Final Results
Anglo American PLC
20 February 2008
News Release
20 February 2008
Anglo American announces record underlying earnings of $5.8 billion
Financial results
• Record total Group operating profit(1) of $10.1 billion, with operating
profit from core operations(2) up 12% to $8.9 billion
• Highest ever total Group underlying earnings(3) of $5.8 billion, up 5%
• Underlying earnings per share up 18% to $4.40
• Strong performances from Base Metals, Platinum, Ferrous Metals and
Industrial Minerals
• Value Based Management being rolled out across the Group:
- $1 billion initial estimate of annualised procurement and shared
services savings in 3 years
- $380 million achieved in cost savings in 2007
• Total Group profit for the year attributable to equity shareholders up
18% at $7.3 billion
Uplifting our unique portfolio and driving significant growth
• Expediting projects for significant near and medium term growth (PPRust,
Sishen, Dawson, Lake Lindsay, Barro Alto, Los Bronces, Zondagsfontein)
• Creating new growth through acquisitions (Minas-Rio / Amapa, Michiquillay,
Foxleigh, Pebble)
• $12 billion of projects currently under development; additional projects
under consideration estimated at $29 billion
• Demerger of Mondi and reduction of AngloGold Ashanti shareholding
Dividend
• Final dividend up 15% to 86 cents per share, bringing total normal
dividends for the year to 124 cents per share - a 15% increase on 2006
HIGHLIGHTS FOR THE YEAR TO 31 DECEMBER 2007 Year ended Year ended %
US$ million, except per share amounts 31 Dec 2007 31 Dec 2006 change
Total Group revenue including associates(4) 35,674 38,637 (7.7)%
Operating profit including associates before special
items and remeasurements - core continuing operations(1)(2) 8,894 7,974 11.5%
Operating profit including associates before special
items and remeasurements - total Group(1) 10,116 9,832 2.9%
Underlying earnings for the year - total Group(3) 5,761 5,471 5.3%
EBITDA - total Group(5) 12,132 12,197 (0.5)%
Net cash inflows from operating activities - total Group 7,264 8,310 (12.6)%
Profit for the year attributable to equity shareholders -
total Group 7,304 6,186 18.1%
Earnings per share (US$):
Basic earnings per share - total Group 5.58 4.21 32.5%
Underlying earnings per share - total Group 4.40 3.73 18.0%
Interim dividend (US cents per share) 38 33 15.2%
Recommended final dividend 86 75 14.7%
Total normal dividends for the year 124 108 14.8%
Special dividend previously paid -- 67
Total dividends for the year including special dividend 124 175 (29.1)%
Total Group includes both continuing and discontinued operations.
(1) Operating profit includes share of associates' operating profit (before share of associates' tax and
finance charges) and is before special items and remeasurements, unless otherwise stated. See note 4 to the
financial information for operating profit on a total Group basis. For definition of special items and
remeasurements see note 6 to the financial information and see note 14 for information on discontinued
operations.
(2) Operations considered core to the Group are Base Metals, Platinum, Ferrous Metals' core businesses (Kumba
Iron Ore, Scaw Metals, Samancor and Minas-Rio), Coal and Diamonds. See the operating profit table in the
financial review of Group results for a reconciliation of operating profit from core operations to total
operating profit.
(3) See note 9 to the financial information for basis of calculation of underlying earnings and see note 14 for
information on discontinued operations.
(4) Represents total Group revenue (including the revenue of discontinued operations) and includes the Group's
share of associates' revenue of $6,142 million (2006: $5,565 million). See note 3 to the financial information.
(5) EBITDA is operating profit before special items and remeasurements, depreciation and amortisation in
subsidiaries and joint ventures and share of EBITDA of associates. See note 13 for analysis of EBITDA by
continuing and discontinued operations.
Cynthia Carroll, Chief Executive, said:
"In my first year as Chief Executive, I am pleased to report a record financial
performance by Anglo American. We achieved our highest ever operating profit of
$10.1 billion and underlying earnings of $5.8 billion, with continued strong
cash generation. The strength of our performance was due to improved production
volumes of ferrous metals, copper and zinc, an increased focus on operational
discipline and a continuation of the supportive trading environment.
The year under review has seen a combination of strategic restructuring and a
period of building from a position of strength, including the identification and
execution of opportunities to drive new growth and value.
We have a tremendous $41 billion pipeline of projects approved and under
consideration across our three commodity businesses - precious, base metals and
bulks - which, with our leading track record of delivery, will generate
significant profitable growth for Anglo American, both in the near and medium
term. 2008 will also see our planned expansions delivering significant new
production in iron ore and coal.
We have made good strategic progress in 2007. The demerger of Mondi was
successfully completed in early July and in August we announced our decision to
sell Tarmac, our construction materials business. We also realised in excess of
$2.9 billion by reducing our stake in AngloGold Ashanti to 16.6% by the year
end.
We approved a number of significant projects during the year, including the $1.7
billion Los Bronces copper expansion in Chile and the $505 million
Zondagsfontein coal project in South Africa. In addition, we made several
substantial acquisitions, further extending our geographic reach - the 50% stake
in the Pebble copper project in Alaska, the Michiquillay copper project in Peru,
70% of the Foxleigh coal mine in Australia and 49% of the Minas-Rio iron ore
project in Brazil. As we announced in January, we are now in negotiations to
acquire control of the Minas-Rio project and a 70% stake in the Amapa iron ore
mine, marking a major advancement in our iron ore growth strategy.
Our restructuring programme is almost complete and we are focused on the
operational improvements that will be delivered by our asset optimisation
programme and the cultural change that we are implementing across the Group.
Together, these initiatives are beginning to drive superior operating
performance, substantial procurement benefits and Group-wide cost savings.
The Group achieved cost savings of $380 million in synergies, efficiencies and
procurement. The mining industry continues to experience significant cost
pressures across the supply chain, including freight, transportation, fuel and
consumables. In spite of these cost pressures, growth in cash costs for the
total Group was limited to 4% above inflation. Two major cost saving exercises
were launched in the year; the introduction of three regional shared service
centres each covering finance, information technology and human resources
located in South Africa, Latin America and Asia Pacific and the move to a
centralised procurement programme to maximise the benefits of being a global
operator - initial estimates are that $1 billion in annualised procurement and
shared services savings will be achieved in 3 years.
2007 also marked a turning point in our approach to safety. Our historic
fatality and injury record has been unacceptable and I believe strongly that
optimally run businesses have good safety records. We have launched a series of
initiatives to drive consistent safety messages and practices across our
business. Significant early progress is being made and I expect our operations
to build on this momentum in 2008.
In terms of the outlook, Anglo American's position as a focused mining company
with a clear strategy and unique position in platinum group metals and diamonds
enables us to benefit from the ongoing strong global environment for commodities
as we accelerate the realisation of our exciting growth prospects."
Review of 2007
Financial results
Anglo American's total Group underlying earnings were a record $5.8 billion for
the year as continued strong metal prices reflected the favourable trading
environment for the Group's key commodities and volumes improved in most
commodities. Operating profit from the Group's core operations was 12% higher
than in 2006 at $8.9 billion.
Strong contributions came from Base Metals, Platinum, Ferrous Metals' core
businesses and Industrial Minerals, which all achieved record operating profit
in the year. Coal recorded lower operating profit due to a sharp reduction in
contribution from Coal Australia, due to port and rail infrastructure
constraints experienced in the industry, necessitating stockpiles and slowing of
production resulting in higher demurrage charges, the impact of the appreciation
of local currency against the US dollar and lower sales prices. The
contributions from both Paper and Packaging and Gold were lower than the prior
year due to the demerger of Mondi in early July and the reduction of the Group's
shareholding in AngloGold Ashanti from 41.6% to 16.6% during October.
Base Metals generated a record operating profit of $4,338 million (49% of Anglo
American's total operating profit from core operations), up 11%, due to
increased copper, zinc and phosphate fertiliser production and higher nickel,
lead, niobium and fertiliser prices.
Platinum reported record operating profit of $2,697 million (30% of Anglo
American's total operating profit from core operations), up 12%, due to a
significantly higher price achieved for the basket of metals sold and the weaker
average rand in relation to the US dollar, partially offset by higher costs and
lower refined production.
Ferrous Metals' operating profit increased 5% to $1,432 million, with operating
profit from its core businesses increasing by 59% to $1,210 million, (14% of
Anglo American's total operating profit from core operations), mainly due to
higher iron ore and manganese prices, partially offset by the loss of
contribution, following their disposal, from Kumba non-iron ore and Highveld.
Coal recorded operating profit of $614 million (7% of Anglo American's total
operating profit from its core operations), 29% lower than the prior year, due
to a significant reduction in Australia's contribution, with port and rail
constraints which reduced sales, the adverse impact of the appreciation of local
currency against the US dollar and lower average metallurgical coal prices.
Despite the port and rail constraints experienced in Australia, production at
the Australian mines was over 25 million tonnes, 3% above the prior year.
Diamonds recorded attributable operating profit of $484 million (5% of Anglo
American's total operating profit from core operations), up 5% on 2006,
principally due to higher earnings from joint ventures and a modest increase in
the price of diamonds.
Industrial Minerals saw a significant improvement in its operating profit, up
38% (excluding benefit from exchange rate movements) at $474 million due in part
to disciplined margin management and favourable demand in certain sectors.
Gold's contribution to total Group operating profit declined 57% to $202 million
due to the reduction of the Group's shareholding in AngloGold Ashanti from 41.6%
to 17.3% on 2 October, combined with the benefit of consolidating AngloGold
Ashanti as a subsidiary for four months in 2006. At 31 December 2007 the
Group's shareholding in AngloGold Ashanti was 16.6%.
