ANGLO American took the total payout to shareholders to $6.2bn for its 2021 financial year ended December after it sweetened the final $1.18 per share dividend with a $0.50c/share special dividend – its second of the year.
This was achieved on the back of record earnings before interest, tax, depreciation and amotisation (EBITDA) of $20.6bn in line with the consensus forecast. Anglo paid out $4.1bn in the first half which included a $1bn share buy-back programme.
Mark Cutifani, who leaves as Anglo CEO in April, said 2021 represented a year of two “distinct” halves following a retreat in mineral prices from July. However, for the 12 months, the average market prices for Anglo’s basket of products increased by 43%.
As a result, all of the group’s operating divisions made handsome contributions to EBITDA in the period. However, Anglo’s 80% investment in Amplats stood out as a key contributor as well as iron or,e held in Minas Rio and Kumba Iron Ore, the 70%-owned Johannesburg firm. Collectively, they comprised about two-thirds of EBITDA.
There was also a strong year-on-year showing from De Beers which reported just over $1.1bn in EBITDA compared to $417m in 2020. “I expect the diamond market to remain strong,” said Cutifani after not being able to “sell a diamond” during Covid.
“I’ve resisted the temptation to call this a supercycle,” he said of the metals market. “But we have the metals to support transition [to decarbonisation]. There is upside in a whole range of metals and stresses in the supply side.
“People under-estimate how tight the supply side is,” said Cutifani.
There has been speculation that tighter sanctions of Russia in retaliation to its invasion of neighbour Ukraine could hamper supply chains and even result in a shortage of specific metals such as palladium. Cutifani said Anglo reserved opinion.
“From our point of view sanctions may have an impact … but it will take time to unfold,” said Cufifani. Anglo didn’t have any direct involvement in the Russian market.
One other potential headwind is mining inflation. Anglo reported 5% CPI compared to 2% in the previous year. Stephen Pearce, CFO of Anglo said second half inflation totalled $500m but that it was “demand-led” which meant it was more than recovered at the revenue line which was $10bn stronger in the same period. “It’ll be interesting to see how this settles down though,” he added.
The upshot was underlying earnings of $8,93bn compared to $3,14bn. Earnings per share came out at $7,22/share. Net debt was $3.8bn as of December 31, lower than the $4.7bn forecast by Goldman Sachs owing to larger than expected working capital release by Anglo American Platinum, Anglo’s Johannesburg-listed subsidiary.
“Numbers are small positive due to cash returns,” said UBS in a note prior to the presentation of Anglo’s results to analysts. The bank added that increased Russia risk could be positive for Anglo’s basket of minreals, especially platinum group metals and diamonds.