Annual Report & Accounts

Anglo American PLC 25 February 2004 News Release 25 February 2004 Anglo American's resilient performance reflects underlying strength of geographic and product diversity • Headline earnings(1) of $1,694 million ($1.20 per share), 4% lower than 2002. Total profit for the year of $1,592 million, a 2% increase over the prior year. • Adverse impact of strong South African rand and Australian dollar. Currency movements reduce headline earnings by $578 million. Despite this significant factor, Anglo American maintained a steady earnings and EBITDA (2) performance. • Strong cash generation: EBITDA of $4.8 billion; EBITDA interest cover(2) of 12.7 times; EBITDA return on total capital(2) of 16.9%. • Recommended increased final dividend of 39 US cents, giving a total dividend for 2003 of 54 US cents per ordinary share, up 6%. • Diversified product portfolio underpinned performance: record earnings from Diamonds, strong contributions from Base and Ferrous Metals, Paper and Packaging and Industrial Minerals offset lower earnings from Platinum, Gold and Coal. • Balanced geographical exposure: split of headline earnings - Europe 26%; South Africa 34%; Americas 18% and Rest of World 22%. • Key acquisitions delivering value across the Group - Minera Sur Andes (formerly Disputada) contributed $111 million to headline earnings in first year and reported increased reserves. • Further cost savings and efficiency improvements of $335 million in 2003, significantly ahead of $200 million target. • $2 billion projects commissioned during the year. Path to growth: $6 billion expansion programme - a strong pipeline of projects across all key commodities. HIGHLIGHTS FOR THE YEAR TO 31 DECEMBER 2003 Year ended Year ended Change 31.12.03 31.12.02 US$ million except per share amounts Turnover including share of joint ventures and associates 24,909 20,497 22% Total operating profit for the year 2,606 3,251 (20)% Total operating profit before operating exceptional items 2,892 3,332 (13)% Profit for the year 1,592 1,563 2% Profit for the year before exceptional items 1,498 1,583 (5)% Headline earnings for the year (1) 1,694 1,759 (4)% Net operating assets (3) 29,709 21,122 41% EBITDA (2) 4,785 4,792 - Net cash inflow from operating activities 3,184 3,618 (12)% Capital expenditure 3,025 2,139 41% Earnings per share (US$): Profit for the year 1.13 1.11 2% Profit for the year before exceptional items 1.06 1.12 (5)% Headline earnings for the year 1.20 1.25 (4)% Dividend for the year (US cents per share) 54.0 51.0 6% (1) See note 7 for basis of calculation of headline earnings. (2) EBITDA is operating profit before exceptional items plus depreciation and amortisation of subsidiaries and share of EBITDA of joint ventures and associates. EBITDA interest cover is EBITDA divided by net interest expense after adjusting for other net financial income. EBITDA return on capital is EBITDA divided by average total capital. EBITDA is reconciled to net cash inflow from operating activities above the cash flow statement. (3) See note 2 for definition of net operating assets. Tony Trahar, Chief Executive, said: "The Group recorded headline earnings of $1,694 million, a resilient performance during a challenging year for our businesses. This solid achievement reflects our success in building a portfolio of high quality assets and maintaining a balanced geographic and product exposure. Group cash flow (EBITDA) remained strong and was virtually unchanged at $4.79 billion for the year. Operating performances were generally very good across the board, though the Group's South African and Australian operations were impacted by a substantially weaker US dollar. This was partially offset by higher dollar prices for gold, diamonds, platinum and base metals and by the further expansion of the Group through acquisition and the commissioning of brownfield and greenfield projects during the year. Anglo American also benefited from the full year earnings contributions from acquisitions made recently across the Group. Our strategy of pursuing growth through both acquisitions and organic projects is now being reflected in significant production volume growth in most of our product areas. A major feature was the turnaround in the performance of Base Metals. The integration of the Minera Sur Andes (formerly Disputada) copper operations in Chile has been successfully completed. The business is now well positioned to benefit from stronger prices. In terms of iron ore, we have delivered our long-term strategic goal of entering the global iron ore market and this will present major expansion opportunities in the medium term. Our focus on driving returns has produced significant results with group-wide cost cutting programmes. We have consistently exceeded our targets in terms of cost savings and efficiency improvements and over the last two years achieved total savings of just over $600 million. The positive outlook for a number of our commodities provides an encouraging platform for the year ahead. Improved economic growth in the US and Japan, combined with the strong industrial performance of China, is encouraging. After two decades of generally flat or declining real prices for metals, despite a background of steadily increasing demand, the backdrop for commodities is more positive than it has been for a number of years. Although the potential for a further weakening of the US dollar remains a cause for concern, this is likely to be offset by rising dollar prices for our key commodities. The Group offers a unique mix of geographic and product diversity which insulates it from the volatility associated with single product cycles. Our gold, platinum, diamond, coal, base and ferrous metals businesses are benefiting from recent price rises and should continue to enjoy steady growth. In addition, paper and packaging and industrial minerals are generating strong cash flows. The Group will also benefit from a number of new projects and recent acquisitions. On the basis of prevailing commodity prices and exchange rates, the Group should achieve good growth in 2004. REVIEW OF 2003 Financial results: Headline earnings per share were $1.20, a reduction of 4% from the prior year. Strong performances by many of the Group's businesses were offset by the significant impact on the Group's results of the stronger South African rand against the US dollar. Despite the weakening of the dollar, headline earnings reached $1,694 million resulting from an outstanding performance from De Beers and strong contributions from Base Metals, Industrial Minerals and Paper and Packaging. Lower earnings were recorded by Anglo Platinum, AngloGold, the Coal business and Ferrous Metals & Industries. Profit for the year was $1,592 million compared with $1,563 million in the prior year. The increased profit for 2003 is principally due to profits on the sale of the Group's interests in Li & Fung and FirstRand Limited, reduced minority interests and a reduced tax rate. Diamonds recorded a 19% increase on 2002 headline earnings to $386 million (23% of Anglo American's total headline earnings) and was the largest contributor to the Group's headline earnings. Sustained diamond retail demand and, in particular, stronger than expected Thanksgiving/Christmas demand in the US resulted in an improved performance. Platinum recorded a 42% decrease in headline earnings to $205 million (12% of Anglo American's total) due primarily to the strength of the rand. This effect was partially offset by a higher average dollar basket price of platinum group metals sold and higher sales volumes. Operating costs increased as a result of increased production volumes from ramp-up mining and smelting operations. The expansion plans to increase platinum output are continuing but have been slowed down due to the impact of the stronger than anticipated rand/dollar exchange rate on cash generated from operations and project returns. Gold's contribution to headline earnings decreased by 19% to $167 million (10% of Anglo American's total) as a result of lower ore grades at Morila in Mali, the sale of Jerritt Canyon and the weakening of the US dollar against local currencies in those countries where AngloGold operates. The stronger local currencies also impacted total cash costs which increased from $161 to $229 per ounce. Coal recorded headline earnings of $232 million, 13% below the prior year (14% of Anglo American's total). In spite of an 8% increase in production to 87 million tonnes and excellent cost containment, the appreciation of the rand and the Australian dollar significantly impacted earnings for the year. Base Metals recorded improved headline earnings of $206 million (12% of Anglo American's total), a 199% increase over 2002. A major turnaround has been achieved in Base Metals. The integration of Minera Sur Andes, which had its first full year of contribution in 2003, has been successfully completed. Copper and nickel operations benefited from higher prices in the second half while zinc prices remained relatively flat. Industrial Minerals increased headline earnings by 17% to $270 million (16% of Anglo American's total) following another year of significant improvement. Tarmac's performance benefited from the full year contribution of acquisitions made in 2002, efficiency improvements in the UK and the strength of European currencies against the US dollar. Copebras also contributed to the increase, the new plant at Goias allowing it to benefit more fully from the buoyant Brazilian market conditions for phosphate fertilizers. Paper and Packaging contributed $368 million to headline earnings, 2% lower than the prior year (22% of Anglo American's total). In spite of weaker market conditions in both the packaging and office communications sectors, Paper and Packaging's steady performance reflected the contribution of full year earnings from businesses acquired in 2002, combined with incremental cost savings from process efficiencies and integration synergies and additional production capacity. Ferrous Metals & Industries contributed $107 million to headline earnings (6% of Anglo American's total), a decrease of 15% over 2002. This was due largely to significantly lower earnings from Tongaat-Hulett which was severely impacted by the strength of the rand together with low international prices. Highveld Steel also suffered from adverse currency movements, while Scaw Metals recorded an improved performance on the back of a full-year contribution from Moly-Cop, acquired in 2002. GROWTH THROUGH ACQUISITIONS Anglo American has developed a strong track record in terms of acquisitions. The EBITDA cash flow returns on the key acquisitions of Minera Sur Andes, Shell Coal, Syktyvkar and Tarmac range between 16% and 23%. The acquisition of Minera Sur Andes late in 2002 has proved extremely attractive for the Group. Not only were the projected synergies exceeded but the operations were earnings accretive in their first full year after acquisition, at an average copper price of 81 US cents/lb. Additional reserves totalling 368 million tonnes have also been identified during the year, thereby extending considerably the life of