Paper and Packaging's contribution to total Group operating profit declined to
$324 million, a decrease of 32%, due to the demerger of Mondi in early July
2007.
Production
Production volumes were up for copper, zinc, iron ore and aggregates despite
challenging operating conditions at some of the base metals mines. Platinum
production volumes from mining operations were down on the prior year due to the
interventions to improve safety combined with reduced production efficiency
following a shortage of skilled labour, and lower grades at Potgietersrust.
Challenging operating conditions and the safety interventions resulted in a
decrease in total nickel production compared with the prior year.
Capital structure and increased return to shareholders
At 31 December 2007 the Group's net debt position has increased by $1.9 billion
to $5.2 billion, reflecting the impact of the share buyback, increased planned
capital expenditure and the acquisition of MMX Minas-Rio, partly offset by
strong operating cashflows, proceeds from disposals and the impact of the Mondi
demerger. The $3 billion share buyback programme announced in February was
completed in October 2007 and the additional share buyback programme of $4
billion, announced in August, is 33% complete, with around $1.3 billion of
shares having been repurchased at 19 February 2008. Over the last two years,
Anglo American has returned a total of $14.5 billion capital to shareholders.
Dividends
In line with the Group's progressive dividend policy, the final dividend has
been raised 15% to 86 cents per share, to be paid on 30 April 2008 subject to
shareholder approval at the Annual General Meeting to be held on 15 April 2008.
Total dividends for the year amount to 124 cents per share (2006: 175 cents per
share including the interim special dividend of 67).
Progress on strategic objectives
Anglo American made good progress in 2007 in line with its objective of becoming
a leading focused mining company. To achieve the goal of focusing on its three
commodity businesses - precious, base metals and bulks, further steps in the
Group's restructuring were completed successfully during the year.
The Company disposed of its remaining 29% holding in Highveld Steel and Vanadium
in May and Hulett Aluminium (Hulamin) was unbundled from Tongaat-Hulett in June,
together with related empowerment transactions, and listed on the Johannesburg
Stock Exchange (JSE), resulting in Anglo American's holding in Tongaat-Hulett
falling to 37% from 50%.
Mondi, the paper and packaging business, was demerged in July and established as
a dual-listed company on the London and Johannesburg stock exchanges. In line
with the intention to ultimately exit AngloGold Ashanti, Anglo American reduced
its holding from 41.6% to 16.6% by the year end, realising in excess of $2.9
billion.
Following a strategic review and as announced in August, the decision was taken
to sell Tarmac, the construction materials business. Tarmac, which enjoys a
leading position in the UK construction materials industry and is well
positioned in certain key markets in continental Europe and the Middle East, had
a very strong operational performance in 2007, with a number of its business
improvement initiatives starting to make a significant impact. It is expected
that the performance of Tarmac will continue to underpin a competitive sale
process, however it has been decided not to launch the marketing phase of the
sale process until current credit market conditions improve. It is therefore
unlikely that a sale will be completed within the originally envisaged
timetable. Tarmac continues to be managed to maximise shareholder value and this
includes active reviews of its portfolio; for example, Tarmac recently increased
its ownership of United Marine Holdings, a significant UK marine dredged
aggregates business, to 100%.
Anglo American is bringing greater rigour to its operating platform by
introducing a value based management (VBM) methodology in all its business
units. A pilot project has been completed in Anglo Coal and VBM is now being
rolled out into all of the businesses. In addition, an asset optimisation
initiative will maximise operational efficiencies at site level and allow
benchmarking of performance and the spread of best practices.
The company also made significant progress during 2007 in meeting the employment
equity and black economic empowerment requirements of the South African Mining
Charter - culminating in ground-breaking equity participation arrangements in
Anglo Platinum's assets.
Project expertise driving profitable growth
Anglo American has one of the strongest and highest quality project pipelines in
the entire mining sector. These projects will build on the Group's unique
portfolio of existing assets and deliver considerable organic growth potential.
Several major projects spanning a variety of countries are currently under
development, totalling $12 billion. Looking further out, an additional $29
billion of projects are under consideration.
Several projects were approved at Anglo Platinum during the year, in particular
the $279 million expansion at the base metals refinery, the $139 million
Townlands ore replacement project and the $188 million Mainstream inert grind
projects. The $692 million PPRust North expansion project is in progress with
the mine expected to reach full capacity in 2009, when it will mill an
additional 600,000 tonnes of ore per month. In addition, the $224 million East
Upper UG2 project at Amandelbult is progressing on schedule and will increase
that mine's output by 100,000 ounces per annum by 2012.
Anglo American's coal business has approved expansion programmes in both South
Africa and Australia. The recently approved $505 million 6.6 Mtpa Zondagsfontein
project will form an important component of Anglo Coal's plans to increase its
South African coal production by 50% to around the 90 Mtpa level by 2015. The
expansions at Lake Lindsay and Dawson will increase Anglo American's coal
production at these mines by approximately 9.7 Mtpa and the approved expansion
at Cerrejon in Colombia to 32 Mtpa is on schedule for 2008, with further
expansion potential being examined.
In addition to several major base metals project acquisitions, the approval of
the $1.7 billion expansion of Los Bronces in Chile was announced in November. On
completion in 2011, production of copper will increase by an average of 170,000
tpa to an initial production level exceeding 400,000 tpa, making Los Bronces one
of the 10 largest copper mines in the world. Also in Chile, a two phase
expansion at Collahuasi is being considered. The $1.5 billion Barro Alto
expansion in Brazil is making good progress and, when fully on stream from 2011,
is expected to increase Anglo American's total attributable nickel production to
an average of around 100,000 tpa. In Peru, the Quellaveco copper project,
currently the subject of a revised feasibility study, is scheduled to be
submitted for Board approval in 2008 and, if approved, would produce around
200,000 tpa of copper.
At Kumba Iron Ore, the commissioning of the $754 million, 13 Mtpa Sishen
Expansion project commenced during the year, with ramp up to design capacity
expected to be achieved in 2009.
De Beers has two significant projects, both in Canada. Snap Lake, the country's
first underground diamond mine, delivered its first diamonds in October 2007 and
is expected to produce approximately 1.6 million carats per year at full
production. A second mine, Victor, is expected to enter production by mid-2008
and produce 0.6 million carats of high quality diamonds per year at full
production. In Botswana, Debswana is reviewing a number of potential expansion
opportunities, predominantly at Jwaneng, one of the world's great diamond mines.
In February 2008, Anglo American announced that it had entered into a memorandum
of understanding ("MOU") with China Development Bank. The MOU represents a long
term commitment to establish a strategic relationship to identify and develop a
pipeline of natural resources projects in China, Africa and elsewhere.
Acquisitions to fuel further growth
During 2007, Anglo American was active in identifying and successfully acquiring
major new projects, particularly in iron ore and copper.
In iron ore, considerable progress was made towards achieving the aim of
becoming a significant player in the global seaborne iron ore trade through the
acquisition, in July, of a 49% stake the MMX Minas-Rio iron ore project in
Brazil, for an effective price of $1.15 billion, plus a potential payment of up
to $600 million if certain criteria are met. Furthermore, in January 2008,
Anglo American announced that it was in negotiations over a transaction in which
it would acquire control of the Minas-Rio project and a 70% stake in the Amapa
iron ore mine, for approximately $5.5 billion, if we acquire 100% of the
interests held by MMX in these assets. The resource statements for Minas-Rio and
Amapa are currently being updated.
In April, the acquisition of the Michiquillay copper project in northern Peru
for a staged cash investment of $403 million was announced, with potential
production of up to 300,000 tpa. Michiquillay is one of the largest undeveloped
copper deposits in the world. This is Anglo American's second major investment
in Peru where the feasibility study for Quellaveco copper deposit in the south
of the country is at an advanced stage.
In July, a 50% stake in the Pebble copper project in Alaska was acquired for a
staged cash investment of $1.425 billion. The key assets of the project, which
is co-owned by Northern Dynasty Minerals, are its open-pit Pebble West
copper-gold-molybdenum deposit and the deeper and higher-grade Pebble East
deposit.
In both Peru and Alaska, a key priority is to build supportive relationships
with local communities, consistent with Anglo American's policy of developing
and operating projects to the highest social and environmental standards and to
promote development that is truly sustainable.
Close to year end, the acquisition of a 70% interest in the Foxleigh coal mine
in Australia, for $620 million was announced, further supporting Anglo
American's coal ambitions.
Further out still, Anglo American is studying several energy schemes in alliance
with various international partners. Prominent among these are the Monash
project in Australia to convert brown coal to ultra-clean diesel and the Xiwan
project in China that is examining the feasibility of converting coal to gas,
fuels and chemicals.
Outlook
The global economic outlook for 2008 is clouded by uncertainty. While it seems
clear that US economic activity will be weaker in 2008 than in recent years, it
is less clear how economic growth will be affected in the rest of the world,
especially in those emerging markets whose growth has been largely responsible
for the strong demand that has underpinned commodity prices. In South Africa,
the electrical power supply problems are causing disruption to mining operations
across the country. At present, it is difficult to accurately forecast the
medium term impact of power shortages on Anglo American's businesses. Anglo
American is working with Eskom and the South African government to implement
solutions.
Global commodity demand remains strong and seems likely to remain so throughout
2008. Global commodity supply continues to be constrained by skills shortages,
rising capital and operating costs, longer permitting processes and strong
exchange rates in many of the countries where key operations are located.
Industry inventories are therefore likely to remain low and continue to underpin
prices.
