Anglo American – Higher Prices And Rising Costs Bring Profits Back Down To Earth

Anglo American plc (LON:AAL) reported full year revenue of $35.1bn, down 15%. Underlying cash profit (EBITDA) fell 30% to $14.5bn. Declines were driven by a fall in production volumes, lower prices for iron ore and copper, as well as higher production costs.

A $1.7bn impairment charge was recognised in association with the Woodsmith project, due to extended development schedule and budget. The new Quellaveco mine delivered its first copper concentrate during the year, with full capacity expected at some point this year.

Get The Full Henry Singleton Series in PDF

Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q4 2022 hedge fund letters, conferences and more

Free cash flow fell from $7.8bn to $1.6bn, largely due to lower profits. Net debt rose $3.1bn, ending the year at $6.9bn.

The board declared a final dividend of $0.74 per share, in line with the 40% payout policy. Total dividends for the year were down 60%.

Anglo American’s Earnings

Matt Britzman, equity analyst at Hargreaves Lansdown

“Anglo is the latest miner to see its top and bottom line take a hefty hit, but its worth taking a step back and remembering the comparable year, 2021, saw record highs for a range of key commodity prices.

At current levels, prices are still plenty high enough for miners like Anglo to make a good chunk of cash. Return on capital employed of 30% over the latest year was double the groups through the cycle target of 15%, so times are still good.

Looking to the future, it’s pleasing to hear positive news from the groups latest copper project, the Quellaveco mine in Peru. First production began last year and it’s ramping up, expected to reach full capacity over the course of this year.

News was less positive for the Woodsmith project, where a $1.7bn impairment charge was taken considering an extended development schedule and budget. It’s never ideal to see delays, but we’re still supportive of the project and the exposure to crop nutrients should add a further level of diversification to income streams.”

copper
iron