PLATINUM (US$/Pt oz)2 COPPER (C1 USc/lb) NICKEL (C1 USc/lb) BWP ZAR CLP BRL 10.25 13.08 665 3.30 -6% +8% +4% +14% 67 63 ~67 148 ~150 350 363 ~365 1,511 ~1,575 137 1,330 FY 2016 H1 2017 2017F FY 2016 H1 2017 2017F FY 2016 H1 2017 2017F F
Slide 33: Operating Performance by Key Asset (US$)
OPERATING PERFORMANCE BY KEY ASSET (US$) JWANENG1 (US$/ct) ORAPA (US$/ct) LOS BRONCES2 (C1 USc/lb) COLLAHUASI2 (C1 USc/lb) -15% +5% +14% +10% 40 34 33 164 ~170 190 ~30 145 156 ~29 28 24 111 122 ~115 21 2012 2016 H1 2017 2017F 2012 2016 H1 2017 2017F 2012 2016 H1 2017 2017F 2012 2016 H1 2017 2017F VE
Slide 34: Organisation Restructuring – On Track
ORGANISATION RESTRUCTURING – ON TRACK Employee and contractor numbers Support Operations -45% 162,000 157,000 151,000 13,000 128,000 11,500 95,000 8,700 87,000 87,000 8,200 Other Coal Iron ore De Beers Copper Platinum 2012 2013 2014 2015 2016 H1 20171 H1 20171 1. Excludes estimate of employees from
Slide 35: Production Outlook
PRODUCTION OUTLOOK Units 2015 2016 2017F 2018F 2019F Diamonds1 Mct 29 27 31-33 Platinum2 Moz 2.3 2.4 2.35-2.40 ~2.5 ~2.13 Copper 4 Kt 709 577 570-600 630-6805 590-650 Metallurgical coal6 Mt 21 21 19-21 20-22 20-22 Thermal coal7 Mt 28 29 29-31 29-31 29-31 Iron ore (Kumba)8 Mt 43 41 41-43 40-42 40-42
Slide 36: De Beers – Strong Sales and Cost Performance
DE BEERS – STRONG SALES AND COST PERFORMANCE Realised Underlying EBITDA Sales Average Production1 Unit cost2 Capex3 price EBITDA margin (Cons.) price index H1 2017 16.1Mct $156/ct $63/ct $786m 25% $74m 18.4Mct4 121 vs. H1 2016 #21% $12% $3% #3% #2pp $69% #7% #4% Underlying EBITDA ($m) H1 2017 Perfor
Slide 37: Copper – Strong EBITDA Performance
COPPER – STRONG EBITDA PERFORMANCE Realised Underlying EBITDA Material Production C1 unit cost Capex Sales price EBITDA margin mined H1 2017 283kt 264c/lb 148c/lb $586m 36% $225m 259kt 124Mt vs. H1 2016 $3% #23% #9% #38% #5pp $5% $8% $10% Underlying EBITDA ($m) H1 2017 Performance 611 • Production d
Slide 38: Platinum – Mogalakwena Record Performance
PLATINUM – MOGALAKWENA RECORD PERFORMANCE Realised Underlying EBITDA Production1 Unit cost2,3 Capex Pt sales Headcount Basket price2 EBITDA margin H1 2017 1,189 koz $1,843/oz $1,511/oz $276m 13% $126m 1,119 koz 28,400 vs. H1 2016 #3% #13% #20% $5% $1pp 0% $8% $36% Mined versus purchase of concentrat
Slide 39: Kumba Iron Ore – Production Increased by 23%
KUMBA IRON ORE – PRODUCTION INCREASED BY 23% Realised Unit cost Underlying EBITDA Break-even Production Capex Sishen waste price (FOB)1 (FOB)1 EBITDA margin price H1 2017 21.9Mt $71/t $32/t $700m 43% $81m 77Mt $43/t vs. H1 2016 #23% #29% #19% #45% #2pp $4% #18% #26% Underlying EBITDA ($m) H1 2017 Pe
Slide 40: Iron Ore Brazil (Minas-Rio) – Ramp-Up Continues
IRON ORE BRAZIL (MINAS-RIO) – RAMP-UP CONTINUES Realised price Unit cost Underlying EBITDA Production Capex3 Sales (FOB)1 (FOB)2 EBITDA margin H1 2017 8.7Mt (wet) $66/wmt $29/wmt $253m 34% $(8)m 8.6Mt vs. H1 2016 #27% #50% $11% nm nm $106% #24% Product - (Mt - wet) H1 2017 Performance +27% • Ramp-up
Slide 41: Metallurgical Coal – Focused Portfolio
METALLURGICAL COAL – FOCUSED PORTFOLIO Metallurgical Underlying FOB realised price2 Unit cost3 EBITDA margin Capex production1 EBITDA H1 2017 9.2 193 64 943 53% 154 vs. H1 2016 $8% #151% #28% #372% #31pp $39% Underlying EBITDA ($m) H1 2017 Performance • Portfolio repositioning continues to focus on
Slide 42: Coal SA and Cerrejon – Steady Performance
COAL SA AND CERREJON – STEADY PERFORMANCE Underlying Export prod. FOB price1 Unit cost2 EBITDA margin EBITDA SA Capex SA / Col SA / Col SA / Col SA / Col SA / Col H1 2017 8.1Mt / 5.2Mt $72/t / $71/t $41/t / $31/t $281m / $183m 23% / 47% $67m vs. H1 2016 $2% / #6% #46% / #51% #24% / #3% #73% / #259%
Slide 43: Nickel – Q1 Issues Resolved, Q2 Stable Performance
NICKEL – Q1 ISSUES RESOLVED, Q2 STABLE PERFORMANCE Realised C1 unit Underlying EBITDA Barro Alto Production1 Capex Sales1 price cost2 EBITDA margin ore feed H1 2017 21.2kt 442c/lb 363c/lb $15m 7% $7m 20.8kt 1.1Mt3 vs. H1 2016 $5% #14% #12% $38% $6pp $50% $5% $1% Barro Alto C1 unit cost (USc/lb) H1 2
Slide 44: Earnings Sensitivities
EARNINGS SENSITIVITIES Sensitivities Analysis – H1 20171 Impact of change ($m) Commodity / Currency Change in price / exchange Realised EBITDA Iron Ore $10/t 71 268 Hard Coking Coal $10/t 195 63 Thermal Coal (SA) $10/t 72 88 Thermal Coal (Australia) $10/t 87 8 Copper2 10c/lb 264 59 Nickel3 10c/lb 44
Slide 45: Spot Pricing and Foreign Exchange
SPOT PRICING AND FOREIGN EXCHANGE Sensitivities Analysis Commodity / Currency Spot at 30 June 2017 Iron Ore ($/t) 63 Hard Coking Coal ($/t) 149 Thermal Coal (SA) ($/t) 78 Copper (c/lb) 268 Nickel (c/lb) 421 Platinum ($/oz) 922 Palladium ($/oz) 841 Rhodium ($/oz) 1,035 South African Rand 13.08 Austra
Slide 46: Debt Maturity Profile at 30 June 2017
DEBT MATURITY PROFILE AT 30 JUNE 2017 Debt repayments ($bn) at 30 June 2017 2.9 1.9 1.8 1.5 1.6 1.4 1.4 1.0 H2 2017 2018 2019 2020 2021 2022 2023 2024+ Euro Bonds US$ Bonds Other Bonds Subsidiary Financing % of portfolio 52% 41% 4% 3% Capital markets 97% Bank 3% US bonds Euro bonds Other bonds (e.g.