For further information, please contact:
United Kingdom
Anna Poulter, Investor Relations
Tel: +44 (0)20 7968 2155
James Wyatt-Tilby, Media Relations
Tel: +44 (0)20 7968 8759
South Africa
Pranill Ramchander, Media Relations
Tel: +27 (0)11 638 2592
Notes to editors:
Anglo American plc is one of the world's largest mining and natural resource
groups. With its subsidiaries, joint ventures and associates, it is a global
leader in platinum group metals and diamonds, with significant interests in
coal, base and ferrous metals, as well as an industrial minerals business and a
stake in AngloGold Ashanti. The Group is geographically diverse, with operations
in Africa, Europe, South and North America, Australia and Asia.
(www.angloamerican.co.uk)
Webcast of presentation:
A live webcast of the annual results presentation, starting at 10.00am UK time
on 20 February, can be accessed through the Anglo American website at
www.angloamerican.co.uk.
Pictures:
High resolution images can be downloaded by the media at www.vismedia.co.uk
Note: Throughout this press release '$' denotes United States dollars and '
cents' refers to United States cents; operating profit includes associates'
operating profit, is before special items and remeasurements and refers to
continuing operations unless otherwise stated; special items and remeasurements
are defined in note 6, results of discontinued operations are presented in note
14 and underlying earnings are calculated as set out in note 9 to the financial
information. Underlying earnings refers to continuing operations unless
otherwise stated. EBITDA is operating profit before special items and
remeasurements, depreciation and amortisation in subsidiaries and joint ventures
and share of EBITDA of associates and refers to continuing operations unless
otherwise stated. EBITDA is reconciled to cash inflows from operations and to
total profit from operations and associates in note 13 to the financial
information.
Financial review of Group results*
Group underlying earnings per share on a continuing basis for the year were
$4.18, an increase of 22% compared with 2006. On a total Group basis, including
results from discontinued operations, underlying earnings per share were $4.40.
Group underlying earnings on a continuing basis totalled $5,477 million, with
record contributions from Base Metals, Platinum, Ferrous Metals' core businesses
and Industrial Minerals as well as a strong contribution from De Beers. Higher
prices realised in the year, in particular for the platinum group metals
(PGM's), nickel, lead, niobium and iron ore, were the main driver for the
increase in Group underlying earnings. Increased volumes at copper, zinc and
iron ore operations also contributed to the increase. Underlying earnings at De
Beers were higher than the prior year, principally reflecting higher income from
joint ventures and a modest increase in diamond prices in 2007. Coal recorded
lower underlying earnings due to a significant reduction in Australia's
contribution. This was driven by the impact of port and rail constraints
necessitating stockpiles and slowing of production, resulting in higher
demurrage charges, as well as the impact of the weak US dollar relative to local
currency and lower sales prices. The contributions from both Paper and
Packaging and AngloGold Ashanti were lower than the prior year due to the
demerger of Mondi in early July and the reduction of the Group's shareholding in
AngloGold Ashanti from 41.6% to 17.3% on 2 October. At 31 December 2007 the
Group's shareholding in AngloGold Ashanti was 16.6%. The results of both
AngloGold Ashanti and Paper and Packaging are shown as discontinued operations.
Underlying earnings Year ended Year ended
$ million 31 Dec 2007 31 Dec 2006(1)
Profit for the financial year attributable to equity shareholders 5,294 5,149
Operating special items including associates 713 458
Operating remeasurements including associates (2) (35)
Net profit on disposals including associates (484) (447)
Financing special items - 4
Financing remeasurements including associates:
Exchange loss/(gain) on De Beers preference shares 3 (40)
Unrealised net gains on non-hedge derivatives (28) (4)
Tax on special items and remeasurements including associates 15 (58)
Related minority interests on special items and remeasurements
including associates (34) (8)
Underlying earnings - continuing operations 5,477 5,019
Underlying earnings - discontinued operations 284 452
Underlying earnings - total Group 5,761 5,471
Underlying earnings per share ($) - continuing operations 4.18 3.42
Underlying earnings per share ($) - discontinued operations 0.22 0.31
Underlying earnings per share ($) - total Group 4.40 3.73
(1)Comparatives have been adjusted to reclassify amounts relating to
discontinued operations
Profit for the year after special items and remeasurements increased by 2.8% to
$5,294 million compared with $5,149 million in the prior year. The increase
relates mainly to strong operational results, as discussed above and in the
Chief Executive's statement, and an increase in net profit on disposals, partly
offset by higher operational special charges, particularly in the Group's
associates.
Net profit on disposals of $484 million which, including associates, was $37
million higher than 2006, includes the net profit of $140 million on disposal of
the remaining 29.2% shareholding in Highveld and the part-disposal of the
investment in shares of Exxaro, generating a $234 million profit on disposal.
* Throughout the financial review, the Group results are presented on a
continuing basis unless otherwise stated
The Group's results are influenced by a variety of currencies owing to the
geographic diversity of the Group. The South African rand on average weakened
slightly against the US dollar compared with the prior year, with an average
exchange rate of R7.05 compared with R6.77 in 2006. Currency movements
positively impacted underlying earnings by $27 million. Operating results
benefited from weaker average rates for the rand, although this was offset by
the stronger Chilean peso, Brazilian real and Australian dollar. Industrial
Minerals' operations benefited from the strength of certain European currencies
against the US dollar. There was a significant beneficial effect on underlying
earnings from increased prices amounting to $1,302 million, particularly in
respect of nickel and PGM's.
Summary income statement Year ended Year ended
$ million 31 Dec 2007 31 Dec 2006(1)
Operating profit before special items and remeasurements 8,518 8,048
Operating special items (251) (424)
Operating remeasurements 5 18
Operating profit from subsidiaries and joint ventures 8,272 7,642
Net profit on disposals 460 265
Share of net income from associates - continuing operations (2) 197 607
Total profit from operations and associates 8,929 8,514
Net finance costs before special items and remeasurements (137) (110)
Financing special items and remeasurements 29 39
Profit before tax 8,821 8,443
Income tax expense (2,693) (2,518)
Profit for the financial year - continuing operations 6,128 5,925
Minority interests (834) (776)
Profit for the financial year attributable to equity shareholders -
continuing operations 5,294 5,149
Profit for the financial year attributable to equity shareholders -
discontinued operations 2,010 1,037
Profit for the financial year attributable to equity shareholders -
total Group 7,304 6,186
Basic earnings per share ($) - continuing operations 4.04 3.51
Basic earnings per share ($) - discontinued operations 1.54 0.70
Basic earnings per share ($) - total Group 5.58 4.21
Group operating profit including associates before special items and
remeasurements - continuing operations
9,590 8,888
Group operating profit including associates before special items and
remeasurements - discontinued operations
526 944
Group operating profit including associates before special items and
remeasurements - total Group
10,116 9,832
(1) Comparatives have been adjusted to reclassify amounts relating to discontinued
operations
(2) Operating profit from associates before special items and
remeasurements - continuing operations
1,072 840
Operating special items and remeasurements (3) (465) (17)
Net profit on disposals (3) 24 182
Net finance costs (before remeasurements) (85) (70)
Financing remeasurements (3) (4) 1
Income tax expense (after special items and remeasurements) (303) (300)
Minority interests (after special items and remeasurements) (42) (29)
Share of net income from associates - continuing operations 197 607
(3) See note 3 to the financial information.
Towards the front of this press release, reference has been made to core
continuing operations. Operations considered core to the Group are Base Metals,
Platinum, Ferrous Metals' core businesses (Kumba Iron Ore, Scaw Metals, Samancor
and Minas-Rio), Coal and Diamonds. The table below reconciles operating profit
from core and other operations to total Group operating profit.
Operating profit Year ended Year ended
$ million 31 Dec 2007 31 Dec 2006(1)
Base Metals 4,338 3,897
Platinum 2,697 2,398
Ferrous Metals - core businesses(1) 1,210 763
Coal 614 862
Diamonds 484 463
Corporate and Exploration (449) (409)
Operating profit including associates before special items and
remeasurements - core continuing operations 8,894 7,974
Industrial Minerals 474 317
Ferrous Metals - other businesses(1) 222 597
Operating profit including associates before special items and
remeasurements - continuing operations 9,590 8,888
Operating profit including associates before special items and
remeasurements - discontinued operations 526 944
Operating profit including associates before special items and
remeasurements - total Group 10,116 9,832
(1) See Ferrous Metals and Industries operations review
Special items and remeasurement charges
Year ended Year ended
31 Dec 2007 31 Dec 2006(1)
Excluding Excluding
associates Associates Total associates Associates Total
$ million
Operating special items (251) (462) (713) (424) (34) (458)
Operating remeasurements 5 (3) 2 18 17 35
Operating special items and
remeasurements (246) (465) (711) (406) (17) (423)
(1) Comparatives have been adjusted to exclude amounts relating to discontinued
operations
Operating special items and remeasurements, including associates, amounted to
$711 million, with $653 million operating special charges in respect of
impairments, restructurings and mine and operation closures, including a $434
million impairment relating to the Group's share of an impairment of De Beers'
Canadian assets, $153 million impairment against certain Coal Australia assets,
and a combined impairment and restructuring charge relating to certain non-core
assets to be sold and other assets to be restructured at Industrial Minerals of
$43 million.
Net profit on sale of operations, including associates, amounted to $484 million
(2006: $447 million), and is mainly a result of the profit on disposal of the
remaining 29.2% shareholding in Highveld ($140 million) and the part-disposal of
the investment in shares in Exxaro generating a $234 million profit on disposal.
Financing remeasurements, including associates, are made up of unrealised net
gains of $28 million on non-hedge derivatives and a $3 million foreign exchange
loss on De Beers dollar preference shares held by a rand denominated entity.
