Anglo American’s (AAL) 2019 performance is a hybrid effort, driven by iron ore price strength and record high palladium prices. Palladium is on a tear partly because of emissions regulations and hybrid car demand, and grew from $1,276 (£982m) an ounce (oz) in January 2019 to $2,000 at the end of the year, according to Johnson Matthey.
This helped Anglo’s underlying cash profits for the year hit $10bn, a 9 per cent year-on-year increase. The company put the earnings down to an overall 2 per cent improvement in prices and a 9 per cent improvement in performance.
The platinum group metal (PGM) basket price (including palladium and rhodium) was up 27 per cent on the year before at $2,819 an ounce (oz). Asked if he would expand production in the face of the high prices, Anglo chief executive Mark Cutifani said that while palladium fundamentals look good, “what goes up quick [can] come down twice as quick”.
Palladium prices have continued to climb in 2020, reaching $2,835 an oz this week. The average price for 2019 was $1,539 an oz. Anglo has a separately listed subsidiary, called Anglo American Platinum (SA:AMP), that has seen major share price gains in the past year. These have not carried through to Anglo. Mr Cutifani said “these [gaps] tend to normalise out”.
There were also negative commodity price movements last year. Thermal coal prices were off by almost a third, and metallurgical coal fell 12 per cent on 2018, Anglo said. De Beers was a weak point because of low rough diamond prices, with underlying cash profits (Ebitda) for the subsidiary falling 55 per cent to $558m and revenue down a quarter year on year.
Shareholders will get a 9 per cent higher final dividend of 109¢ as a result of the year’s earnings, although the buyback programme has not continued as management signalled in mid-2019. The company still has a major capex draw in the Quellaveco copper mine in Peru, which is on schedule for 2022 production.
This year, Anglo could also take on the Sirius Minerals (SXX) project Woodsmith through the all-cash takeover that will be voted on in early March. This could add several billion dollars in capex requirements, with Sirius aiming to spend another $3bn to get it built before changing its plans in the face of funding issues last year.
Bloomberg consensus estimates see cash profits sitting between $9bn and $10bn for the next two years.
| Anglo American (AAL) | |||||
| ORD PRICE: | 2,128p | MARKET VALUE: | £27bn | ||
| TOUCH: | 2,127-2,129p | 12-MONTH HIGH: | 2,294p | LOW: | 1,655p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 10 | ||
| NET ASSET VALUE: | 2,506ȼ | NET DEBT: | 18%* | ||
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (ȼ) | Dividend per share (ȼ) | |
| 2015 | 20.5 | -5.50 | -436 | 32 | |
| 2016 | 21.4 | 2.62 | 124 | nil | |
| 2017 | 26.2 | 5.51 | 248 | 102 | |
| 2018 | 27.6 | 6.19 | 280 | 100 | |
| 2019 | 29.9 | 6.15 | 281 | 109 | |
| % change | +8 | -1 | +0.5 | +9 | |
| Ex Div: | 12-Mar | ||||
| Payment: | 07-May | ||||
| £ = $1.3 *Includes lease liabilities of $469m | |||||