this large, low-cost producer at a time when few large, new copper mines are coming into production. Since 1999, the Group has achieved significant volume growth: for platinum, volume growth has been 17%, 40% for diamonds, 67% for copper, 57% for nickel, 197% for zinc, 40% for coal, 152% for aggregates, 166% for uncoated woodfree paper, 158% for packaging papers, 346% for industrial sacks. In terms of geographic exposure, significant progress has been made in transforming Anglo American's asset base into a more diverse platform with 30% of its assets today in Europe, 40% in South Africa, 16% in the Americas and the balance spread across the globe. Further acquisitions were announced in 2003: - Anglo American increased its shareholding in Anglo Platinum from 67.6% to 74.1% for a total of $533 million, as part of its ongoing programme of buying shares in the market from time to time. - In November, the Ghanaian government gave its backing to AngloGold's bid to bring about a merger with Ashanti Goldfields. The merger, which is expected to be completed in the first half of 2004, will create one of the world's largest gold mining companies in terms of reserves and gold production. Ashanti Goldfields has six operations spread across the African continent including the long-life Obuasi mine, where $1 billion is estimated to be spent over its remaining life, including $570 million on the Obuasi Deeps Project. During the year, Anglo American increased its shareholding in AngloGold by 3.1% to 54.5% for a total of $301 million. - In October, Anglo American's shareholding in Kumba increased to just over 35% following approval from South Africa's Competition Tribunal and, as a consequence, the Company extended a mandatory cash offer to Kumba's shareholders, resulting in Anglo American's stake increasing to 66.6% for consideration of $539 million for the mandatory offer. Discussions are continuing with the South African government and Black Economic Empowerment partners. - Anglo Industrial Minerals further strengthened its European presence with acquisitions in the UK, France, Spain, Germany and the Czech Republic totalling $100 million. Tarmac is now the largest aggregates producer in the Czech Republic, and is well placed to benefit from the country's forthcoming entry into the EU. - Anglo Paper and Packaging continued to develop and expand its European and South African asset base. In December, Mondi Packaging acquired the Austrian Bauernfeind Group for $118 million, a corrugated paper and packaging business with extensive European operations. Frantschach acquired, subject to competition approval, the industrial sack business of Mexico's Copamex for $52 million, one of the world's largest producers of industrial sacks. ORGANIC GROWTH - $6 BILLION PROJECT PIPELINE Anglo American has one of the strongest pipelines of growth projects in the mining and natural-resource industry, spanning all of its key products, with around $6 billion of approved project capital expenditure over the next five years. A number of projects were successfully commissioned during 2003, including the $454 million Skorpion zinc project in Namibia which has already reached 75% of design capacity levels. The timing of this project appears opportune with zinc prices and demand starting to recover from recent record lows. At Hudson Bay, the $276 million 777 project was substantially completed ahead of schedule and within budget. The $233 million Ruzomberok paper mill project in Slovakia was also commissioned successfully increasing the group's paper production capacity by some 100,000 tonnes. Industrial Minerals' new phosphate fertilizer plant at Goias in Brazil was completed during the year, $19 million under its budgeted cost of $147 million and is operating at full capacity. Other developments in the project pipeline include: - The $173 million cement plant at Buxton, which is undergoing final commissioning trials, is expected to be in full production in the second quarter of 2004. In China, Tarmac is developing a quarry 140 kilometres from Shanghai. The quarry is the nearest known reserve of top-quality asphalting aggregates to China's booming commercial capital. - In Paper and Packaging, the $221 million Richards Bay pulp mill expansion in South Africa, set to increase pulp production capacity by 40% to 475,000 tonnes by 2005, and the $150 million upgrade of the Merebank paper mill, which will increase production by 160,000 tonnes per annum by 2005, are both on track. - In Base Metals, the $288 million (being the Group's share) Rosario project at Collahuasi and Black Mountain's $110 million Deeps project are on budget, with Collahuasi scheduled to complete and Black Mountain scheduled to produce its first ore in 2004. - As part of Anglo Platinum's continuing expansion programme, Modikwa will build up to its full production level by the end of 2004 and the Western Limb Tailings Retreatment project commenced operations in January 2004. Polokwane Smelter and the Anglo Platinum Converting Process will increase throughput in line with increasing volumes of mined and purchased material. - In Gold, the $191 million Mponeng deepening project is due to be completed by the end of 2004. - Major expansionary capital in the Coal business in 2004 will include the Kriel South, as well as the Greenside and Kleinkopje expansions in South Africa. In Australia, a feasibility study is under way regarding the development of the remainder of the Dawson complex, which incorporates Moura and Theodore while work continues on several other projects. In Colombia, Cerrejon is expanding its operations to an output of 28 million tonnes of coal annually by 2007. Other developments during 2003: In May, Anglo American sold its 34.5% stake in Anglovaal Mining Limited to a black empowerment consortium for $231 million. In line with its strategy of disposing of non-core assets, Anglo American sold its 11.5% stake in Avgold Limited for $88 million and also disposed of its remaining stakes in Li & Fung Limited and FirstRand Limited for $269 million and $176 million respectively. Restructuring in Base Metals continued in line with its strategy of focusing on fewer, large, long life operations, disposing of its investments in Anaconda Nickel in Australia and Bindura Nickel in Zimbabwe in 2003 and its stake in the Nkomati Joint Venture in February 2004. Other developments during the year included the launch of Anglo American's inaugural euro-denominated benchmark bond offering, the five-year bond raising €1.0 billion, and its inaugural 7 year sterling denominated benchmark bond offering, which was issued under the existing EMTN programme, raising £300 million. The proceeds from both these issues, made through Anglo American Capital plc, have been used to repay existing bank borrowings. Cost savings: All businesses across the Group continued to focus on efficiency initiatives and cost control during 2003. The total cost savings achieved amounted to $335 million, of which operating efficiencies (comprising maintenance, administration and overheads, labour and materials and supplies) realised $217 million, restructuring and synergies $18 million and procurement $100 million. Black Economic Empowerment: The legislative framework governing the transformation of the South African Mining Industry is continuing to emerge. Promulgation of the Minerals and Petroleum Resources Development Act is expected later this year together with the regulations governing its application. The process of conversion from old order to new order mineral rights will then begin. The South African government has confirmed that regarding the Royalties Bill, royalties based on turnover will only become payable in 2009 when the conversion process is complete. In terms of Black Economic Empowerment (BEE), the Group continues to make steady progress having now recorded over $2 billion in major transactions and over $1.5 billion in procurement and small business promotion spend. The Group is making good progress towards complying with the Mining Charter BEE targets. Exceptional items: Operating exceptional charges amounted to $286 million. These included impairments or write-downs of $208 million to the carrying value of Hudson Bay in Base Metals, $20 million against the Boyongan project by Exploration and $43 million to mining assets in AngloGold, principally Savuka. An exceptional finance charge of $13 million relates to the Group's share of De Beers' costs on the early redemption of debt. Non-operating exceptional gains amounted to $386 million. These included $163 million for the profit on sale of the Group's remaining holding in Li & Fung Limited, $117 million for the profit on the sale of shares in FirstRand Limited, $51 million for the profit on the sale of the Group's stake in Avgold Limited and $42 million for sale of shares in East Africa Gold mines and Randgold Resources. Taxation: The effective rate of taxation for the Group before exceptional items was 29%. This saw a reduction from the effective rate of 33% in 2002, due to the impact of a number of one-off deferred tax benefits arising from tax rate reductions in a number of countries, benefits from losses not previously recognised, and the change in the mix of earnings contributed by the Group's businesses. Dividend: The directors recommend a final dividend of 39 US cents per share to be paid on 29 April 2004. Total dividends for the year will amount to 54 US cents per share, increasing last year's total dividend by 6%. Outlook: The positive outlook for a number of Anglo American's commodities provides an encouraging platform for the year ahead. Improved economic growth in the US and Japan, combined with the strong industrial performance of China, is encouraging. After two decades of generally flat or declining real prices for metals, despite a background of steadily increasing demand, the backdrop for commodities is more positive than it has been for a number of years. Although the potential for a further weakening of the US dollar remains a cause for concern, this is likely to be offset by rising dollar prices for the Group's key commodities. The Group offers a unique mix of geographic and product diversity which insulates it from the volatility associated with single product cycles. Anglo American's gold, platinum, diamond, coal, base and ferrous metals businesses are benefiting from recent price rises and should continue to enjoy steady growth. In addition, paper and packaging and industrial minerals are generating strong cash flows. The Group will also benefit from a number of new projects and recent acquisitions. On the basis of prevailing commodity prices and exchange rates, the Group should achieve good growth in 2004. For further information: Anglo American - London Investor Relations Media Relations Nick von Schirnding Kate Aindow Tel: +44 207 698 8540 Tel: +44 207 698 8619 Anglo American - Johannesburg Investor Relations Media Relations Anne Dunn Marion Dixon Tel: +27 11 638 4730 Tel: +27 11 638 3001 Notes to Editors: Anglo American plc with its subsidiaries, joint ventures and associates is a global leader in the mining and natural resource