The De Beers US dollar preference shares held by a rand functional currency
entity are classified as 'financial asset investments' and are retranslated at
each period end. The resulting rand:US dollar foreign exchange gains and losses
are reported through the income statement as a remeasurement charge.
Discontinued operations
On 2 July 2007 the Paper and Packaging business was demerged from the Group by
way of a dividend in specie paid to shareholders.
On 2 October 2007 the Group sold 67.1 million shares in AngloGold Ashanti which
reduced the Group's shareholding from 41.6% to 17.3%. The remaining investment
is accounted for as a financial asset investment. The Group has subsequently
reduced its shareholding in AngloGold Ashanti which at 31 December 2007 was
16.6%.
Both of these operations are considered discontinued. Please refer to note 16
for further details on the demerger of Paper and Packaging and the disposal of
AngloGold Ashanti.
Year ended Year ended
$ million 31 Dec 2007 31 Dec 2006
Profit for the financial year - discontinued operations 318 593
Special items and remeasurements (77) 404
Profit for the financial year after special items and remeasurements-
discontinued operations 241 997
Net profit after tax on disposal and demerger of discontinued
operations 1,803 -
Total profit for the financial year - discontinued operations 2,044 997
Minority interests - discontinued operations (34) 40
Profit for the financial year attributable to equity shareholders -
discontinued operations 2,010 1,037
Net profit after tax on disposal and demerger of discontinued operations
amounted to $1,803 million and is principally as a result of the sale of 67.1
million shares in AngloGold Ashanti on 2 October 2007. Proceeds on sale of
these shares are the major contributor to net cash inflows from investing
activities of discontinued operations of $2.6 billion.
Net finance costs
Net finance costs from continuing operations, excluding special items and
remeasurements of $29 million gain (2006: gain of $39 million), increased from
$110 million in 2006 to $137 million. The increase reflects higher interest
costs due to the increase in net debt.
Taxation
Year ended Year ended
31 Dec 2007 31 Dec 2006(1)
Before special Associates' Including Before special Associates' tax Including
items and tax and associates items and and minority associates
remeasurements minority remeasurements interests
$ million interests
Profit before tax 9,021 347 9,368 8,401 307 8,708
Tax (2,676) (305) (2,981) (2,598) (278) (2,876)
Profit for financial
year 6,345 42 6,387 5,803 29 5,832
Effective tax rate
including associates % 31.8 33.0
(1) Comparatives have been adjusted to exclude amounts relating to discontinued
operations
IAS 1 Presentation of Financial Statements requires income from associates to be
presented net of tax on the face of the income statement. Associates' tax is
therefore not included within the Group's total tax charge on the face of the
income statement. Associates' tax before special items and remeasurements
included within 'Share of net income from associates' for the year ended 31
December 2007 was $305 million (2006: $278 million).
The effective rate of tax before special items and remeasurements including
share of associates' tax on a continuing basis was 31.8%. This was a decrease
from the equivalent effective rate of 33.0% in the year ended 31 December 2006.
The main reasons for this net decrease are reduced levels of tax on
distributions, changes in statutory tax rates, prior year adjustments and the
availability of enhanced tax depreciation on certain assets.
Balance sheet
Equity attributable to equity shareholders of the Company was $22,461 million
compared with $24,271 million at 31 December 2006.
The $3 billion share buyback programme announced in February was completed in
October 2007 and the additional share buyback programme of $4 billion, announced
in August is 33% complete, with around $1.3 billion of shares having been
repurchased at 19 February 2008.
Net debt, excluding hedges but including balances that have been reclassified as
held for sale ($69 million) was $5,239 million, an increase of $1.9 billion from
31 December 2006. The increase reflects the impact of the share buy back,
increased planned capital expenditure on projects in Platinum, Base Metals and
Coal and the acquisition of MMX Minas-Rio for $1.15 billion, partly offset by
strong operating cashflows, proceeds from disposals and the impact of the Mondi
demerger.
Net debt at 31 December 2007 comprised $8,313 million of debt, offset by $3,074
million of cash and cash equivalents. Net debt to total capital(1) at 31
December 2007 was 20.0%, compared with 12.9% at 31 December 2006.
(1) Net debt to total capital is calculated as net debt divided by total capital
less investments in associates. Total capital is net assets excluding net debt.
Cash flow
Year ended Year ended
$ million 31 Dec 2007 31 Dec 2006
Net cash inflows from operating activities - continuing operations 6,800 7,337
Net cash inflows from operating activities - discontinued operations 464 973
Net cash inflows from operating activities - total Group 7,264 8,310
Net cash inflows from operating activities on a continuing operations basis were
$6,800 million compared with $7,337 million in 2006. EBITDA from continuing
operations was $11,171 million, an increase of 7% from $10,431 million in 2006.
Acquisition expenditure from continuing operations accounted for an outflow of
$1,934 million compared with $197 million in 2006. This included $1.15 billion
in respect of the Group's acquisition of a 49% interest in the MMX Minas-Rio
integrated iron ore project in Brazil and $658 million in respect of the Group's
investment in 4.4 million ordinary shares in Anglo Platinum Limited.
Proceeds from disposals on a continuing basis totalled $711 million including
net proceeds on the sale of the remaining 29.2% shareholding in Highveld of $182
million and $456 million proceeds from the part-disposal of the investment of
shares in Exxaro.
Repayment of loans and capital from associates on a continuing basis amounted to
$119 million, of which $43 million relates to the redemption of De Beers
preference shares. Purchases of tangible assets amounted to $3,931 million, an
increase of $1,022 million. Increased capital expenditure by Platinum, Coal and
Base Metals was partly offset by lower spend at Ferrous Metals and Industries
and Industrial Minerals.
Weighted average number of shares
The weighted average number of shares used to determine earnings per share in
2007 was 1,309 million compared to 1,468 million in 2006. This reflects the
effect of the share buyback programme as well as the Anglo American share
consolidation on demerger of Mondi which on 2 July 2007, resulted in 100
existing Anglo American ordinary shares being exchanged for 91 new Anglo
American ordinary shares.
Dividends
A final dividend of 86 US cents per share to be paid on 30 April 2008 has been
recommended.
Analysis of dividends
US cents per share 2007 2006
Interim dividend (US cents per share) 38 33
Recommended final dividend 86 75
Normal dividend for year 124 108
Special dividend previously paid - 67
Total dividends 124 175
Operations review 2007
In the operations review on the following pages, operating profit includes
associates' operating profit and is before special items and remeasurements
unless otherwise stated. Capital expenditure relates to cash expenditure on
tangible and biological assets. Share of Group operating profit and share of
Group net operating assets for both 2007 and 2006, is based on continuing
operations and therefore excludes the contribution of Mondi and AngloGold
Ashanti.
BASE METALS
$ million Year ended Year ended
(unless otherwise stated) 31 Dec 2007 31 Dec 2006(1)
Operating profit 4,338 3,897
Copper 2,983 3,019
Nickel, Niobium, Mineral Sands and Phosphates 786 426
Zinc 654 516
Other (85) (64)
EBITDA 4,683 4,255
Net operating assets 4,989 4,599
Capital expenditure 610 315
Share of Group operating profit 45% 44%
Share of Group net operating assets 19% 22%
(1) In 2007, Copebras was reclassified from Industrial Minerals to Base Metals
to align with internal management reporting. As such, the comparative data has
been reclassified.
Operating profit at Anglo Base Metals reached an all time high of $4,338
million, surpassing the previous year's record of $3,897 million. This resulted
from increased copper, zinc and phosphate fertiliser production combined with
higher nickel, lead, niobium and fertiliser prices, partially offset by adverse
exchange rate movements and further rises in the costs of energy, labour and
most key consumables. Although the LME copper price was higher than in 2006, a
significant mark to market and final liquidation adjustment as at 31 December
2007 resulted in realised copper prices being very little changed from 2006.
Markets
Average prices (c/lb) 2007 2006
Copper 323 305
Nickel 1,686 1,095
Zinc 147 148
Lead 118 58
During 2007, the copper market was broadly in balance, with prices recovering
strongly in the first half as the Chinese restocked, but then moved lower in the
fourth quarter. Nickel had a buoyant first six months, with very tight terminal
market stocks, but weakened materially in the second half as ongoing stainless
steel production cutbacks, greater scrap availability, substitution and
increases in nickel pig-iron production all contributed to a material build up
of stock across the year. Zinc prices weakened, particularly in the second half,
owing to market concerns about the impact of increasing 2008 supply on terminal
market stocks.
Operating performance
Copper division 2007 2006
Operating profit ($m) 2,983 3,019
Attributable production (tonnes) 655,000 643,800
All of the division's mines, with the exception of Mantos Blancos, increased
production. In addition, Mantos Blancos, Mantoverde and Collahuasi all
successfully renegotiated collective bargaining agreements without any
disruption to the operations.
Los Bronces increased output by 2% principally due to a 14% increase in cathode
production. Despite the attributable loss of 9,200 tonnes of production owing to
the shutdown of the SAG mill number 3 (for replacement of its stator motor) and
planned lower oxide and sulphide grades, Collahuasi increased its attributable
production by 3%. El Soldado lifted production by 6%. Output from Mantoverde
was marginally up, while Mantos Blancos was affected by planned and unplanned
maintenance shutdowns as well as an earthquake and was unable to offset the
impact of lower grades with higher throughputs, leading to a marginal production
decline. Molybdenum production rose 8% to 4,400 tonnes, primarily as a result
of increases at Collahuasi. Chagres' output fell by 5% mainly due to the lower
average grade of concentrate treated. Adverse exchange rate movements and
further rises in the costs of energy, labour and most key consumables impacted
all Chilean operations.
