Anglo American unveils special dividend and share buy-back taking interim returns to $4.1bn

ANGLO American today unveiled an interim special dividend and share buy-back programme which combined with its 40% earnings payout policy sees the UK-listed group return $4.1bn to shareholders.

Anglo American will repurchase up to 204.3 million shares in terms of the buy-back programme due to start today and ending no later than 14 February 2022. It is valued at about $1bn whilst a special dividend of $1bn will be paid.

The balance consists of $2.1bn in ordinary dividends to be paid out of an interim attributable profit of $5.2bn. Compared to $471m in interim profit in 2020, that is a staggering year-on-year improvement of just over 1000%.

The total payout is 77% of interim earnings.

Earnings per share totalled $4,30/share of which $3.31 per share was paid out in dividends and the share buy-back.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) totalled $12.1bn, a record, said Mark Cutifani, CEO of Anglo American. “I have three words to describe these results: breadth, depth, and diversity,” he said in a media call today.

Price driven

The results were driven by a “pretty good market” with platinum group metals (PGMs), iron ore, copper, and the improvement at De Beers, he said. Of the $12.1bn in EBITDA, $7.9bn was driven by prices that were 62% higher compared to the first half of 2020. There was also an¬†$800m contribution as a result of recovery from the effects of Covid-19 disruption.

In terms of business segment, about three quarters of EBITDA was provided by contributions from Anglo’s iron ore businesses in Kumba Iron Ore and Minas Rio ($4.91bn) and Anglo American Platinum ($4.38bn).

As of June 30, net debt totalled $2bn, a reduction of $3.5bn during the six month period as a result of attributable free cash flow of $5.4bn. Net debt is 0.1x of annualised underlying EBITDA at the end of June.

Asked if the results were as good as it gets Anglo American, Cutifani replied: “Not for us”. The group was, compared to its peer group BHP, Rio Tinto and Glencore, differentiated with the lowest overall costs. “The nature of the portfolio is deeper, diversified and we’re growing. We’re going to get better,” he said.

There would be a 20% volume growth over the next three years led by the firm’s $5bn Quellaveco copper project in Peru. Whilst some prices are said to have hit at a high watermark, such as iron ore, Cutifani said that on a relative basis Anglo would continue to outperform its rivals owing to the quality of production.

“Our finest is yet to come,” he said.

Share buy-back

Commenting on the share buy-back, Anglo American CFO, Stephen Pearce, said it was “all you need to know” about where the group “was travelling”.

There were further improvements to come from De Beers, Anglo’s 85% held diamond business, which had endured “a really bumpy ride” in the last 12 months. Rough diamond prices had gained 12% in the period – owing to timing factors – but would settle at 6%.

The group also expected a stronger performance in the second half of the year from its Brazilian iron ore asset, Minas Rio, where maintenance had been disrupted by the Covid-19 pandemic which has been particularly hard in that country.

The commissioning of Quellaveco, which would help drive down costs, further improvements in the iron ore premia earned by Kumba Iron Ore, and the commissioning of Anglo American’s Mogalakwena project would also feed into margin growth, he said.

Said Cutifani: “When you look at the discount, our cost position, our diversification, the work we have done in marketing and the technical strategy and growth opportunities, the market is not giving us that value.

“It [the share buy-back] is a strong message about what we think of the business,” said Cutifani.