sectors. It has significant and focused interests in gold, platinum, diamonds, coal, base metals, ferrous metals and industries, industrial minerals and paper and packaging as well as financial and technical strength. The Group is geographically diverse, with operations in Africa, Europe, South and North America and Australia and Asia. (www.angloamerican.co.uk) Note: Throughout this press release '$' denotes United States dollars. OPERATIONS REVIEW Diamonds $ million 2003 2002 Total operating profit 562 541 Headline earnings 386 324 Group's share of De Beers' net assets(1) 2,706 2,149 Share of Group headline earnings (%) 23 18 In 2003, the Group's share of De Beers' operating profit was $21 million higher at $562 million, while De Beers' contribution to Anglo American's headline earnings was $386 million. Increased sales at higher prices and lower financing costs more than compensated for the negative impact of the significant appreciation of the South African rand against the dollar. Sales by the Diamond Trading Company (DTC), the marketing arm of De Beers, were 7% higher at $5.52 billion. Diamond stocks were reduced further by nearly $700 million during the year and, for the second year running, operating cash flow of $1.6 billion was generated. This enabled the group to reduce net interest-bearing debt from $1.72 billion to $906 million and to reduce net gearing to 15% (2002: 28%). Overall, 2003 was a good year for the diamond industry, with further encouraging growth in retail sales of diamond jewellery, up 6% in dollar terms. There was particularly strong growth in sales in the second six months as the world economy and consumer confidence rebounded. The USA, which accounts for over 50% of world diamond jewellery sales, was particularly strong, as were India, China and the UK. Encouragingly, Japan also recorded growth for the first time in several years. The combined total production of De Beers and its partners, Debswana and Namdeb, totalled 43.9 million carats (2002: 40.2 million carats). The Combined Treatment Plant in Kimberley, South Africa, was fully commissioned during the year. De Beers had a strong first sight in 2004 at which it raised its rough diamond prices by a further 3% and there is optimism that 2004 will be another good year for the diamond industry. Macro-economic indicators are positive for the global economy and there is growing evidence that the transformation of the diamond industry, stimulated by De Beers' Supplier of Choice strategy, is producing the desired results. Greater investment by the trade in marketing and branding is driving demand for diamond jewellery and helping diamonds to gain a larger share of the luxury goods sector. (1) De Beers is an associate of the Group. The Group's share of De Beers' net assets is disclosed. The figures for share of Group net operating assets shown for other businesses relate to the Group's subsidiaries only. Platinum $ million 2003 2002 Total operating profit 433 802 Total operating profit before exceptionals 447 802 Headline earnings 205 351 Net operating assets 6,119 3,580 Capital expenditure 1,004 586 Share of Group headline earnings (%) 12 20 Share of Group net operating assets (%) 21 17 Anglo Platinum's contribution to headline earnings dipped sharply to 12% from 2002's 20%, while operating profit was 46% lower at $433 million. The adverse impact of the firmer rand was only partly compensated by improved average dollar prices for platinum group metals (PGMs) and higher sales. The average realised price of PGMs and nickel in dollars was slightly higher in 2003. Platinum and nickel moved upward, while palladium and rhodium declined. Platinum, at $696 per ounce, gained $152, with nickel moving upward from $3.03 to $4.07 per pound. Platinum's sister metals, palladium and rhodium, were both down, at $198 per ounce (2002: $329) and $527 per ounce (2002: $831), respectively. During 2003, the Polokwane smelter was successfully commissioned, as were the new slag-cleaning furnace and the Anglo Platinum Converting Process plant near Rustenburg. Total platinum received at the smelters, including platinum purchased from joint venture partners, increased by 8%, while refined production rose by 2.5% to 2.3 million ounces. The robustness of the rand continues to have a major impact on operating margins, cash generation and the future funding of new projects. In consequence, the expansion plan to raise platinum output from around 2 million ounces a year to 3.5 million by the end of 2006 has been slowed down, with a new target of 2.9 million ounces. Notwithstanding this, the company's long-term strategy to grow markets for PGMs, to expand production to meet that growing demand, and to optimise value in existing operations remains in place. In light of its funding requirements, on 16 February 2004 Anglo Platinum announced a R4 billion ($570 million) convertible preference share offer. Anglo American will be subscribing for its pro rata share of the issue and continues to believe in the fundamental long-term attraction of the platinum business. In 2004, Anglo Platinum plans to raise platinum output to 2.45 million ounces. The platinum price is expected to remain firm, supported by a continuing supply deficit. The palladium price, despite firming demand, is largely dependent on Russian supply patterns. Gold $ million 2003 2002 Total operating profit 326 463 Total operating profit before exceptional items 369 463 Headline earnings 167 205 Net operating assets 3,302 2,511 Capital expenditure 339 246 Share of Group headline earnings (%) 10 12 Share of Group net operating assets (%) 11 12 In 2003, a combination of stronger currencies in most of AngloGold's operating regions, as well as inflation and lower ore grade had a significant negative impact on AngloGold's costs, margins and earnings. This was partly offset by a 20% increase in the dollar gold price. Headline earnings fell by 19% to $167 million, while operating profit was 30% lower at $326 million. Gold production declined by 5% to 5.6 million ounces following the sale of Jerritt Canyon in the United States and lower ore grades at Morila in Mali. Total cash costs increased from $161 to $229 per ounce. AngloGold has a number of major capital projects in South Africa, which will yield some 12 million ounces of gold production over their lives, while future capital projects could add a further 7.5 million ounces. Potential growth projects elsewhere include the Cuiaba expansion in Brazil and the Sunrise Dam underground project and Boddington mine in Australia, which together could add a further 7 million ounces of gold production. The completion of the AngloGold-Ashanti merger would pave the way for the exploitation of Obuasi Deeps in Ghana, extending Obuasi's life by some 20 years. Production in 2004 is expected to decrease to some 5.4 million ounces, following the sale of Jerritt Canyon, the closure of Union Reefs in Australia and lower grades at Morila in Mali. However, following the expected completion of the Ashanti deal during April, AngloGold is anticipating that production will increase to some 6.6 million ounces. Assuming an exchange rate of R7.00 to the dollar, AngloGold is expecting total unit cash costs to rise to $238 per ounce and capital expenditure to increase to $589 million. Many of the economic factors which are negative for the US currency have been, conversely, incentives for investors to buy gold. It is expected that these factors will remain in play in the year ahead, and there is good reason to expect gold price strength to be maintained. Coal $ million 2003 2002 Total operating profit 333 427 South Africa 133 247 Australia 130 130 South America 70 50 Headline earnings 232 266 Net operating assets 2,152 1,658 Capital expenditure 207 142 Share of Group headline earnings (%) 14 15 Share of Group net operating assets (%) 7 8 Anglo Coal's operating profit was 22% down at $333 million, mainly as a result of the appreciation of the South African rand and Australian dollar, while headline earnings declined by 13% to $232 million. Production increased by 8% to 87 million tonnes. Operating profit for South African-sourced coal fell by 46% to $133 million. The effects of the rand's 28% appreciation(1) were partially offset by production and sales increases, as well as by rigorous cost control. Major expansionary capital projects, including the Kriel South project and the Greenside and Kleinkopje expansions, are progressing to plan. The Australian operations maintained operating profit at $130 million. Attributable saleable coal production rose by 4% to 26.1 million tonnes, while attributable sales were 6% lower at 26.4 million tonnes. The longwall mines at Dartbrook and Moranbah had a good first six months with record production but technical problems slowed production in the second half of the year. Drayton production was steady, while both Moura and German Creek exceeded previous performances. Theodore commenced production in September. Grasstree remains on schedule for start-up of production during 2006. Full production at Kayuga should be reached in 2004. A significant fall of ground in January 2004 at Moranbah North will reduce production by some 10% compared with 2003. The effect on earnings will be felt in the first half of 2004. Operating profit at the South American operations rose by 40% to $70 million. In Colombia, synergies achieved as a result of merging Cerrejon Zona Norte and Carbones del Cerrejon exceeded expectations. The operation is now being expanded from 22 million to reach 28 million tonnes per annum by 2007. Carbones del Guasare in Venezuela was hit by the national strike at the beginning of 2003 and subsequently by problems in the administration of the exchange controls imposed at that time. In 2004 average coal prices are expected to be significantly better than those in 2003, while the upward trend looks set to continue for some time yet in respect of export coal prices. (1) increase in average exchange rate year on year Base Metals $ million 2003 2002 Total operating profit before exceptional items 286 133 Copper 269 110 Nickel, Niobium, Mineral Sands 106 94 Zinc (62) (51) Other (27) (20) Exceptional items (208) (51) Total operating profit after exceptional items 78 82 Headline earnings 206 69 Net operating assets 4,087 3,617 Capital expenditure 352 346 Share of Group headline earnings (%) 12 4 Share of Group net operating assets (%) 14 17 Headline earnings grew strongly to $206 million from $69 million in 2002. Operating profit before exceptionals increased from $133 million to $286 million. The average copper price increased from 70.6 US cents/lb to 80.7 US cents/lb, nickel moved from 307 US cents/lb to 437 cents/lb, while zinc prices remained roughly flat at 37.6 US cents/lb (2002: 35.3 US cents/lb). Commodity price rises were offset by US dollar weakness against the local currencies of many operations. Attributable copper production rose from 497,700 tonnes to 708,800 tonnes, with Minera Sur Andes (formerly Disputada) contributing 278,300 tonnes. Collahuasi's $654 million Rosario Project is on budget and on schedule to enter production in mid-2004. Attributable