Nickel, Niobium, Mineral Sands and Phosphates 2007 2006
Operating profit ($m) 786 426
Attributable nickel production (tonnes) 25,600 26,400
At Codemin, output moved up marginally, but sales were 5% lower following a
slowdown in stainless steel producer offtake. At Catalao, niobium production
was flat, with higher mill throughput being offset by lower metallurgical
recoveries arising from a change in ore characterisation. Copebras had a
spectacular year, with much improved prices and fertiliser sales climbing by 14%
to exceed 1 million tonnes for the first time. All of the Brazilian operations
saw costs increase as a consequence of adverse currency movements and cost
increases in fuel oil, aluminium powder and sulphur. Loma de Niquel's production
declined by 5% due to heavy rains and strike action, while tonnage processed was
affected by a planned maintenance stoppage and a series of refractory and
equipment failures. These also had a bearing on operating costs which were
impacted further by numerous cost and indirect tax increases within a fixed
exchange rate and increasingly difficult operating environment. Sales fell from
16,900 tonnes to 14,500 tonnes arising out of a combination of administrative
delays by the Venezuelan authorities and weakening stainless steel customer
demand.
The Venezuelan Ministry of Basic Industries and Mining ("MIBAM") commenced
administrative proceedings in January 2007 in relation to the sixteen nickel
exploration and exploitation concessions held by the Company's subsidiary,
Minera Loma de Niquel ("MLdN") alleging that MLdN had failed to fulfil certain
conditions of its concessions. MLdN submitted a timely response to MIBAM's
administrative writ in February 2007. By means of a series of resolutions
published in two Official Gazettes made available in January 2008, MIBAM
declared the termination of thirteen of MLdN's nickel concessions. The thirteen
concessions do not include the concessions where the current mining operations
and the metallurgical facilities are located. MLdN is in the process of filing
administrative appeals seeking the annulment of all of these resolutions and
requesting that their effects be suspended pending a final decision by MIBAM
At 31 December 2007 Anglo American's interest in the book value of MLdN,
including its mineral rights, was $616 million (as included in the Group's
balance sheet). In the 12 months to December 2007, MLdN's production and
contribution to Group operating profits were respectively, 15,700 tonnes of
nickel in ferronickel and $370 million. The average price of nickel in 2007 was
1,686 c/lb. As of 19 February 2008 the price of nickel was 1,259 c/lb.
Anglo American is proud of its record in Venezuela where it has invested
substantial amounts in exploration and subsequently the construction of the
country's only primary nickel producer. It is a major contributor to and
employer in the Venezuelan economy as well as a significant tax payer. The
operation continues, as it has always done, to work constructively with all
stakeholders - employees, local communities and government - and to the highest
sustainable development, social and environmental standards.
Anglo American and MLdN are seeking further clarification from MIBAM, with which
they have maintained a constructive working relationship in the past. Anglo
American and MLdN believe that there is a valid legal basis to reverse the
notices of termination and will pursue all appropriate legal and other remedies
and actions to protect their respective interests both under Venezuelan and
international law. As a result, the Group continues to consolidate MLdN and no
impairment has been recorded for the year ended 31 December 2007.
Zinc division 2007 2006
Operating profit ($m) 654 516
Attributable zinc production (tonnes) 343,100 334,700
Attributable lead production (tonnes) 62,100 71,400
Skorpion operated at design capacity throughout the year, producing a record
150,100 tonnes (2006: 129,900 tonnes). Mine operating unit costs fell,
reflecting tight cost control and higher volumes, partially offset by increases
in royalties and the costs of key consumables. At Lisheen, zinc production
decreased by 4%, and lead output was down 13%. Higher than anticipated water
inflows and poor ground conditions limited mining flexibility, resulting in
lower tonnages, grades and metallurgical recoveries. At Black Mountain, mining
difficulties related to limited stope availability were compounded by a slower
than anticipated ramp up of the infrastructure and ore handling systems of the
new Deeps shaft as well as seven weeks of industrial action. Overall, declining
mill throughput and lower grades were only partly offset by material
improvements in metallurgical recoveries and 28,300 tonnes of zinc and 41,900
tonnes of lead were produced (2006: 34,100 tonnes and 48,300 tonnes,
respectively). The previously announced sale of Namakwa Sands (R2.0 billion,
subject to contractual adjustments) and 26% of each of Black Mountain and
Gamsberg (combined R180 million, subject to contractual adjustments) to Exxaro
Resources has yet to be completed, awaiting the approval of the conversion of
old order to new order mining rights. The sale is expected to be completed in
2008.
Projects
Anglo Base Metals has a strong project pipeline which provides significant scope
for organic growth. The pipeline includes the Barro Alto nickel project which is
on track for first production in 2010 and is due to increase existing nickel
production by an average 36,000 tpa from 2011. To date, in excess of $900
million of the $1.5 billion capital expenditure required has been committed to
this project and the strength of the Brazilian currency is putting ongoing
material upward pressure on the domestic component of capital expenditure.
The $1.7 billion Los Bronces expansion project, which aims to increase sulphide
mill throughput from 61,000 tpd to 148,000 tpd and increasing copper production
by an average of 170,000 tpa to an initial production level exceeding 400,000
tpa has been approved. Construction is under way, with first production
scheduled for 2011.
A debottlenecking project at Collahuasi, which will increase sulphide mill
throughput from 130,000 tpd to 140,000 tpd, has been approved at a total cost of
$64 million, with ramp-up due to commence in the second half of 2008. The first
phase of a potential two phase expansion at Collahuasi, which will increase
throughput to 170,000 tpd, plus the addition of a separate 30,000 tpd sulphide
leach circuit (equivalent to around 650,000 tpa of copper on a 100% basis), will
be evaluated during 2008. Recent exploration success at Rosario Oeste, suggests
that there is the potential to further increase production to around 1 million
tpa by 2014.
The revised feasibility study on the Quellaveco project in Peru, which
contemplates an operation producing approximately 200,000 tpa of copper in
concentrate at a capital cost of approximately $1.7 billion, will be completed
in 2008.
In April 2007, Anglo American tendered $403 million and won the Michiquillay
privatisation auction in Peru. The consideration for this world class resource,
with a production potential of up to 300,000 tpa, will be payable over five
years. However, there is a right to exit the project, at any time after the
first year, by paying 30% of the difference between monies expended and the $403
million. During the first year there is a minimum work commitment of $1 million
with no exit payment. The Peru-based team has been mobilised and the primary
focus of efforts in the first 12 months will be the development of a productive
relationship with the local communities.
In July 2007, Anglo American became a 50% partner with the Northern Dynasty
Partnership (a wholly owned affiliate of Northern Dynasty Minerals Ltd.) in the
Pebble Limited Partnership for a staged cash investment of $1.425 billion. The
partnership owns the Pebble Project, the key assets of which are the open pit
style Pebble West copper-gold-molybdenum deposit and the adjacent, deeper and
higher grade Pebble East deposit. The resources rank amongst the world's most
important accumulations of copper, gold and molybdenum. The objective is to
complete a pre-feasibility study in 2008, a feasibility study around 2011 and to
have a world class mine in operation by 2015.
Chagres, Mantoverde, Mantos Blancos, El Soldado, Catalao, Gamsberg, Copebras,
Boyongan and Kalayaan have early-stage studies underway examining options for
projects that will either increase production and/or extend mine lives.
Outlook
Production of copper, zinc, lead, niobium and fertilisers are all forecast to
increase in 2008, while there is a risk that the nickel production profile will
be affected by uncertainties in Venezuela. With the base metals industry
operating at capacity and, on the assumption that the currencies of the
countries where the division produces continue to remain firm in relation to the
dollar, cost pressures will remain, with sulphur and sulphuric acid prices
forecast to rise dramatically. In Chile the energy supply situation in the
northern grid is very tight and the risk of periodic requests for load shedding
cannot be ruled out.
It seems likely that certain base metal markets will move into surplus in 2008,
with some modest build up of stock forecast (except in the case of zinc, which
is likely to see a material market surplus), the extent of which will be
dependent on the magnitude of any supply side disruptions. Notwithstanding these
shorter term uncertainties, medium and longer term fundamentals remain positive.
PLATINUM
$ million Year ended Year ended
(unless otherwise stated) 31 Dec 2007 31 Dec 2006
Operating profit 2,697 2,398
EBITDA 3,155 2,845
Net operating assets 9,234 7,078
Capital expenditure 1,479 923
Share of Group operating profit 28% 27%
Share of Group net operating assets 35% 33%
Anglo Platinum's operating profit rose by 12% to $2,697 million. This was mainly
due to a higher price achieved for the basket of metals sold and a weaker
average rand relative to the US dollar, offset by lower sales volumes on the
back of reduced production from mining operations.
The average dollar price realised for the basket of metals sold equated to
$2,579 per platinum ounce, 27% higher than in 2006, with firmer platinum,
rhodium and nickel prices making the largest contribution to the increase. The
average realised price for platinum was $162 higher than 2006 at $1,302 per
ounce, while nickel averaged $17.04 per pound against $10.73 in 2006. The
realised rhodium price averaged $4,344 per ounce, an increase of $802 per ounce
over 2006, and includes the effect of existing long term contractual
arrangements with some customers, entered into to support and develop the
rhodium market.
Anglo Platinum is at an advanced stage of negotiations to achieve mutual
recognition with its relevant customers of structural changes to the rhodium
market affecting the dollar price of the metal. The objective of the
negotiations is to move towards a contractual price for rhodium which is market
related. The year also saw a significant increase in the price of ruthenium
following strong growth in demand, driven by its use in hard disk drives. This
new use, and its relative price insensitivity, has resulted in a structural
change to the market.
