A scintillating week for the Anglo stable

Written by Ciaran Ryan. Posted in Uncategorized

Records were smashed across the board, as rising commodity prices translated into dividend pay-backs. From Moneyweb.

Image: Anglo American, Flickr
Image: Anglo American, Flickr

What a great week for the Anglo stable of companies, with Anglo American, Anglo American Platinum (Amplats) and Kumba Iron Ore all announcing their 2021 half-year results.

Records were smashed left and right. Kumba more than doubled Ebitda (earnings before interest, tax, depreciation and amortisation) to R44.4 billion (H1 2020: R17.4 billion) on the back of a 12% increase in production to 20.4 million tons (Mt). Higher sales volumes and improved product quality mix contributed to the improved performance. Average realised export prices were nearly a third higher than the benchmark and more than double that achieved in the prior half year.

Kumba’s share price ended last week nearly 10% higher at R770, and is now up 220% from the low reached after the introduction of Covid lockdowns in March 2020. Shareholders were handsomely rewarded with a 271% bump in dividends to R72.70 per share (H1 2020: R19.80 per share).

When you’re making money at this rate, you start looking at ways to de-bottleneck production, and in Kumba’s case, that’s the logistics of shipping iron ore by rail from Sishen to the port of Saldanha. Kumba CEO Themba Mkhwanazi this week pointed to some progress in refurbishing tracks, while working with state-owned rail company Transnet to speed up delivery times.

On the safety front, Kumba is now five years without a work-related fatality.

Anglo American likewise benefitted from surging commodity prices, from platinum group metals (PGMs) to copper and iron ore. The group exited its South African coal businesses in the first half of the year, when these were hived off into Thungela Resources. It also announced an agreement to sell its interests in Cerrejón in Colombia, Latin America’s largest coal mine, as it transitions away from coal altogether.

The group’s Ebitda margin improved 61% over the half year compared with the same period in 2020. Free cash flow of $5.4 billion was used to pay down debt, with $2 billion being returned to shareholders by way of a special dividend and a share buy-back.

CEO Mark Cutifani this week told analysts that the group’s focus over the next three years is to drive “mining-enhancing volume” by 20%.

Copper production from Peru’s Quellaveco mine, one of the world’s largest reserves of copper, kicks in from 2022. “Our business is increasingly geared towards providing the future-enabling metals and minerals for a low-carbon economy and to meet global consumer demand trends. Combined with our commitment to carbon neutrality across our operations by 2040, we are working to meet the expectations of our full breadth of stakeholders,” said Cutifani.

Revenue shot up 114% to $21.8 billion at the halfway stage to June 2021, Ebitda climbed 262% to $12.1 billion, but it’s shareholders who stand to benefit most with a 1 082% increase in dividend and share buybacks, equivalent to $3.31 (2020: $0.28).

Amplats’ high

Anglo Platinum (Amplats) achieved a 47% increase to $2 884 per PGM ounce for the half-year, helped by rhodium and palladium setting new all-time highs of $30 000 and $3 000 per ounce, respectively, while platinum hit a six-year high above $1 300 per ounce.

Amplats recovered well from the February 2020 shutdown of the Anglo Converter Plant to record a 128% increase to 2.3 million PGM ounces of refined production. It will take another two years to clear the inventory accumulated as a result of the plant stoppage.

Rising commodity prices have been kind to Anglo American and Amplats, but there are signs that costs are rising at above inflation levels. In Anglo American’s case, rising costs hit Ebitda by $200 million, while Amplats reported a 9% increase in unit costs per ounce.

Higher commodity prices can provide cover for cost increases like this, but at some point the costs, unless contained, will start to shine through. But for now, it’s celebration time in the Anglo stable.

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.