nickel output totalled 24,900 tonnes (2002: 25,600 tonnes). Codemin's production rose 7%, while Loma de Niquel attained design capacity, with output rising to 17,200 tonnes. The $67 million Codemin II project to treat Barro Alto ore is scheduled to enter production in early 2005. At Catalao, production and sales were maintained. Namakwa's output of zircon and rutile products declined following a fire in October and profits were severely impacted by the strong rand. Attributable zinc output rose from 211,500 tonnes to 360,500 tonnes. Hudson Bay's zinc output rose 9% to a record 117,900 tonnes. Skorpion produced 47,400 tonnes and is on target to achieve design throughput of 150,000 tonnes per annum by the end of 2004. Lisheen achieved record output of 169,300 tonnes. At Hudson Bay, the $276 million 777 project was substantially completed ahead of schedule and within budget. Black Mountain's $110 million Deeps project is on budget and scheduled to deliver first ore in late 2004. Robust global growth is widely forecast for 2004. However, Chinese demand will have to remain very firm, and OECD demand improve markedly, to sustain prices at their present levels. Nevertheless, the outlook for base metals is more encouraging than at any time in the past five years. Industrial Minerals $ million 2003 2002 Total operating profit 325 277 Tarmac 290 253 Copebras 35 24 Headline earnings 270 231 Net operating assets 4,304 3,848 Capital expenditure 316 363 Share of Group headline earnings (%) 16 13 Share of Group net operating assets (%) 14 18 Headline earnings were 17% higher at $270 million, with Tarmac contributing $256 million, a rise of 20%. Operating profit also improved by 17% to $325 million. During 2003, Tarmac made ten acquisitions, thereby widening its asphalt and road contracting interests in the UK, and bolstering its aggregates businesses in France, Spain, Germany and the Czech Republic. In China, Tarmac is developing a quarry approximately 140 kilometres from Shanghai. In the UK, three new dry silo mortar plants were constructed, underpinning Tarmac's leadership position in the mortar market. The core aggregates businesses in the UK all improved their profitability in a disappointing market, while the cement business at Buxton had a satisfactory year. The new plant should commence operation in the second quarter of 2004. In continental Europe, operating profit increased by 56%, reflecting continuing strong market conditions in Spain and a full-year contribution from Mavike. France suffered weak market conditions, while the businesses in eastern Europe moved forward satisfactorily. The Middle Eastern operations strongly increased operating profit owing to buoyant market conditions, while the Far East business also had an improved year. Copebras' operating profit increased by 46% due to continued strong demand for fertilizers and higher prices. The new plant at Goias is already operating at full capacity. In the UK the challenge will be to improve margins in a highly competitive market while at least maintaining market share. Difficult trading conditions are expected to continue in Germany. However, EU entry is expected to lead to an improvement in demand in Poland and the Czech Republic. In Spain, demand should remain firm, but France may see some further weakening. Brazilian fertilizer demand is expected to remain strong. Paper and Packaging $ million 2003 2002 Total operating profit 656 649 Europe 471 434 South Africa 185 215 Headline earnings 368 376 Net operating assets 4,820 3,897 Capital expenditure 601 365 Share of Group headline earnings (%) 22 21 Share of Group net operating assets (%) 16 18 Headline earnings were $368 million, a 2% decrease on 2002, while operating profit of $656 million was marginally higher. Operating profit at Mondi Europe increased by 9% to $471 million in spite of weaker market conditions in both the packaging and office communications sectors. In Slovakia, the $233 million modernisation and expansion at the Ruzomberok pulp and paper mill proceeded according to schedule. Annual output is expected to increase by 100,000 tonnes of paper in 2004 and 105,000 tonnes of pulp by 2005. Neusiedler Syktyvkar in Russia and the La Rochette corrugated packaging plants in France and the UK have been fully integrated with the rest of the group. In December, the Bauernfeind corrugated paper and packaging business was acquired, thereby achieving a further step towards attaining critical mass in European markets. Frantschach also acquired (subject to competition approval) the sack business of Mexican industrial packaging group Copamex, providing the opportunity to expand in North America. In South Africa, in difficult external trading conditions, operating profits reduced by only 14% to $185 million. The stronger rand resulted in increasing pressure on domestic prices and lower export margins. However, improved operating efficiencies and higher outputs, as well as initiatives to sustain market share and grow volumes, compensated for much of the negative impact of prices. The Richards Bay mill modernisation and expansion is progressing well, with completion due in April 2005. The upgrade of Merebank's PM1 machine, with the plan to produce 250,000 tonnes per year of uncoated woodfree papers from late 2005, has been approved. Mondi will continue to focus on operating efficiencies, capitalising on recent expansions and extracting synergistic benefits from the integration of acquisitions. General economic conditions are expected to remain weak, with the dollar's current low levels and a buoyant euro creating difficult trading conditions with margins flat at best. Ferrous Metals & Industries $ million 2003 2002 Ferrous Metals operating profit 156 150 Industries operating profit 52 114 Total operating profit 208 264 Kumba 33 - Highveld Steel 11 38 Scaw Metals 70 51 Samancor 41 48 Boart Longyear 33 31 Tongaat-Hulett 10 96 Terra 14 (3) Other (4) 3 Headline earnings 107 126 Net operating assets 4,629 1,696 Capital expenditure 194 85 Share of Group headline earnings (%) 6 7 Share of Group net operating assets (%) 16 8 Headline earnings were $107 million (2002: $126 million). Operating profit was $56 million lower at $208 million, mainly as a result of sharply reduced earnings from Tongaat-Hulett in a year when many operations were affected by the strengthening South African rand. In December, control was acquired of Kumba, the world's fifth largest iron ore producer, with attractive growth prospects in South Africa and Australia. In 2003, Kumba contributed $33 million to operating profit. In 2003, Scaw's operating profit rose by $19 million to $70 million, which included a $21 million full-year contribution from Moly-Cop. Highveld's operating profit was impacted by the appreciating rand and fell by $27 million to $11 million and Samancor's contribution to operating profit reduced by $7 million to $41 million. Boart Longyear's operating profit was $2 million higher at $33 million. Tongaat-Hulett's operating profit fell to $10 million from $96 million. This severe downturn arose from a combination of factors that included a firming rand, lower world sugar and aluminium prices, and substantially higher maize input costs. Terra turned an operating loss of $3 million into an attributable operating profit of $14 million. The outlook for 2004 is cautiously optimistic, with the possibility of higher ferrous metal prices. Scaw and Highveld are likely to benefit from an improved domestic market. Profitability should be restored to more normal levels at Tongaat-Hulett through increasing aluminium volumes and more stable maize-procurement costs. Attention is now being focused on unlocking value for shareholders in Highveld Steel and Tongaat-Hulett. Exploration In 2003, total Group cash expenditure on exploration was $105 million including $50 million spent by Base Metals, $11 million by Anglo Platinum and $36 million by AngloGold. In addition, there was a non-cash exceptional charge of $20 million against the Boyongan project in the Philippines. Base Metals' exploration efforts focused on areas most likely to produce enhanced results, including significant brownfields exploration around operations. The rationalisation programme continued in 2003 with closure of the Zambian and DRC country offices and reduction of global staff. Drilling adjacent to the Chilean copper operations intersected several potential new resources. Copper was also targeted in Brazil, Mexico, Peru, Philippines and Sweden. A nickel sulphide programme focused in the Arctic had early success, with nickel-copper-platinum group elements drill intersections at West Raglan in northern Quebec. Zinc exploration continued in India and Australia and around the Black Mountain, Flin Flon, Lisheen and Skorpion operations. Anglo Platinum's exploration effort in South Africa was directly linked to its commitment to increase production. Internationally, Anglo Platinum's partners have progressed several programmes in Canada and Russia. AngloGold's exploration was focused around operations in Argentina, Australia, Brazil, Tanzania, Mali, Namibia, South Africa and the USA. In addition, exploration was pursued in highly prospective areas in Canada and Peru. Cash flow Group EBITDA was maintained at $4,785 million compared with $4,792 million in 2002. Net cash inflow from operations was $3,184 million compared with $3,618 million in 2002. Depreciation and amortisation, which increased by $362 million, are analysed below. Analysis of depreciation by business segment (subsidiaries) US$ million 2003 2002 Platinum 206 107 Gold 180 182 Coal 124 104 Base Metals 220 124 Industrial Minerals 176 142 Paper and Packaging 285 228 Ferrous Metals & Industries 105 63 Other 14 12 1,310 962 Analysis of goodwill amortisation by business segment (subsidiaries) US$ million 2003 2002 Platinum 17 16 Gold 32 31 Coal 5 4 Base Metals 1 1 Industrial Minerals 53 46 Paper and Packaging 18 15 Ferrous Metals & Industries 5 4 Other 22 22 153 139 Acquisition expenditure accounted for an outflow of $1,469 million. The principal acquisitions included an increase in the Group's shareholding in Kumba to 66.6%. The Group has also increased its interests in Anglo Platinum and AngloGold. Purchase of tangible fixed assets amounted to $3,025 million, an increase of $886 million from 2002. The major components of expansion were in Platinum and Paper and Packaging. Analysis of capital expenditure by business segment (subsidiaries) US$ million 2003 2002 Platinum 1,004 586 Gold 339 246 Coal 207 142 Base Metals 352 346 Industrial Minerals 316 363 Paper and Packaging 601 365 Ferrous Metals & Industries 195 85 Other 11 6 3,025 2,139 Balance sheet Total shareholders' funds were $20,394 million compared with $16,261 million as at 31 December 2002. The increase was primarily due to retained earnings and the appreciation of the South African rand. Net debt was $8,633 million, an increase of $3,055 million from 2002. This increase was principally due to debt incurred to fund acquisitions during the period. Net debt at 31 December 2003 comprised $10,759 million of debt, offset by $2,126 million of cash and current asset