Markets
Current high dollar PGM market prices partly reflect the up-cycle being enjoyed
by most commodities, but are supported by strong market fundamentals, in
particular for platinum, where metal supply has substantially been in deficit
for 11 years. Long term demand for the metal is expected to remain robust, based
on tightening automotive emissions legislation, buoyant demand in the relatively
price resilient Chinese jewellery market, growth in existing applications and
emerging fuel cell technology.
Supplies of and demand for platinum are expected to grow and the market is
expected to remain balanced over the medium term with short term deficits
associated with reduced South African output. Palladium demand is also expected
to grow but, against a backdrop of increasing supply from South African
expansions on higher palladium content UG2 ore, remains adequately supplied. The
increased supply of rhodium from expansionary activity should ease pressure on
current prices in the longer term.
Safety
Anglo Platinum remains committed to the principle of zero harm and has
implemented a major shift in its approach to safety. In addition, steps have
been implemented to align Anglo Platinum's approach to employee safety to that
adopted by the Group.
The creation of a culture in which safety standards are paramount, with
effective learning from safety incidents to ensure 'no repeats', underlies this
new approach. This includes a visible, felt commitment from leadership to
eliminate harm and increase capacity to manage safety risks wherever they may
occur.
Safety as the overriding priority, clarity of personal and collective
responsibilities and rigid and consistent application of standards lie at the
heart of the new approach. This approach to safety is being implemented at all
Anglo Platinum operations.
A significant deterioration in safety performance occurred in the first half of
2007 with 18 fatal incidents, 12 of which occurred at Rustenburg mine. A
decision was taken to suspend production at all Rustenburg shafts on a staggered
basis. Following the temporary closure of Rustenburg, senior management and
other relevant stakeholders developed a comprehensive enhanced safety
improvement plan, which is being implemented over the next three years.
In the second half of 2007, following the initial intervention, the lost time
injury frequency rate at managed operations reduced to 1.71 compared to 2.37 in
the first half of the year.
Operating performance
Equivalent refined platinum production (equivalent ounces are mined ounces
converted to expected refined ounces) from the mines managed by Anglo Platinum
and its joint venture partners for 2007 decreased by 167,200 ounces or 6% when
compared to 2006. This was due to the intervention aimed at achieving a
significant improvement in employee safety as well as reduced production
efficiency following a shortage of skilled labour, strike action at joint
ventures, the unsettled labour situation associated with wage negotiations and
lower grades at Potgietersrust.
Refined platinum production for 2007 decreased by 12% to 2.47 million ounces.
The decrease is attributed to the reduced production experienced in 2007 as well
as the one-off release of 112,000 ounces from the process pipeline in 2006 due
to the effect of the shutdown of the Polokwane smelter in 2005.
The cash operating cost per equivalent refined platinum ounce in rand terms
increased by 34% due to reduced production, substantial inflationary pressures
including above inflation increases in wages, diesel, tyres, chemicals and steel
grinding media, costs associated with the safety intervention, increased support
costs and ramp-up costs at Mototolo and Marikana. In addition, an increase in
labour complement to support a planned increase in production at mining
operations in 2007 further contributed to the increase in unit costs.
Projects
The implementation of the majority of Anglo Platinum's mining and processing
projects to expand and maintain production continues on schedule. Marikana and
Mototolo (which delivered its first production in the last quarter of 2006) both
increased production in 2007, adding a combined 92,800 equivalent refined
platinum ounces.
Anglo Platinum approved capital expenditure totalling $1,520 million in 2007.
Major items include the expansion of the base metals refinery plant to 33,000
tonnes per annum of contained nickel by the end of 2010, the Townlands ore
replacement project, at a capital cost of $139 million, which will replace
70,000 ounces of refined platinum per annum from 2014, with production expected
from the new Merensky and UG2 areas at the Rustenburg Townlands shaft.
The $188 million Mainstream inert grind projects were approved in November 2007.
These projects will improve mineral liberation and metallurgical performance
within the process flow of the current concentrators, and will result in an
increase in PGM recovery.
The PPRust North expansion project, which will mill an additional 600,000 tonnes
of ore per month, is progressing. Commissioning of the new concentrator has
commenced. The relocation of the Ga-Puka and Ga-Sekhaolelo communities commenced
in July 2007 under the guidance of a representative task team facilitated by the
office of the Premier of Limpopo.
The Amandelbult East Upper UG2 project, which will contribute an additional
100,000 ounces of refined platinum per annum by 2012, is progressing on
schedule. The Rustenburg Paardekraal 2 shaft replacement project is in progress
and is expected to produce 120,000 ounces of refined platinum annually by 2015,
replacing decreasing production as a result of continuing Merensky ore reserve
depletion.
The strong global demand for resources is placing material inflationary pressure
on capital expenditure and the ability to meet project schedules, the effect of
which was experienced in the latter part of 2007. These pressures are likely to
continue in the foreseeable future.
Outlook
Anglo Platinum's commitment to safety including the principle of zero harm will
continue to be an area of focus in 2008. The new approach to safety, together
with operational difficulties, has had a material impact on performance in 2007,
which is likely to continue in 2008. Production disruptions arising from
Eskom's inability to supply sufficient power have been experienced in 2008.
Consequently, refined platinum production for 2008 is expected to be 2.4 million
ounces.
A combination of a weak dollar, robust demand for platinum and slower than
anticipated supply growth is supportive of higher US dollar prices. The
autocatalyst sector remains buoyant, driven by rising European demand for diesel
vehicles and their associated catalyst and filter requirements, as well as
growing Asian automotive production. Purchases of newly mined platinum for
jewellery manufacturing in China are holding up well in the face of record
prices, but new metal demand is declining in the Japanese and US jewellery
markets as recycling of old jewellery is encouraged by the higher price levels.
Industrial demand remains firm, particularly in the electrical and petroleum
sectors.
Palladium demand for autocatalyst and industrial applications continues to grow,
supported by the low price relative to platinum. Jewellery demand is expected to
take increasing market share from white gold as palladium prices have lagged the
recent significant increase in the gold price. Palladium prices continue to
trade in a narrow band and remain vulnerable to a change in investor and fund
sentiment.
Prices for rhodium are anticipated to stay strong as the market remains finely
balanced.
FERROUS METALS AND INDUSTRIES
$ million Year ended Year ended
(unless otherwise stated) 31 Dec 2007 31 Dec 2006
Operating profit 1,432 1,360
Kumba Iron Ore 834 565
Scaw Metals 172 160
Samancor Group 225 52
Other (21) (14)
Core businesses 1,210 763
Highveld Steel 108 230
Tongaat-Hulett / Hulamin 114 154
Kumba Resources - 213
Other businesses 222 597
EBITDA 1,561 1,560
Net operating assets 3,987 2,796
Capital expenditure (including biological assets) 471 582
Share of Group operating profit 15% 15%
Share of Group net operating assets 15% 13%
Ferrous Metals' operating profit of $1,432 million was up by 5% on 2006, though
operating profit from core businesses increased by 59%. The iron ore and
manganese markets experienced favourable market conditions and stronger prices.
Markets
Demand for iron ore and manganese ore continues to be robust, driven by healthy
demand by steel manufacturers in China and other markets. The American, European
and Asian manganese alloy markets all remain generally strong, driven by
continuing buoyant demand for manganese alloys and ongoing concerns around
security of supply.
Operating performance
The unbundled Kumba Iron Ore achieved its highest ever operating profit of $834
million, 48% up on 2006, on the back of strong iron ore prices. Global demand
for iron ore in 2007 rose by 5.7% to 1.89 billion tonnes, fuelled by increasing
demand for seaborne iron ore in China and other developing markets. The company
produced 32.4 million tonnes of iron ore, an increase of 4% on 2006 production
volumes. Operating costs, however, remained under pressure owing to above
inflation cost increases, particularly in energy, labour, contractors and raw
materials.
Scaw Metals delivered a record operating profit of $172 million, with strong
demand for most of its products. Margins remained under pressure owing to
significant price increases in key raw materials and import competition for
certain South African product lines.
Anglo American's attributable share of Samancor's operating profit increased
more than four fold to $225 million as strong global demand for both manganese
ore and alloys, together with constrained global manganese ore production,
resulted in surging ore prices during the second half of the year. Higher ore
and alloy sales volumes also contributed to the strong performance.
The Tongaat-Hulett and Hulamin contribution to operating profit declined by 26%
to $114 million following the unbundling of Hulamin from Tongaat-Hulett and
related empowerment transactions in June 2007. These businesses, which were
consolidated for the first six months of 2007, were equity accounted in the
second half of the year.
The sale of the remaining 29% stake in Highveld to Evraz was completed in April
2007.
Projects
In July, a 49% stake in the MMX Minas-Rio iron ore project in Brazil was
acquired for an effective price of $1.15 billion plus a potential payment of up
to $600 million if certain criteria are met. On 17 January 2008, Anglo American
announced that it had entered into a period of exclusive discussions with the
controlling shareholder of MMX Mineracao e Metalicos S.A. (MMX) to acquire a
63.6% shareholding in a new company ("Newco") which will be demerged from MMX
and will own MMX's current 51% interest in the Minas-Rio iron ore project and
70% interest in the Amapa iron ore mine. After the acquisition of the 63.6%
stake, Anglo American will offer to purchase the Newco shares held by the
minority shareholders of Newco at the same price per share, for a total of
approximately $5.5 billion on a 100% basis or approximately $361.12 per Newco
share (assuming one Newco share for each current MMX share), as well as royalty
payments to MMX beginning in 2025 for the Minas-Rio project and 2023 for the
Amapa mine.
