Anglo American’s (AAL) half-year results for 2019 show the timeliness of the restart of the Minas-Rio iron ore mine in Brazil. Cash profits, return on capital employed and revenue all grew year on year, and chief executive Mark Cutifani said it was the best half the company has had since 2011. This was down to “good prices and solid cost control”, Mr Cutifani said. The average realised free on board (FOB) iron ore price for the period was $108 a tonne, up from $69 a tonne last year. Underlying cash profits climbed 19 per cent to $5.45bn (£4.37bn) in the six months to 30 June.
These results are a product of the massive turnaround engineered by Mr Cutifani, which has set the company up to enjoy higher commodity prices. A similar shift has happened at the other major diversified miners, but Anglo shareholders have watched over the past two years as Rio Tinto (RIO), BHP (BHP) and Glencore (GLEN) handed shareholders billions in buybacks.
Now Anglo has joined the party with a “one-off” buyback of up to $1bn, on top of the 62¢ a share half-year dividend (a 27 per cent year-on-year increase, costing $800m). Bernstein analyst Paul Gait forecasts $2.6bn in shareholder returns for the full year. Anglo is not far off its 12-month high share price of 2,294p, but it could be getting a bargain, with analyst target prices ranging from 2,400p to 2,650p.
The capital returns came as net debt climbed from $2.8bn at the end of 2018 to $3.4bn as of 30 June, largely thanks to the adoption of IFRS 16 – but that’s still down from $4bn at the mid-point of last year.
In a week when BHP said it would start working with customers on scope 3 emissions (the emissions linked to its products further down the supply chain), Anglo underlined its commitment to thermal and metallurgical coal. In his investor presentation on Thursday morning, Mr Cutifani said “quality coal and quality iron ore” were important differentiators for Anglo as a major miner, adding that Anglo would hold onto its thermal assets.
Bloomberg consensus forecasts point to EPS rising from 255¢ in 2018 to 303¢ this year, and falling to 281¢ in 2020.
| ANGLO AMERICAN (AAL) | ||||
| ORD PRICE: | 2,221p | MARKET VALUE: | £28.7bn | |
| TOUCH: | 2,220.5-2,221.5p | 12-MONTH HIGH: | 2,294p | LOW: 1,434p |
| DIVIDEND YIELD: | 4.1% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 1,825¢ | NET DEBT: | 11% | |
| Half-year to 30 June | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
| 2018 | 13.7 | 2.4 | 102 | 49.0 |
| 2019 | 14.8 | 3.4 | 148 | 62.0 |
| % change | +8 | +41 | +45 | +27 |
| Ex-div: | 15 Aug | |||
| Payment: | 20 Sep | |||
| £1=$1.25 *Includes intangible assets of $3bn, or 239¢ a share | ||||