investments. Net debt to total capital as at 31 December 2003 was 26.6%, compared with 23.1% in 2002. Exchange rates against the US dollar Average 2003 2002 South African rand 7.55 10.48 Pound sterling 0.61 0.67 Euro 0.88 1.06 Australian dollar 1.53 1.84 Year end South African rand 6.67 8.58 Pound sterling 0.56 0.62 Euro 0.79 0.95 Australian dollar 1.33 1.79 Commodity prices Average market prices for the period 2003 2002 Gold - US$/oz 363 310 Platinum - US$/oz 692 541 Palladium - US$/oz 201 336 Rhodium - US$/oz 530 838 Copper - US cents/lb 81 71 Nickel - US cents/lb 437 307 Zinc - US cents/lb 38 35 Lead - US cents/lb 23 21 European eucalyptus pulp price (CIF) - US$/tonne 500 452 Consolidated profit and loss account for the year ended 31 December 2003 Before Exceptional Before Exceptional exceptional items exceptional items items (note 5) items (note 5) US$ million Note 2003 2003 2003 2002 2002 2002 Group turnover 2 24,909 - 24,909 20,497 - 20,497 including share of joint ventures and associates Less: Share of joint 2 (1,060) - (1,060) (1,066) - (1,066) ventures' turnover Share of associates' 2 (5,212) - (5,212) (4,286) - (4,286) turnover Group turnover - 2 18,637 - 18,637 15,145 - 15,145 subsidiaries Operating costs (16,740) (286) (17,026) (12,757) (47) (12,804) Group operating profit 2 1,897 (286) 1,611 2,388 (47) 2,341 - subsidiaries Share of operating 2 247 - 247 219 (34) 185 profit of joint ventures Share of operating 2 748 - 748 725 - 725 profit of associates Total operating 2 2,892 (286) 2,606 3,332 (81) 3,251 profit Profit on disposal of 5 - 386 386 - 98 98 fixed assets Loss on termination of 5 - - - - (34) (34) operations Profit on ordinary 3 2,892 100 2,992 3,332 (17) 3,315 activities before interest Investment income 308 - 308 304 - 304 Interest payable (614) (13) (627) (483) - (483) Profit on ordinary 2,586 87 2,673 3,153 (17) 3,136 activities before taxation Tax on profit on 6 (749) 13 (736) (1,042) (3) (1,045) ordinary activities Profit on ordinary 1,837 100 1,937 2,111 (20) 2,091 activities after taxation Equity minority 3 (339) (6) (345) (528) - (528) interests Profit for the 3 1,498 94 1,592 1,583 (20) 1,563 financial year Equity dividends to (766) - (766) (720) - (720) shareholders Retained profit for the 732 94 826 863 (20) 843 financial year Headline earnings for 7 1,694 1,759 the financial year Basic earnings per share (US$): Profit for the 8 1.13 1.11 financial year Headline earnings for 8 1.20 1.25 the financial year Diluted earnings per share (US$): Profit for the 8 1.10 1.10 financial year Headline earnings for 8 1.17 1.23 the financial year Dividend per share (US 54.0 51.0 cents): Basic number of shares 8 1,415 1,411 outstanding(1) (million) Diluted number of 8 1,478 1,426 shares outstanding(1) (million) (1) Basic and diluted number of shares outstanding represent the weighted average for the year. The impact of acquired and discontinued operations on the results for the year is not material. Consolidated balance sheet as at 31 December 2003 US$ million 2003 2002 Fixed assets Intangible assets 2,267 2,310 Tangible assets 24,379 16,531 Investments in joint ventures: 1,630 1,544 Share of gross assets 2,483 2,763 Share of gross liabilities (853) (1,219) Investments in associates 4,804 4,119 Other investments 1,394 1,713 34,474 26,217 Current assets Stocks 2,744 1,814 Debtors 4,383 3,337 Current asset investments 1,032 1,143 Cash at bank and in hand 1,094 1,070 9,253 7,364 Liabilities due within one year: Short term borrowings (4,094) (1,918) Other current liabilities (5,224) (4,329) Net current (liabilities)/assets (65) 1,117 Total assets less current liabilities 34,409 27,334 Liabilities due after one year: Long term borrowings (6,665) (5,873) Convertible debt (1,088) (1,084) Other long term liabilities (5,577) (4,789) Provisions for liabilities and charges (3,954) (2,896) Equity minority interests (3,396) (2,304) Net assets 20,394 16,261 Capital and reserves Called-up share capital 738 735 Share premium account 1,284 1,216 Merger reserve 460 636 Other reserves 716 716 Profit and loss account 17,196 12,958 Total shareholders' funds (equity) 20,394 16,261 The financial statements were approved by the board of directors on 24 February 2004. Reconciliation from EBITDA to net cash inflow from operating activities US$ million 2003 2002 EBITDA 4,785 4,792 Less: Share of operating profit of joint ventures (247) (219) Share of operating profit of associates (748) (725) Amortisation of goodwill in joint ventures and (50) (50) associates Underlying depreciation and amortisation in joint (380) (309) ventures and associates Increase in stocks (302) (117) (Increase)/decrease in debtors (246) 67 Increase in creditors 348 48 Increase in provisions 38 115 Other items (14) 16 Net cash inflow from operating activities 3,184 3,618 Consolidated cash flow statement for the year ended 31 December 2003 US$ million Note 2003 2002 Net cash inflow from operating activities 10 3,184 3,618 Dividends from joint ventures and associates 426 258 Returns on investments and servicing of finance Interest received and other financial income 201 309 Interest paid (452) (281) Dividends received from other fixed asset 42 49 investments Dividends paid to minority shareholders (349) (375) Net cash outflow from returns on investments and (558) (298) servicing of finance Taxation UK corporation tax (6) (10) Overseas tax (701) (712) Taxes paid (707) (722) Capital expenditure and financial investment Payments for tangible fixed assets (3,025) (2,139) Proceeds from the sale of tangible fixed assets 117 313 Exit funding for Konkola Copper Mines (KCM) - (182) Payments for other investments(1) (46) (351) Proceeds from the sale of other investments(1) 617 217 Net cash outflow for capital expenditure and (2,337) (2,142) financial investment Acquisitions and disposals Acquisition of subsidiaries(2)(3) (1,469) (2,911) Disposal of subsidiaries 3 24 Investment in joint ventures (1) (34) Sale of interests in joint ventures - 122 Investment in proportionally consolidated joint - (13) arrangements Investment in associates(3) (78) (613) Sale of interests in associates 260 24 Net cash outflow from acquisitions and disposals (1,285) (3,401) Equity dividends paid to Anglo American (741) (732) shareholders Cash outflow before management of liquid resources (2,018) (3,419) and financing Management of liquid resources 182 1,021 Financing 10 1,785 2,458 (Decrease)/increase in cash in the year 11 (51) 60 (1) Disposal and acquisition of other investments included in fixed assets. (2) Net of cash acquired within subsidiaries of $214 million (2002: $157 million). (3) All amounts paid in 2003 in respect of the acquisition of Kumba are included within acquisition of subsidiaries. Consolidated statement of total recognised gains and losses for the year ended 31 December 2003 US$ million Note 2003 2002 Profit for the financial year 3 1,592 1,563 Joint ventures 190 83 Associates 479 384 Unrealised profit on deemed disposal 13 39 Less: Related overseas current tax charge - (22) Currency translation differences on foreign currency 3,282 2,531 net investments Less: Related tax charge (59) - Total recognised gains for the financial year 4,828 4,111 Combined statement of movement in shareholders' funds and movement of reserves for the year ended 31 December 2003 US$ million Issued Share Merger Other Profit Total share premium reserves reserves and loss capital account Balance at 1 January 735 1,216 636 716 12,958 16,261 2003 Profit for the financial - - - - 1,592 1,592 period Dividends paid and - - - - (766) (766) proposed Shares issued 3 68 - - - 71 Realisation of merger - - (176) - 176 - reserve Unrealised profit on - - - - 13 13 deemed disposal Currency translation - - - - 3,282 3,282 differences Less: related tax - - - - (59) (59) charge Balance at 31 December 738 1,284 460 716 17,196 20,394 2003 Notes to financial information 1. Basis of preparation The financial information has been prepared according to the historical cost convention, and in accordance with accounting standards applicable in the United Kingdom. The accounting policies applied in preparing the financial information are consistent with those adopted and disclosed in the Group's financial statements for the year ended 31 December 2002. 2. Segmental information Turnover Operating profit(1) Net operating assets(2) _____________ _________________________________ ______________ Before Exceptional exceptional items items (note 5) US$ million 2003 2002 2003 2003 2003 2002 2003 2002 By business segment Group subsidiaries Platinum 2,232 1,964 442 (14) 428 784 6,119 3,580 Gold 1,718 1,450 269 (43) 226 351 3,302 2,511 Coal 1,556 1,463 260 - 260 379 2,152 1,658 Base Metals 1,720 907 172 (208) (36) 30 4,087 3,617 Industrial 3,196 2,811 308 - 308 264 4,304 3,848 Minerals Paper and 5,352 4,529 638 - 638 624 4,820 3,897 Packaging Ferrous 1,198 780 86 - 86 83 3,030 461 Metals Industries 1,665 1,241 44 - 44 121 1,599 1,235 Exploration - - (105) (20) (125) (93) - - Corporate - - (217) (1) (218) (202) 296 315 Activities 18,637 15,145 1,897 (286) 1,611 2,341 29,709 21,122 Joint ventures Gold 312 312 99 - 99 108 Base Metals 346 413 114 - 114 41 Industrial 100 76 14 - 14 9 Minerals Paper and 274 252 18 - 18 25 Packaging Ferrous 28 13 2 - 2 2 Metals 1,060 1,066 247 - 247 185 Associates Platinum 46 40 5 - 5 18 Gold 11 7 1 - 1 4 Diamonds 2,967 2,746 562 - 562 541 Coal 295 247 73 - 73 48 Base Metals 60 58 - - - 11 Industrial 22 25 3 - 3 4 Minerals Paper and 2 24 - - - - Packaging Ferrous 813 457 68 - 68 65 Metals Industries 663 516 8 - 8 (7) Corporate 333 166 28 - 28 41 Activities 5,212 4,286 748 - 748 725 24,909 20,497 2,892 (286) 2,606 3,251 (1) Comparative figures for operating profit for 2002 are stated after deducting the following exceptional items: US$ million Operating profit before 3,332 exceptional items Less: Group subsidiaries' exceptional items: Base Metals (17) Corporate Activities (30) Less: Share of joint ventures (34) exceptional items - Base Metals Operating profit after 3,251 exceptional items Further details of these exceptional items are given in note 5. (2) Net operating assets consist of tangible assets, intangible assets, stocks and operating debtors less non-interest bearing current liabilities. See note 12 for the reconciliation of net operating assets to net assets. 