In October 2007, the $754 million, 13 Mtpa Sishen Expansion Project commenced
commercial production, with ramp up to full design capacity expected to be
achieved in 2009.
The Sishen South Project, which involves the development of a new opencast
operation some 70 kilometres south of Sishen mine, is currently being considered
for development. A decision to proceed with this 9 Mtpa new mine is imminent,
and is dependent on finalising logistical arrangements and the granting of
mining rights. A pre-feasibility study on a further expansion at Sishen mine of
10 Mtpa by beneficiating lower grade resources is due to be completed during
2008.
The $183 million GEMCO expansion project in Australia's Northern Territory is on
target to increase the company's annual manganese ore production capacity from
3.0 dry metric tonne units (dmtu) to 4.0 dmtu by the first half of 2009.
Outlook
Global demand for steel is expected to remain strong through 2008, underpinning
demand for iron ore and manganese products. 2008 also promises to be a year of
healthy steel production growth, with year on year global output forecast to
rise by 6.8%. With iron ore producers struggling to bring on new capacity,
China and other major steel producing regions remain under-supplied. As a
result, the annual iron ore price increase with effect from 1 April 2008 is
expected to be significant.
Demand for manganese ore and alloy is forecast to remain firm which, together
with supply constraints in manganese ore, should result in the record ore prices
seen in the latter part of 2007 continuing well into 2008. Manganese alloy
prices will be supported by higher iron ore and other production costs. Scaw
Metal's volumes in the South African market are expected to grow, driven by
infrastructural expansion and construction and mining industry activity.
Demand for Scaw's products is forecast to remain strong, driven by mining demand
and infrastructure growth. Increasing input costs will, however, place further
pressure on margins.
COAL
$ million Year ended Year ended
(unless otherwise stated) 31 Dec 2007 31 Dec 2006(1)
Operating profit 614 862
South Africa 414 380
Australia 9 279
South America 227 227
Projects and corporate (36) (24)
EBITDA 882 1,082
Net operating assets 3,984 2,870
Capital expenditure 1,052 782
Share of Group operating profit 6% 10%
Share of Group net operating assets 15% 13%
(1) In 2007, Yang Quarry was reclassified from Industrial Minerals to Coal to
align with internal management reporting. As such, the comparative data has been
reclassified.
Anglo Coal's operating profit decreased by 29% to $614 million. This was mainly
brought about by a disappointing performance from Australian operations, where
port and rail infrastructure constraints across the industry, lower sales prices
and a 11% appreciation of the local currency against the US dollar, resulted in
significantly lower earnings.
During the period under review, Anglo Coal Australia has recorded an impairment
of $153 million against certain Australian operations to reflect the latest
commercial and operational conditions relating to those operations.
Markets
An increase in global thermal coal demand, buoyed by the influential Indian and
Chinese markets and coupled with periods of significant supply disruptions in
key producing countries, resulted in a particularly strong market in the second
half of 2007. In addition to the supply fundamentals, competing energy oil and
gas prices further supported the renaissance of coal. Recently, thermal coal
price indices have set new historical highs.
In Australia, 2007 opened with a strengthened market for thermal coal on the
back of strong Asia Pacific demand, particularly from China, which experienced a
reduction in export tonnage and a rise in domestic prices. Continued port
congestion at Newcastle throughout the year and storm and flood events kept
supply tight and further strengthened the export thermal market. Prices steadily
increased throughout the year and are likely to remain high into 2008. Export
performance from South Africa and Colombia was steady.
Metallurgical coal prices turned lower at the start of the year in the wake of
the high 2006 prices that were driven by increasing global steel demand.
However, supply constraints from Australia's congested Dalrymple Bay port,
declining Russian exports, and China's net importer status, resulted in a steady
price increase from April, with prices remaining high at year end.
As most sales in respect of both thermal and metallurgical coal are concluded
for delivery some months hence, the full value of the rising market will only be
felt next year.
Operating performance
Operating profit from South African sourced coal was 9% higher at $414 million,
mainly because of a 10% rise in export prices and despite a decrease of nearly
1% in export sales volumes.
Production was maintained at around 59 Mt with a reduction of 0.6 Mt for the
trade mines being offset by a modest increase from Eskom and domestic
production. Total sales, however, declined by just over 1% to 58.7 Mt, mainly
because export sales volumes were below 2006 due to poor rail performance,
adverse weather conditions at the Richards Bay Coal Terminal, together with some
production issues.
Capital expenditure was $150 million higher than in 2006, the Mafube Macro and
New Vaal MacWest projects being the primary contributors of the significant
increase in expansionary capital expenditure of $121 million.
Operating profit from the Australia operation fell to $9 million. This was
primarily due to lower realised prices, unfavourable exchange rate and higher
port demurrage charges. Port and rail infrastructure constraints limited the
ability to then offset through volume increases.
Delays in the port and rail infrastructure programme have affected the
operations. Significantly, high value metallurgical coal capacity allocation was
reduced by 2.7 Mt, on a 100% basis, and material additional costs were suffered
owing to lengthening port queues. Mitigating actions have included building
stockpiles, adjusting production profiles, securing coal sales via alternative
routes, rescheduling high rate vessels and renegotiating demurrage rates.
Thermal coal prices strengthened by 7% over 2006, however, the 2007 coking coal
settlement was below the high levels of 2006.
Operational performance improvements were limited by infrastructure constraints
for all export mines except Dawson. The Dawson expansion project will ramp up
production to achieve design rates by the end of 2008. It incurred an operating
loss during 2007 following transitional issues and a change in the mine plan.
The Grasstree project at Capcoal became operational in 2007 and delivered an
increase in volumes over 2006. The full benefits of this could not be realised
owing to the port constraints and operating shifts were reduced here and at
existing operations. The Lake Lindsay project to expand operations at Capcoal
will be completed in late 2008.
Operating profit from South America was in line with 2006 at $227 million. Coal
sales at Cerrejon increased by 4% to 29.8 Mt as the expansion project to 32 Mtpa
progressed, however operating costs also rose as a result of the appreciation of
the Colombian peso and high fuel prices. In Venezuela, sales volumes at Carbones
del Guasare were marginally ahead of 2006.
The 66%-held Peace River Coal operation in Canada began producing high quality
coking coal from the Trend Mine at the end of 2007.
Projects
In South Africa, the $505 million Zondagsfontein project has been approved,
expected to deliver 6.6 Mtpa from 2010. The $292 million development of the
Mafube Macro project is progressing well, with plant commissioning commencing in
mid-December 2007. Mafube will supply coal to Eskom and to the export market and
it is anticipated that the mine will increase thermal coal production by a total
of 5.4 Mtpa, the attributable share being 2.7 Mtpa.
In Australia, the expansion of the Dawson Complex to increase production by 5.7
Mtpa (100%) is operational and ramping up to full design capacity and is
expected to achieve design rates by the end of 2008. At Capcoal, the Lake
Lindsay development is progressing with estimated completion during the second
half of 2008. The additional production from both Dawson and Lake Lindsay will
increase coal production at these mines by approximately 9.7 Mtpa. In addition
to the current developments, Anglo Coal is reviewing a number of studies for key
future development prospects including Moranbah South, Grosvenor, Dartbrook and
Saddlers Creek.
In Colombia, the approved expansion at Cerrejon to 32 Mtpa is on schedule and
should be achieved in 2008. Feasibility studies are currently under way
reviewing possibilities of expanding the Cerrejon operation beyond 32 Mtpa.
Outlook
The increasing demand for thermal coal from China continues to demonstrate
coal's strategic importance within the global energy mix. Compared to oil and
gas, coal's security of supply from widely distributed reserves make it one of
the world's most reliable energy sources. This together with the development and
implementation of clean coal technologies will, over time, provide coal the
opportunity to make a significant contribution towards satisfying future global
energy demand while addressing environmental concerns.
In South Africa, the rand/dollar exchange rate and coal prices will continue to
be the two main variables in 2008. Export spot coal prices have doubled over the
past six months, reaching record highs. Globally, the high demand for
electricity and increased economic activity are expected to continue into 2008,
which will have a positive impact on earnings.
In Australia, port and rail expansions and related constraints are set to
continue in 2008. Alternative sales routes have been secured, enabling the large
stockpiles built in 2007 to be reduced. Infrastructure related supply
constraints will result in a return to higher prices in the current contract
negotiations for delivery later in 2008. Growth from projects will deliver
higher volumes in 2008.
DIAMONDS
$ million Year ended Year ended
(unless otherwise stated) 31 Dec 2007 31 Dec 2006
Share of associate's operating profit 484 463
EBITDA 587 541
Group's aggregate investment in De Beers 1,802 2,062
Share of Group operating profit 5% 5%
The Group's share of operating profit from De Beers increased by 5% to $484
million. Earnings from joint ventures were higher than in 2006 and there was a
modest rise in diamond prices in 2007, although the weakening of the dollar in
the second half of the year had an impact on costs and margins. Diamond sales
were lower than prior year, resulting from diminishing supplies of rough
diamonds to Diamond Trading Company International (DTCI) from the Russian state
producer Alrosa.
Underlying earnings at De Beers were higher than prior year, principally
reflecting an increased share of earnings from joint ventures and a tax refund
to De Beers Consolidated Mines Limited (DBCM), which offset lower preference
share income arising as a result of the June 2006 redemptions and higher
minorities due to the Ponahalo BEE transaction which was completed in April
2006.
