Tuesday, 18 May 2021 11:13 GMT

Investors junk Anglo American as losses soar and sales beckon

(MENAFN - ProactiveInvestors)Anglo American (LON:AAL) dropped into investors' junk box in more ways than one on Tuesday as losses surged and it unveiled plans for a US$4bn asset sell-off. The stock slumped 26p or 6.6% to 367.05p as the miner racked up a pre-tax loss of US$5.5bn sharply wider than the losses of US$259mln a year ago. Moody's piled on the pain by downgrading its senior unsecured ratings to (P)Ba3 from (P)Baa3 saying low commodity prices would make it tougher to slash its US$12.9bn debt pile. The rating agency said: "The company now faces a higher business risk due to deterioration in commodity market conditions and a longer and more uncertain deleveraging period than expected." Anglo has already pledged to close or sell mines cut jobs and suspend its dividend. But on Tuesday it said it would up the pace by focusing on De Beers diamonds platinum and copper and off-loading its iron ore and coal operations. The group has cut its asset count to 45 from about 65 having completed or announced US$2.1bn of disposals in 2015. It sold its half-stake in Lafarge Tarmac and the Norte copper assets in Chile while also agreeing to sell the Rustenburg platinum operations and two non-core coal assets in Australia which it is due to complete this year. Anglo said it planned to cut a further US$1.9bn this year and to realise US$3bn-US$4bn from disposals resulting in expected net debt of less than US$10bn by the end of the year. It is already pressing ahead with selling its nickel niobium and phosphate businesses and Moranbah and Grosvenor metallurgical coal operations. The company said it had made more progress on other planned disposals including some platinum and thermal and metallurgical coal operations in South Africa and Australia. Chief executive Mark Cutifani admitted that the commodity price collapse had put the company under pressure and that it had too much debt. "It's a matter of stripping us back to the core rebuilding the base and making sure we're fit to go forward' he told Bloomberg. Cloudy outlook Analysts said the full-year figures were dire but slightly ahead of expectations. Shore Capital's mining specialist Yuen Low pointed out that Anglo had now added bulk commodities to the list of non-core businesses and was considering options to off-load its Kumba iron ore business in South Africa. Low said: "There wasn't as much detail as we would have liked and we would preferred to see announcements of actual disposals rather than more disposal plans." Investec said the rating downgrade was not a surprise but was not good news for the company. It also said Anglo should have got out of iron ore last year before further falls in commodity prices. "Further downgrades to other mining companies can be expected in the days to come" the broker said. "Recent share price rallies across the mining sector fly in the face of fundamentals in our view and the outlook for commodities remains cloudy at best. The recent resumed strength in the US$ is the biggest cloud on the horizon. "We suggested in May last year that Anglo's should exit its iron ore portfolio sadly it is now doing so in a considerably weaker commodity price environment." Anglo said group underlying pre-tax earnings before interest fell to US$2.2bn from US$4.9bn on a 26% decline in revenue to US$23bn. Underlying EBITDA dipped 38% to US$4.8bn. The company said the falls were partly offset by weaker producer country currencies resulting in an underlying EBIT benefit of US$1.8bn plus cost reductions. It expects to reduce capital spending year-on-year by a quarter to less than US$3bn in 2016. The company saved US$1.3bn in 2015 by cutting unit costs by 16% and increased production volumes by 5%. Cutifani said: "We're taking decisive action to sustainably improve our cash flows and materially reduce net debt while focusing on our most competitive assets."

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