2. Segmental information (continued) Turnover Operating profit Net operating assets(1) _____________ _________________________________ ______________ Before Exceptional exceptional items items (note 5) US$ million 2003 2002 2003 2003 2003 2002 2003 2002 By geographical segment (by origin) Group subsidiaries South Africa 7,308 5,863 886 (49) 837 1,587 14,148 7,712 Rest of 44 67 (4) - (4) 21 873 555 Africa Europe 7,721 6,545 592 - 592 509 8,086 7,001 North 708 634 (71) (208) (279) (41) 868 934 America South 1,675 908 361 (1) 360 151 3,168 3,196 America Australia and 1,181 1,128 133 (28) 105 114 2,566 1,724 Asia Joint ventures South Africa 17 12 9 - 9 5 Rest of 312 330 98 - 98 106 Africa Europe 372 398 31 - 31 (50) North 28 13 2 - 2 1 America South 323 313 105 - 105 123 America Australia and 8 - 2 - 2 - Asia Associates South Africa 1,302 1,068 135 - 135 198 Rest of 2,157 1,582 398 - 398 312 Africa Europe 640 733 116 - 116 124 North 504 527 (4) - (4) 21 America South 280 238 61 - 61 46 America Australia and 329 138 42 - 42 24 Asia 24,909 20,497 2,892 (286) 2,606 3,251 29,709 21,122 By geographical segment (by destination) Group subsidiaries South Africa 3,503 2,566 Rest of 295 302 Africa Europe 9,726 8,295 North 1,607 1,144 America South 859 436 America Australia and 2,647 2,402 Asia Joint ventures South Africa 7 3 Rest of 11 35 Africa Europe 787 803 North 91 99 America South 45 19 America Australia and 119 107 Asia Associates South Africa 399 309 Rest of 34 40 Africa Europe 1,287 947 North 2,157 1,901 America South 41 23 America Australia and 1,294 1,066 Asia 24,909 20,497 (1) Net operating assets consist of tangible and intangible assets, stocks and operating debtors less non-interest bearing current liabilities. See note 12 for the reconciliation of net operating assets to net assets. 3. Profit for the financial year The table below analyses the contribution of each business segment to the Group's profit for the financial year and its headline earnings. 2003 US$ million Opera Opera Non- Good Pro- Inter- Divid Other Inter- Net Tax Equity Total ting ting opera will fit est End finan- est invest minority profit except ting amorti before income income cial exp- ment interests ional excep sation inter income/ ense income/ items tional est (exp (expense) items ense) By business segment Platinum 433 14 - 17 464 14 - 21 (47) (12) (152) (95) 205 Gold 326 43 - 41 410 42 - 51 (44) 49 (122) (170) 167 Diamonds 562 - - 32 594 10 - - (59) (49) (153) (6) 386 Coal 333 - - 8 341 13 2 (31) (7) (23) (86) - 232 Base Metals 78 208 - 1 287 6 - (12) (38) (44) (32) (5) 206 Industrial 325 - - 53 378 7 1 (4) (15) (11) (81) (16) 270 Minerals Paper and 656 - - 18 674 27 5 31 (126) (63) (172) (71) 368 Packaging Ferrous 156 - - 9 165 14 2 3 (50) (31) (41) (4) 89 Metals Industries 52 - - 4 56 44 9 (11) (104) (62) 21 3 18 Exploration (125) 20 - - (105) - - 1 - 1 - 21 (83) Corporate (190) 1 - 20 (169) 23 17 23 (124) (61) 69 (3) (164) Activities Headline 2,606 286 - 203 3,095 200 36 72 (614) (306) (749) (346) 1,694 earnings for the financial year Headline - (286) 386 (203) (103) - - - (13) (13) 13 1 (102) earnings adjustments Profit for 2,606 - 386 - 2,992 200 36 72 (627) (319) (736) (345) 1,592 the financial year 2002 US$ million Opera Opera Non- Good Pro Inter Divid Other Interest Net Tax Equity Total ting ting oper will fit est End finan Ex invest min profit except ating amorti before income income cial pense ment ority ional except sation inter income/ income/ inter items ional est (expense) (ex ests items pense) By business segment Platinum 802 - - 17 819 17 - - (5) 12 (265)(215) 351 Gold 463 - - 39 502 39 - 75 (47) 67 (157)(207) 205 Diamonds 541 - - 29 570 16 - - (95) (79) (159) (8) 324 Coal 427 - - 7 434 8 1 (65) (5) (61) (107) - 266 Base Metals 82 51 - 1 134 4 - (2) (43) (41) (22) (2) 69 Industrial 277 - - 46 323 6 - 7 (3) 10 (86) (16) 231 Minerals Paper and 649 - - 15 664 12 9 18 (84) (45) (173) (70) 376 Packaging Ferrous 150 - - 5 155 16 3 2 (23) (2) (53) (12) 88 Metals Industries 114 - - 3 117 32 9 (17) (66) (42) (10) (27) 38 Exploration (93) - - - (93) - - (1) - (1) - 17 (77) Corporate (161) 30 - 27 (104) 95 28 (8) (112) 3 (10) (1) (112) Activities Headline 3,251 81 - 189 3,521 245 50 9 (483) (179)(1,042)(541) 1,759 earnings for the financial year Headline - (81) 64 (189) (206) - - - - - (3) 13 (196) earnings adjustments Profit for 3,251 - 64 - 3,315 245 50 9 (483) (179)(1,045)(528) 1,563 the financial year 4. Exploration expenditure US$ million 2003 2002 By business segment Platinum 11 13 Gold 36 27 Base Metals 50 47 Impairment of Boyongan (see note 5) 20 - Other 8 6 125 93 5. Exceptional items US$ million 2003 2002 Operating exceptional items Impairment of Hudson Bay Mining and Smelting Co Ltd (208) - Impairment of Boyongan (20) - Impairment of Savuka (34) - Disposal of Salobo Metais SA - reversal of previous - 46 impairment Write-down of investments - (30) Other impairments (24) (97) Total operating exceptional items (286) (81) Taxation 22 - Minority interests 23 - (241) (81) Exceptional finance charge Share of associate's charge on early redemption of debt (13) - Total exceptional finance charge (13) - Non-operating exceptional items Disposal of interest in Li & Fung 163 - Further disposal of interests in FirstRand Limited 117 7 Disposal of interest in Avgold 51 - Disposal of interest in East Africa Gold Mines 25 - Disposal of interest in Randgold Resources 17 - Disposal of interest in JCI (20) - Disposal of Anglovaal Mining Limited (13) - Disposal of Tati Nickel Mining Company (Pty) Limited - 53 Disposal of Salobo Metais SA - 5 Disposal of other fixed assets and investments 21 14 Share of associates' exceptional items 25 19 Profit on disposal of fixed assets 386 98 KCM exit costs - (34) Total non-operating exceptional items 386 64 Taxation (9) (3) Minority interests (29) - 348 61 Total exceptional items (net of tax and minority interest) 94 (20) Operating exceptional items A review of the carrying value of the Hudson Bay assets has resulted in a $208 million exceptional charge to operating profit, attributable to Base Metals. The review was based on estimated value in use. During the year the Exploration division has made an exceptional charge of $20 million against the Boyongan project in the Philippines. AngloGold impaired the mining assets of Savuka in South Africa with a charge of $34 million. Exceptional finance charge The exceptional finance charge of $13 million relates to the Group's share of De Beers' costs on the early redemption of debt, being facility fees not yet amortised. Non-operating exceptional items During the year, Ferrous Metals & Industries disposed of their investment in Li & Fung for net proceeds of $269 million, leading to an exceptional gain of $163 million. The Group made further sales of its interest in FirstRand Limited during the year for a total consideration of $176 million, leading to an exceptional gain of $117 million attributable to Corporate Activities. The Group also disposed of its remaining stake in Avgold in November 2003 resulting in an exceptional gain of $51 million attributable to Corporate Activities. 6. Tax on profit on ordinary activities a) Analysis of charge for the year US$ million 2003 2003 2002 2002 Excluding Including Excluding Including exceptional exceptional exceptional exceptional items items items items United Kingdom corporation tax at 26 26 (4) (4) 30% South Africa corporation tax at 74 74 435 435 30% Other overseas taxation 240 240 187 187 Share of taxation charge of joint 15 15 29 29 ventures Share of taxation charge of 200 200 216 216 associates Current tax on exceptional items - 9 - 3 Total current tax 555 564 863 866 Deferred taxation - subsidiaries 193 193 160 160 Deferred taxation - joint 17 17 14 14 ventures Deferred taxation - associates (16) (16) 5 5 Deferred tax on exceptional - (22) - - items Total deferred tax 194 172 179 179 Total tax charge 749 736 1,042 1,045 b) Factors affecting current tax charge for the year The current tax charge assessed for the year is lower than the standard rate of corporation tax in the United Kingdom and South Africa (30%). The differences are explained below: US$ million 2003 2002 Including Including exceptional exceptional items items Profit on ordinary activities before 2,673 3,136 tax Tax on profit on ordinary activities at 802 941 30% (2002: 30%) Tax effects of: Expenses not deductible for tax purposes: Operating exceptional items 86 24 Goodwill amortisation 61 41 Exploration costs 32 28 Other permanent items - 10 Non-taxable income: Dividends receivable (11) (15) Non-operating exceptional items (103) (19) Tax allowances for capital expenditure (207) (175) in excess of depreciation Movement in tax losses 15 37 South African secondary tax on 45 53 companies Effect of differences between local and (66) -(1) UK tax rates Other differences (90) (59) Current tax charge for the year 564 866 (1) The prior year comparative is included within other differences. c) Factors that may affect future tax charges The Group anticipates that its effective rate will move above the statutory rate of 30% as the Group operates in certain countries where tax rates are higher than the UK rate, including South Africa (effective rate of 37.8% assuming distribution of profits). In addition to the amounts provided in deferred tax, unrecognised assets exist in respect of taxable losses. No asset has been recognised in respect of these losses as it is not regarded as more likely than not that there will be suitable taxable profits against which to offset these losses. Any utilisation of these losses in the future may lead to a reduction in effective tax rates. No deferred tax has been provided in respect of accumulated reserves of overseas subsidiaries, associates or joint ventures as no dividends have been declared. Overseas earnings have not been remitted to the UK in such a way as to incur a UK tax charge. 7. Headline earnings 2003 2002 Basic Basic earnings earnings per per share share US$ million (unless otherwise stated) Earnings US$ Earnings US$ Profit for the financial year 1,592 1.13 1,563 1.11 Operating exceptional items 286 0.20 81 0.06 Exceptional finance charge 13 0.01 - - Non-operating exceptional items (386) (0.27) (64) (0.05) Amortisation of goodwill: Subsidiaries 153 0.11 139 0.10 Joint ventures and associates 50 0.04 50 0.04 Related tax (13) (0.01) 3 - Related minority interest (1) (0.01) (13) (0.01) Headline earnings for the financial 1,694 1.20 1,759 1.25 year Headline earnings per share is calculated in accordance with the definition in the Institute of Investment Management and Research ("IIMR") Statement of Investment Practice No 1, 'The Definition of IIMR Headline Earnings', which the directors believe to be a useful additional measure of the Group's performance. 8. Earnings per share 2003 2002 Basic number of ordinary shares outstanding 1,415 1,411 (million)(1) Potentially dilutive ordinary shares (million) 63 15 Diluted number of ordinary shares outstanding 1,478 1,426 (million)(1) Profit for the financial year: Basic earnings per share (US$)(2) 1.13 1.11 Diluted earnings per share (US$)(3) 1.10 1.10 Headline earnings for the financial year(4): Basic earnings per share (US$) 1.20 1.25 Diluted earnings per share (US$) 1.17 1.23 (1) Basic and diluted number of shares outstanding represent the weighted average for the year. (2) Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. The average number of shares in issue excludes the shares held by the employee benefit trust. (3) Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all dilutive potential ordinary shares. (4) Basic and diluted earnings per share are also shown based on headline earnings, which the directors believe to be a useful additional measure of the Group's performance. Headline earnings per share is calculated in accordance with the definition issued by the Institute of Investment Management and Research (now Society of Investment Professionals), in Statement of Investment Practice No. 1, 'The Definition of Headline Earnings'. 