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Anglo's FY'17 profit doubles on strong commodity prices, cost controls

Anglo American Plc on Feb. 22 posted a 99% year-over-year surge in profit attributable to shareholders for 2017 to US$3.17 billion, or US$2.45 per share.

The company increased the dividend for the second half of 2017 to 54 U.S. cents per share, from 48 cents in the first half, for a total dividend of US$1.02 per share for 2017. It did not pay a dividend in 2016.

Underlying EBITDA for the company increased 45% on a yearly basis to US$8.82 billion, on the back of higher bulk commodity and copper prices.

Anglo said it is targeting an additional US$3 billion to US$4 billion of annual underlying EBITDA run-rate improvement by 2022 from production volumes, productivity improvements and cost reductions.

Revenue for the year swelled to US$26.24 billion in the year, from US$21.38 billion in 2016.

Operating profit for the company surged to US$5.53 billion in the year, from US$1.67 billion a year ago, due to strong operating cost performance.

The company managed to cut its net debt 47% to US$4.5 billion, driven by US$4.9 billion of attributable free cash flow.

On the operations side, the company posted a 5% increase in copper equivalent production on the back of higher output at De Beers SA, Kumba Iron Ore Ltd., and Iron Ore Brazil, partly offset by lower coal production.

It lowered 2018 copper output guidance to between 630,000 tonnes and 660,000 tonnes. Platinum in concentrate output is seen in the range of 2.3 million to 2.4 million ounces, with palladium in concentrate output expected at 1.5 Moz to 1.6 Moz.

Forecast diamond output is expected to come in at between 34 million and 36 million carats, on a 100% basis, except Gahcho Kue is accounted for on a 51% ownership basis.

Anglo increased the full-year 2018 guidance for Kumba iron ore to 44 million tonnes to 45 Mt thanks to improved performance at Sishen and Kolomela, while lowering its production outlook for the Brazilian iron ore operations to between 13 Mt and 15 Mt, from 15 Mt to 18 Mt expected previously. Costs for the Brazilian business are seen rising to tune of about US$35 per wet tonne.

The mining giant also lowered its nickel guidance for the full year to between 42,000 and 44,000 tonnes due to planned maintenance at the Barro Alto plant. Guidance for export thermal and met coal was not changed.

The 2017 results included a tax charge, before special items and remeasurements, of US$1.3 billion, up from US$700 million 2016.

Anglo recorded net impairment reversals of US$111 million in the year, after tax and non-controlling interests, compared to impairment charges of US$1.35 billion in 2016.

Anglo unit Anglo American Platinum Ltd. also reinstated its dividend after six years, declaring a payout of 3.49 South African rand per share for 2017, following a surge of over 3x in net profit.