- Platinum group metals and copper prices drive doubling of adjusted cash profit
- Second half saw declines but profit margins remained strong
Anglo American (AAL) runs a different show to the other major miners, with a broader portfolio that has less focus on iron ore and heavy exposure to platinum group metals (PGM) and diamond markets. In 2021, its PGM division overtook iron ore in terms of cash profit, while copper and metallurgical coal earnings also surged thanks to the overall commodities bull market.
Despite its more varied portfolio, Anglo well and truly joined the major miner dividend party, with its total dividend for the year 15 per cent ahead of consensus estimates, at 419¢ (315p) a share, including a second special payout.
Much higher copper and PGM prices, on top of consistent iron ore prices prices, saw Anglo’s underlying cash profit double compared with 2020, to $20.6bn. Its cash profit margin also jumped 13 percentage points in the year to 56 per cent, even as costs climbed. The PGM unit’s cash profit almost tripled to $7.1bn, overtaking iron ore, which brought in $6.9bn. Even De Beers contributed more thanks to the diamond market’s slight recovery, with the cash profit up to $1.1bn compared with $417mn in 2020.
Chief executive Mark Cutifani, who is stepping down in April after nine years in the job, said much of the 2021 earnings bonanza had come in the first half. “We generated attributable free cash flow of $7.8bn due largely to a strong price environment in the first half, which moderated in the second half,” he said.
Anglo head of strategy Duncan Wanblad is taking the top job. In the analyst presentation, Cutifani said he was leaving Wanblad plenty to carry on with, including the final work on the Quellaveco copper mine in Peru before it is finished – expected by mid-year – and development work on the Woodsmith fertiliser mine in North Yorkshire.
The company will spend the last of the Quellaveco start-up money this year, forecast at $500mn-$700mn, and expects to produce 100,000-150,000 tonnes of copper in the second half. The 2022 Woodsmith spend has been revised down by $100mn to around $600mn. Total growth spending for this year will be $1.6bn-$2.1bn.
RBC Capital Markets analyst Tyler Broda said Anglo's PGM production could prove even more valuable this year, given Russia produces 40 per cent of the globe's palladium and exports could be banned after the invasion of Ukraine. Consensus estimates currently see PGM cash profits coming down this year on lower prices and lower production, so higher prices could once again rev up earnings.
Outside of PGMs, the Quellaveco start-up this year should support earnings even if metals prices come off. Buy.
Last IC View: Buy, 2,761p, 3 Nov 2021
|ANGLO AMERICAN (AAL)|
|ORD PRICE:||3,548p||MARKET VALUE:||£47bn|
|TOUCH:||3,546p - 3,548p||12-MONTH HIGH:||3,678p||LOW: 2,350p|
|DIVIDEND YIELD:||8.7%||PE RATIO:||7|
|NET ASSET VALUE:||2,080ȼ||NET DEBT:||10%|
|Year to 31 Dec||Turnover ($bn)||Pre-tax profit ($bn)||Earnings per share (ȼ)||Dividend per share (ȼ)|
|£1=$1.36 **Excludes 2021 interim and final special dividends of 80ȼ and 50ȼ *Restated|