9. Capital expenditure US$ million 2003 2002 Platinum 1,004 586 Gold 339 246 Coal 207 142 Base Metals 352 346 Industrial Minerals 316 363 Paper and Packaging 601 365 Ferrous Metals & Industries 195 85 Other 11 6 3,025 2,139 10. Consolidated cash flow statement analysis a) Reconciliation of Group operating profit to net cash inflow from operating activities US$ million 2003 2002 Group operating profit - subsidiaries 1,611 2,341 Exceptional charges (all non cash items) 286 47 Group operating profit before exceptionals 1,897 2,388 Depreciation and amortisation charges 1,463 1,101 Increase in stocks (302) (117) (Increase)/decrease in debtors (246) 67 Increase in creditors 348 48 Increase in provisions 38 115 Other items (14) 16 Net cash inflow from operating activities 3,184 3,618 b) Financing US$ million 2003 2002 Increase/(decrease) in short term borrowings 875 (514) Increase in long term borrowings 531 2,932 Net movement in minorities' shares and loans 3 (1) Exercise of share options 71 41 Issue of shares in subsidiaries 305 - Financing 1,785 2,458 c) Reconciliation of net cash flow to movement in net debt US$ million 2003 2002 (Decrease)/increase in cash in the year (51) 60 Cash inflow from debt financing (1,406) (2,418) Cash inflow from management of liquid resources (182) (1,021) Change in net debt resulting from cash flows (1,639) (3,379) Loans and current asset investments acquired with (746) (212) subsidiaries Loans and current asset investments disposed with 5 4 subsidiaries Cessation of consolidation of KCM(1) - 148 Exchange adjustments (675) (121) Movement in net debt (3,055) (3,560) Net debt at start of year (5,578) (2,018) Net debt at end of year (8,633) (5,578) (1) KCM ceased to be consolidated by the Group during 2002. 11. Movement in net debt Acquisitions Disposals excluding excluding Overdrafts Other cash and cash and Included Non-cash Exchange US$ million 2002 Cash overdrafts overdrafts In debt movements movements 2003 flow Cash at bank 1,040 (51) - - 30 - 75 1,094 and in hand (1) Debt due (5,873) (531) (537) 2 - 453 (179) (6,665) after one year Debt due (1,888) (875) (209) 3 (30) (453) (642) (4,094) within one year (7,761) (1,406) (746) 5 (30) - (821) (10,759) Current asset 1,143 (182) - - - - 71 1,032 investments Total (5,578) (1,639) (746) 5 - - (675) (8,633) (1) Net of bank overdrafts in 2002. 12. Reconciliation of net operating assets to net assets US$ million 2003 2002 Net operating assets 29,709 21,122 (see note 2) Fixed asset 7,828 7,376 investments Current asset 1,032 1,143 investments Cash at bank and in 1,094 1,070 hand Other non-operating assets and (4,700) (2,868) liabilities Long term liabilities (6,665) (5,873) Provisions for liabilities and (3,954) (2,896) charges Equity minority (3,396) (2,304) interests Proposed dividend (554) (509) Net assets 20,394 16,261 13. Status of financial information The financial information set out herein does not constitute the Company's statutory accounts for the year ended 31 December 2003, but is derived from those accounts which were approved by the board of directors on 24 February 2004. Statutory accounts for the year ended 31 December 2002 have been delivered to the Registrar of Companies, and those for 2003 will be delivered following the Company's annual general meeting convened for 21 April 2004. The auditors have reported on these accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. Production statistics 2003 2002 Anglo Platinum (troy ounces)(1)(2) Platinum 2,356,100 2,294,300 Palladium 1,213,700 1,136,500 Rhodium 237,400 215,900 Nickel (tonnes) 22,500 19,700 AngloGold (gold in troy ounces)(2) South Africa 3,281,000 3,412,000 North and South America 922,000 940,000 Australia and Asia 432,000 502,000 Rest of the world 981,000 1,085,000 5,616,000 5,939,000 Gold Fields (gold in troy ounces)(2) Gold 870,500 464,600 Anglo Coal (tonnes) South Africa: Eskom 31,301,000 28,649,000 Trade - Thermal 18,600,200 15,681,000 - Metallurgical 1,835,500 3,889,000 51,736,700 48,219,000 Australia - Thermal 17,025,400 16,341,000 - Metallurgical 9,100,000 8,679,000 26,125,400 25,020,000 South America - Thermal 8,728,400 6,937,000 86,590,500 80,176,000 Anglo Base Metals Copper Collahuasi 100% basis (Anglo American 44%) Ore mined tonnes 27,680,000 34,871,000 Ore processed Oxide tonnes 6,355,000 5,358,000 Sulphide tonnes 24,415,000 25,231,000 Ore grade processed Oxide %Cu 0.8% 0.9% Sulphide %Cu 1.5% 1.6% Production Copper concentrate dmt 861,600 1,019,400 Copper cathode tonnes 63,400 60,600 Copper in tonnes 331,300 372,900 concentrate Total copper production tonnes 394,700 433,500 for Collahuasi (1) Includes Anglo Platinum's share of Northam Platinum Limited. (2) See Anglo American Platinum Corporation Limited, Northam Limited, AngloGold Limited and Gold Fields Limited published results for further analysis of production information. Production statistics (continued) 2003 2002 Minera Sur Andes(1) - Los Bronces mine Ore mined tonnes 20,901,000 3,291,000 Marginal ore mined tonnes 23,676,000 1,577,400 Las Tortolas Ore processed tonnes 19,514,000 2,523,300 concentrator Ore grade processed %Cu 1.1% 1.1% Average recovery % 87.1% 85.6% Production Copper concentrate dmt 553,800 81,300 Copper cathode tonnes 27,700 3,600 Copper in tonnes 180,100 25,400 concentrate Total tonnes 207,800 29,000 - El Soldado mine Ore mined Open pit - ore tonnes 3,188,000 583,200 mined Open pit - marginal tonnes 1,590,000 47,800 ore mined Underground tonnes 3,267,000 389,000 (sulphide) Total tonnes 8,045,000 1,020,000 Ore processed Oxide tonnes 531,000 91,200 Sulphide tonnes 6,581,000 931,700 Ore grade processed Oxide %Cu 1.7% 1.2% Sulphide %Cu 1.1% 1.1% Production Copper concentrate dmt 228,600 31,200 Copper cathode tonnes 8,000 1,000 Copper in tonnes 62,500 9,000 concentrate Total tonnes 70,500 10,000 - Chagres Smelter Copper concentrates tonnes 165,500 23,300 smelted Production Copper blister/ tonnes 160,100 21,900 anodes Acid tonnes 436,700 66,400 Total copper production tonnes 278,300 39,000 for Minera Sur Andes group Mantos Blancos - Mantos Blancos mine Ore mined Oxide tonnes 4,738,000 4,606,000 Sulphide tonnes 4,021,000 4,005,000 Marginal ore mined tonnes 8,819,000 5,672,000 Ore grade processed Oxide %Cu (Soluble) 0.7% 0.8% Sulphide %Cu (Insoluble) 1.0% 1.2% Marginal ored %CuS 0.4% 0.4% Production Copper concentrate dmt 110,200 137,600 Copper cathode tonnes 51,600 51,000 Copper in tonnes 35,300 45,200 concentrate Total tonnes 86,900 96,200 - Mantoverde mine Ore processed Oxide tonnes 9,001,000 8,398,200 Marginal ore tonnes 6,048,000 4,573,000 Ore grade processed Oxide %Cu (Soluble) 0.7% 0.7% Marginal ore %Cu (Soluble) 0.3% 0.3% Production Copper cathode tonnes 60,200 57,300 Black Mountain and Hudson Bay tonnes 87,800 88,800 Other tonnes 21,900 25,600 Total attributable copper production tonnes 708,800 497,700 (1) Results for 2002 represent 49 days of operations - since date of acquisition. Production statistics (continued) 2003 2002 Nickel, Niobium and Mineral Sands Nickel Codemin Ore mined tonnes 500,600 513,200 Ore processed tonnes 530,300 500,800 Ore grade processed % Ni 1.4% 1.4% Production tonnes 6,400 6,000 Loma de Niquel Ore mined tonnes 1,208,000 1,301,100 Ore processed tonnes 1,216,000 1,095,200 Ore grade processed % Ni 1.7% 1.7% Production tonnes 17,200 15,500 Other tonnes 1,300 4,100 Total attributable nickel tonnes 24,900 25,600 production Niobium Catal(C)?o Ore mined tonnes 559,100 591,600 Ore processed tonnes 529,700 568,400 Ore grade processed kg Nb/ 10.87 10.57 tonne Production tonnes 3,300 3,300 Mineral Sands Namakwa Sands Ore mined tonnes 16,739,000 16,434,500 Production - Ilmenite tonnes 314,600 315,900 - Rutile tonnes 20,400 26,000 - Zircon tonnes 93,300 112,400 Smelter production - Slag tapped tonnes 165,800 162,700 - Iron tapped tonnes 105,900 103,000 Zinc and Lead Black Mountain Ore mined tonnes 1,501,000 1,588,700 Ore processed tonnes 1,449,000 1,554,000 Ore grade processed - Zinc % 2.6% 2.6% - Lead % 3.3% 3.5% - Copper % 0.5% 0.5% Production - Zinc in tonnes 25,900 27,600 concentrates - Lead in tonnes 39,600 45,300 concentrates - Copper in tonnes 4,700 5,400 concentrates Hudson Bay Ore mined tonnes 2,206,000 2,989,300 Ore processed tonnes 2,207,000 3,004,500 Ore grade processed - Copper % 1.9% 1.7% - Zinc % 5.0% 4.1% Concentrate treated - Copper tonnes 273,000 294,100 - Zinc tonnes 228,500 211,100 Production (domestic) - Copper tonnes 39,400 42,900 - Zinc tonnes 93,100 102,100 Production (total) - Copper tonnes 83,100 83,400 - Zinc tonnes 117,900 108,100 - Gold ozs 57,500 59,300 - Silver ozs 1,032,800 1,234,200 Production statistics (continued) 2003 2002 Lisheen 100% basis (Anglo American 50% in 2002) Ore mined tonnes 1,522,000 1,571,400 Ore processed tonnes 1,521,000 1,541,300 Ore grade processed - Zinc %Zn 12.3% 11.2% - Lead %Pb 2.1% 2.1% Production - Zinc in tonnes 169,300 151,500 concentrate - Lead in tonnes 20,800 22,000 concentrate Other zinc production tonnes 47,400 - Total attributable zinc tonnes 360,500 211,500 production Anglo Industrial Minerals (tonnes) Aggregates 67,158,100 63,928,400 Lime products 893,800 871,000 Concrete (m3) 7,874,600 6,955,700 Sodium tripolyphosphate 88,800 88,200 Phosphates 1,040,300 734,600 Anglo Paper and Packaging (tonnes) South Africa Pulp 109,810 81,550 Graphic papers 507,270 518,200 Packaging papers 590,740 572,900 Corrugated board (000 m3) 297,780 300,050 Lumber (m3) 56,060 126,500 Wood chips (green metric 2,122,470 1,647,700 tonnes) Mining timber 158,640 143,100 Europe Pulp 181,860 181,800 Graphic papers 1,648,280 1,475,700 Packaging papers 1,790,600 1,506,800 Corrugated board (000 m2) 1,384,900 1,121,100 Industrial sacks (m units) 2,723 2,600 Consumer bags and pouches 544 470 (m units) Anglo Ferrous Metals & Industries (tonnes) Kumba)(1) Iron ore - Production - - Lump 18,172,000 - - Fine 11,421,000 - Total iron ore 29,593,000 - Coal Power Station Coal 13,868,700 - Coking Coal 2,161,700 - Steam Coal 2,932,800 - Total coal 18,963,200 - Zinc metal 112,000 - Heavy minerals Crude Ilmenite 457,000 - Ilmenite 609,000 - (1) 100% of production has been reported for full year 2003. See Kumba Resources Limited published results for further analysis of production information. Production statistics (continued) 2003 2002 Scaw Metals Rolled products 352,343 356,446 Cast products 114,716 114,701 Grinding media 388,886 224,483 Highveld Steel Rolled products 578,035 701,087 Continuous cast blocks 877,405 951,921 Vanadium slag 69,814 68,100 Samancor Chrome ore 1,127,360 1,055,588 Chrome alloys 407,680 310,900 Manganese ore (mtu m) 76 62 Manganese alloys 288,176 306,100 Zimbabwe Alloys Chrome alloys 39,179 44,064 Tongaat-Hulett Sugar 843,307 811,780 Aluminium 146,729 120,613 Starch & glucose 609,532 616,404 Hippo Valley Sugar 223,595 284,109 Terra Ammonia 677,000 729,400 Nitrogen solutions 1,862,400 1,923,100 Urea 264,500 300,800 Ammonium nitrate 452,800 442,400 The figures above include the entire output of consolidated entities and the Group's share of joint ventures and associates where applicable, except for Collahuasi in Base Metals which is quoted on a 100% basis. Reconciliation of