In the US, a preliminary agreement was reached in March 2006 with all of the
plaintiffs, which resolved all outstanding class actions in the US and
settlement funds were paid into an escrow account pending conclusion of the
settlement process. The matter is proceeding according to the timetable of the
Court and De Beers anticipates that a Fairness Hearing will occur in the first
half of 2008.
The Court of First Instance in Luxembourg announced in July 2007 that it had
annulled the European Commission's decision to accept commitments offered by De
Beers to cease all purchase of rough diamonds from Alrosa from 1 January 2009.
De Beers will continue to purchase goods from Alrosa, up to the agreed levels
and within the proposed timeframe set out in the prior commitments.
De Beers was informed by the South African Department of Minerals and Energy
(DME) on 4 February 2008 that it has granted a New Order Mining Right in respect
of the Venetia mine, to be executed in March. De Beers has already been granted
New Order Mining Rights for Voorspoed and Cullinan and conversions for
Namaqualand, Kimberley and Finsch mines are being processed by the DME.
De Beers has made an impairment charge of $965 million ($434 million
attributable) against its Canadian assets. This non-cash valuation adjustment
has been brought about by the strengthening of the Canadian dollar against the
US dollar, revised long term crude oil prices, labour cost pressures and the
effect of capital expenditure overruns at Snap Lake.
Markets
Early estimates indicate that the all important Thanksgiving to Christmas period
in the US has seen sales of jewellery, including diamond jewellery, underperform
against analysts' and retailers' expectations - despite a surge in the week
before Christmas - with the result that sales are likely to have declined in
comparison with prior years.
Retail experts point to the 2007 holiday season having started well, but
consumers reduced spending amid financial concerns in the worsening economic
environment, resulting in soft sales across the board, particularly for diamond
jewellery. The majority of chains also reported lacklustre sales, with
Tiffany, a benchmark for higher end branded jewellers, reporting negative sales
growth in the US for November and December. Notwithstanding this, diamond
jewellery sales growth was positive in the US for the first three quarters of
2007 and it is likely that full year results will show positive growth, though
in low single digits.
Operating performance
In 2007, De Beers production was 51.1 million carats, maintaining the record
production achieved in 2006. Output from the South African operations increased
by 3% to 15.0 million carats mainly due to improvements made to the diamond
recovering process at Venetia mine which increased carats recovered by 9% .
Output in Namibia rose by 4% to 2.2 million carats, reflecting increased
production from off-shore operations. This offset a 2% decline in production
from Debswana to 33.6 million carats. The industrial diamond arm, Element Six,
continued to expand and recorded sales growth of 18% and organic growth of 10%.
Projects
Snap Lake in the Northwest Territories of Canada was brought into production in
the fourth quarter of 2007. The mine is currently being commissioned, full
production of 1.6 million carats per year is expected to be achieved during
2008. By mid-2008, the Victor mine in Ontario is planned to enter production -
expected to be 0.6 million carats of high quality diamonds per year.
In Botswana, Debswana is reviewing expansion opportunities, the most significant
of which is for Jwaneng which will result in open-pit operations until 2022,
after which the transition to underground mining is planned. In mid-2007, the mv
Peace in Africa, De Beers' latest marine mining vessel, started operations off
South Africa's Atlantic coastline. It is expected to yield approximately 0.2
million carats per year. Also in South Africa, the Voorspoed mine in the Free
State is scheduled to commence production in the fourth quarter of 2008,
reaching full production in 2009. Voorspoed is expected to produce 0.7 million
carats per year.
Outlook
The outlook for 2008 is tempered by uncertainty over global economic growth. The
economic conditions in the US could continue to impact consumer diamond
jewellery sales through the first half, particularly at the lower end.
Nevertheless, strong demand from China, India and the Middle East is expected,
sustaining pricing for larger and better quality diamonds.
Looking beyond 2008, De Beers is confident about the diamond market
fundamentals. With strong growth in the emerging markets of China, India and
Russia, demand should exceed new supply with the opportunity for future price
growth. In this environment, De Beers continues to focus on transforming itself
to ensure it remains the leading company in an increasingly competitive diamond
industry.
INDUSTRIAL MINERALS
$ million Year ended Year ended
(unless otherwise stated) 31 Dec 2007 31 Dec 2006(1)
Operating profit 474 317
EBITDA 732 539
Net operating assets 4,509 4,185
Capital expenditure 274 279
Share of Group operating profit 5% 4%
Share of Group net operating assets 17% 20%
(1) In 2007, Copebras and Yang Quarry were reclassified from Industrial Minerals
to Base Metals and Coal respectively to align with internal management
reporting. As such, the comparative data has been reclassified.
In 2007, Tarmac's operating profit climbed by 38% (excluding benefit from
exchange rate movements) to $474 million. Although the year was characterised by
high cost pressures and volatile energy prices in a tight and highly competitive
market, disciplined margin management, procurement initiatives and healthy
demand from certain sectors had a major positive bearing on results. In the UK,
operating profits grew by 41%, with sales growing ahead of the market. At Tarmac
International, operating profits were 32% higher, benefiting from milder weather
and buoyant markets in France, Poland and the Czech Republic.
Markets
The construction industry has experienced challenging market conditions over the
past few years, and some weakness could continue, particularly with roads and
housing. The volatility of energy prices and the impact on cement and
distribution costs will also continue to affect the industry.
Operating performance
The year was marked by a range of initiatives to drive and unlock further
shareholder value from the current portfolio of businesses.
Overall, within the UK market, volumes in aggregates and concrete products were
in line with growth in the construction markets, with lower demand in housing
and roads being offset by improved demand in the commercial and infrastructure
sectors.
In the UK Aggregate Products business, operating profits were 21% up on 2006,
mainly as a consequence of the business being well placed to capitalise on
benign markets as well as successful cost saving initiatives aimed at ensuring
aggregates and asphalt deliveries come from the lowest cost source available.
The UK Building Products business saw operating profits climb by 27%. Its
commercial strategy was focused around offering customers comprehensive building
solutions. Cement achieved a record turnover in 2007, driven by increased output
from new plant in a favourable market environment. Project Gryphon, for example,
involved a thorough review of the operational and commercial structure of Buxton
Lime and Cement, a process that is now largely complete, with the consequent
improvements expected to contribute $10 million of additional cost savings
during the period 2008 to 2010.
Tarmac International's higher operating profits were partially offset by market
weaknesses and high cost pressures in Spain and Romania. The year witnessed a
re-balancing of the company's international activities, with a $20 million
expansion programme in growth areas such as Dubai and the benefits coming
through in 2007 from the disposal of non-core or under performing businesses in
2006.
Outlook
A three year business plan is now in place that will deliver performance gains
through to 2010, driven by efficiency improvements and targeted capital
expenditure. In the UK, a predicted downturn in the housing markets and low
investment levels in road building are expected to have a modest effect in the
short term. The outlook for non-residential and civil construction is stable,
with further demand support in the London area from the 2012 Olympics and other
major infrastructure projects such as the widening of the M25 and the potential
Crossrail east-west rail link. Internationally, Tarmac has a presence in
attractive markets with strong fundamentals and compelling growth prospects. At
a time when industrial minerals are in high demand, Tarmac has access to
substantial reserves (3.2 billion tonnes of quarry reserves worldwide) and has
direct and stable routes to end markets.
DISCONTINUED OPERATIONS
ANGLOGOLD ASHANTI
$ million Year ended Year ended
31 Dec 2007 31 Dec 2006
Share of associate's operating profit (1) 202 467
EBITDA 401 843
(1) The results for 2007 are reported as an associate up to 2 October 2007.
After this date the remaining investment is accounted for as a financial asset
investment. The results for 2006 are reported as a subsidiary up to 20 April
2006 and thereafter as an associate at 42% attributable.
Attributable operating profit from AngloGold Ashanti of $202 million represented
a 57% decrease against the prior year. The decrease is due to the Group
accounting for AngloGold Ashanti as an associate until 2 October 2007, when the
Group sold 67.1 million shares in AngloGold Ashanti which reduced the Group's
shareholding from 41.6% to 17.3%, as well as four months of contribution as a
subsidiary in 2006. The Group's shareholding in AngloGold Ashanti was 16.6% at
31 December 2007. The remaining investment is accounted for as a financial
asset investment. The AngloGold Ashanti business is presented in the Group's
financial statements as a discontinued operation.
PAPER AND PACKAGING
$ million Year ended Year ended
31 Dec 2007 31 Dec 2006
Operating profit (1) 324 477
Mondi Packaging 195 287
Mondi Business Paper 105 130
Other 24 60
EBITDA 560 923
(1) On 2 July 2007, the Paper and Packaging business was demerged from the Group
by way of a dividend in specie paid to shareholders. The results for 2007 are
reported up to the date of demerger.
Attributable operating profit from Paper and Packaging of $324m represented a
32% decrease against the prior year. The decrease was due to the demerger of
the Paper and Packaging business from the Group by way of a dividend in specie
on 2 July 2007. The results for the year ended 31 December 2007 are therefore
reported up to the date of demerger.
For the six months to the date of demerger, Mondi experienced a substantial
improvement in performance compared to the same period in the prior year, with
operating profit up 53% to $324 million. There was a significant pick-up in the
trading environment, particularly in Mondi Packaging, with price increases
across all major paper grades. Mondi Business Paper also benefited from better
operability of the PM31 paper machine in Merebank, South Africa, complemented by
modest increases in uncoated woodfree paper pricing. These positive
developments were partially offset by significant cost inflation in fibre costs
as a result of Chinese fibre demand and alternative uses for wood in Europe.
For the full financial accounts, please see attached PDF document:
http://www.rns-pdf.londonstockexchange.com/rns/3487o_-2008-2-19.pdf
This information is provided by RNS
The company news service from the London Stock Exchange