subsidiaries' and associates' profits to those included in the consolidated financial statements For the year to 31 December 2003 Note only key reported lines are reconciled AngloGold Limited 2003 US$ million IAS adjusted headline earnings (published) (1) 282 Exploration (excluding joint ventures) 36 318 Depreciation on assets revalued on acquisition (1) Minority interest (150) UK GAAP contribution to headline earnings 167 (1) before unrealised non-hedge derivatives and mark-to-market of debt financial instruments, and related deferred tax. Anglo American Platinum Corporation Limited IAS headline earnings (published) 277 Secondary Tax on Companies adjustment 17 Movement on unrealised profit on Forward Exchange Contracts 6 Exploration 11 Prior year stock adjustment change in Anglo Platinum's 29 accounting policy Weighted average exchange impact 5 Other 3 348 Minority interest (95) Depreciation on assets revalued on acquisition (48) UK GAAP contribution to headline earnings 205 DB Investments SA 2003 US$ million Reconciliation of headline Total Ordinary Preference earnings shares shares(3) DBI headline earnings - IAS (100%) 676 - - GAAP adjustments(1) 40 - - DBI headline earnings - UK GAAP 716 599 117 (100%) AA plc's 45% ordinary share 269 269 - interest Additional 3.65% ordinary share 22 22 - interest(2) AA plc's portion of the preference 95 - 95 shares(3) AA plc headline earnings 386 291 95 (1) The GAAP adjustments include +$39 million relating to the mark-to-market of interest rate hedging contracts referred to in Dbsa's 5 February 2004 press release. Whereas in Dbsa's earnings, the full amount of $70 million is charged against earnings in 2003, under UK GAAP only $31 million is charged against earnings in 2003, being the portion that was realised in the year. (2)As a result of the De Beers' partial interest in Debswana Diamond Company (Proprietary) Limited (one of the shareholders in DBI), AA plc accounts for an additional 3.65% of DBI's post-tax earnings attributable to ordinary shares. (3) AA plc grosses up its preference share income to the operating profit level and accounts for its preference share interest in operating profit, exceptional items, investment income and net interest, tax and minorities, in the same way as it accounts for its ordinary share interest in these balances. This treatment is in accordance with FRS9, paragraph 33, which indicates that where preference shares are an integral part of the investor's long-term interest, it is appropriate to include the preference share interest with the ordinary share interest in determining the investor's overall share of an associate's results. The headline earnings attributable to AA plc's $70 million preference share income are arrived at by adjusting for a proportion of exceptional items (+$2 million) and goodwill amortisation (+$23 million) in the same way as the ordinary share interest is calculated. Key financial data US$ million (unless stated otherwise) 2003 2002 2001(1) 2000(1) 1999(1) Group and share of turnover of joint 24,909 20,497 19,282 20,570 19,245 ventures and associates Less: Joint ventures' turnover (1,060) (1,066) (1,109) (1,590) (1,720) Associates' turnover (5,212) (4,286) (3,387) (4,156) (5,947) Group turnover - subsidiaries 18,637 15,145 14,786 14,824 11,578 Group operating profit before exceptional 2,892 3,332 3,298 3,479 2,141 items Operating exceptional items(2) (286) (81) (513) (433) - Total operating profit(2) 2,606 3,251 2,785 3,046 2,141 Non-operating exceptional items(2) 386 64 2,148 490 410 Net interest (expense)/investment income (319) (179) 130 308 265 Profit on ordinary activities before 2,673 3,136 5,063 3,844 2,816 taxation Taxation on profit on ordinary (749) (1,042) (1,247) (1,143) (538) activities Taxation on exceptional items 13 (3) (147) - 18 Equity minority interests (345) (528) (584) (818) (758) Profit for the financial year 1,592 1,563 3,085 1,883 1,538 Headline earnings 1,694 1,759 1,681 1,927 1,296 Earnings per share ($)(3) 1.13 1.11 2.09 1.20 1.00 Headline earnings per share ($)(3) 1.20 1.25 1.14 1.23 0.84 Dividend per share (US cents) 54.0 51.0 49.0 47.5 37.5 Basic number of shares outstanding 1,415 1,411 1,474 1,567 1,540 (million)(3) EBITDA(4) 4,785 4,792 4,647 4,688 3,113 EBITDA interest cover(5) 12.7 20.0 31.2 - - Operating margin (before exceptional 11.6% 16.3% 17.1% 16.9% 11.1% items) Dividend cover (based on headline 2.2 2.5 2.3 2.6 2.2 earnings) Balance Sheet Fixed assets 26,646 18,841 12,870 14,315 11,110 Investments 7,828 7,376 5,523 7,936 8,373 Working capital 1,903 822 282 971 914 Provisions for liabilities and charges (3,954) (2,896) (2,194) (2,594) (2,604) Net (debt)/funds (8,633) (5,578) (2,018) (3,590) 81 Equity minority interests (3,396) (2,304) (1,607) (2,212) (2,477) Shareholders' funds (equity) 20,394 16,261 12,856 14,826 15,397 Total capital(6) 32,423 24,143 16,481 20,628 17,793 Net cash inflow from operating 3,184 3,618 3,539 2,959 1,850 activities Dividends received from joint ventures and 426 258 258 258 209 associates Return on capital employed(7) 10.7% 17.5% 19.0% 19.5% 13.2% EBITDA/average total capital 16.9% 23.6% 25.0% 24.4% 18.1% Net debt/(funds) to total capital 26.6% 23.1% 12.2% 17.4% (0.5%) (1) 1999, 2000 and 2001 restated for the adoption of FRS 19. (2) Operating profit for 2000 has been restated for the reclassification of the loss of $167 million arising on the anticipated disposal of Terra Industries Inc. The disposal did not proceed and the loss has therefore been reclassified into operating exceptional items as an impairment. (3) 2000 and 1999 restated to reflect the three-for-one bonus issue in May 2001. (4) EBITDA is operating profit before exceptional items plus depreciation and amortisation of subsidiaries and share of joint ventures and associates. (5) EBITDA interest cover is EBITDA divided by net interest expense, excluding other net financial income (2003: $72 million) and exceptional financing charges (2003: $13 million). EBITDA interest cover for 2002 is annualised to account for acquisitions during the year. The actual EBITDA interest cover for 2002 was 25.5 times. For 2000 and 1999, EBITDA interest cover is not applicable as the Group was a net interest recipient after adjusting for other net financial income. (6) Total capital is the sum of shareholders' funds, net debt and minority interests. (7) Return on capital employed is calculated as total operating profit before impairments for the year divided by the average total capital less other investments and adjusted for impairments. Summary by business segment Headline earnings Operating profit /(loss) /(loss) US$ million 2003 2002 2003 2002 Platinum 205 351 433 802 Platinum 205 351 447 802 Exceptional items - - (14) - Gold 167 205 326 463 Gold 167 205 369 463 Exceptional items - - (43) - Diamonds 386 324 562 541 Coal 232 266 333 427 South Africa 79 133 133 247 Australia 94 98 130 130 South America 59 35 70 50 Base Metals 206 69 78 82 Copper 216 80 269 110 Nickel, Niobium, Mineral Sands 76 54 106 94 Zinc (65) (66) (62) (51) Other (21) 1 (27) (20) Exceptional items - - (208) (51) Industrial Minerals 270 231 325 277 Europe 256 214 290 253 Brazil 14 17 35 24 Paper and Packaging 368 376 656 649 Europe 277 233 471 434 South Africa 91 143 185 215 Ferrous Metals 89 88 156 150 Kumba 18 - 33 - Highveld Steel 5 20 11 38 Scaw Metals 55 41 70 51 Samancor Group 10 19 41 48 Other 1 8 1 13 Industries 18 38 52 114 Boart Longyear 21 26 33 31 Tongaat-Hulett (10) 24 10 96 Terra 7 (18) 14 (3) Other - 6 (5) (10) Exploration (83) (77) (125) (93) Exploration (83) (77) (105) (93) Exceptional items - - (20) - Corporate (164) (112) (190) (161) Gold Fields 35 27 28 41 Other (199) (139) (218) (202) 1,694 1,759 2,606 3,251 ANGLO AMERICAN plc (Incorporated in England and Wales - Registered number 3564138) ("the Company") Notice of Recommended Final Dividend Notice is hereby given that a final dividend on the Company's ordinary share capital in respect of the year to 31 December 2003 will, subject to approval by shareholders at the Annual General Meeting to be held on 21 April 2004, be payable as follows: Amount (United States currency) 39 cents per ordinary share ( see notes) Currency conversion date Friday, 20 February 2004 Last day to trade on the JSE Securities Friday, 5 March 2004 Exchange, South Africa ("JSE") to qualify for the dividend Ex-dividend on the JSE from the commencement Monday, 8 March 2004 of trading on Ex-dividend on the London Stock Exchange Wednesday, 10 March 2004 from the commencement of trading on Record date (applicable to both the Friday, 12 March 2004 principal register and South African branch register) Last day for receipt of Dividend Thursday, 8 April 2004 Reinvestment Plan ("DRIP") Mandate Forms by Computershare (note 4) Dividend warrants posted Wednesday, 28 April 2004 Payment date of dividend Thursday, 29 April 2004 Notes: 1. Shareholders on the United Kingdom register of members with an address in the United Kingdom will be paid in pounds sterling and, those with an address in a country in the European Union which has adopted the euro, will be paid in euros. Such shareholders may, however, elect to be paid their dividends in US dollars provided the UK Registrar receives such election by Friday, 12 March 2004. Shareholders with an address elsewhere (except in South Africa) will be paid in US dollars. The equivalent of the dividend in sterling will be 20.6934 pence per ordinary share based on an exchange rate of US$1 = £0.5306. The equivalent of the dividend in euros will be 30.8295 euro cents per ordinary share based on an exchange rate of US$1 = €0.7905. 2. Shareholders on the South African branch register will be paid in South African Rand at R2.622750 per ordinary share based on an exchange rate of US$1 = R6.7250. 3. Dematerialisation and rematerialisation of registered share certificates in South Africa will not be effected by Central Securities Depositary participants (" CSDPs") during the period Monday, 8 March 2004 to Friday, 12 March 2004 (both days inclusive). 4. DRIP election forms, in respect of elections by shareholders who hold their shares in dematerialised form in STRATE, are required to be lodged with CSDPs by Tuesday, 6 April 2004. 5. Share certificates/Crest Notifications are expected to be mailed and CSDP investor accounts credited/updated on Thursday, 20 May 2004 in respect of shares issued in terms of the DRIP, subject to the acquisition of shares on the open market. 6. Copies of the Terms and Conditions of the DRIP are available from the Company's Registrar or the Registrar's Agent. By order of the Board Registered Office: 20 Carlton House Terrace N Jordan London SW1Y 5AN Company Secretary 24 February 2004 Registered office UK Registrar Registrar's Agent (South 20 Carlton House Terrace Computershare Investor Africa) London Services PLC Computershare Limited SW1Y 5AN P O Box 82 70 Marshall Street United Kingdom The Pavilions Johannesburg 2001 Bridgwater Road (PO Box 61051, Marshalltown Bristol BS99 7NH 2107) United Kingdom South Africa This information is provided by RNS The company news service from the London Stock Exchange
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