London - Global miner Anglo American said its overhaul should gather pace in the next two years after initial improvements at its copper and iron ore mines helped annual operating profit beat forecasts.
However, a $1.9 billion (R21 billion) impairment charge related mainly to its nickel and platinum divisions meant Anglo, the smallest of the major diversified miners, made its second consecutive annual net loss as it battles to turn the business around.
After years of sector-lagging returns, Anglo has embarked on an initiative to improve operations of major mines under chief executive Mark Cutifani, who took the helm less than a year ago.
Cutifani said on Friday that most of the improvements are still to come.
“As we go into 2015-2016 we expect a continuing improvement and will start to really step up the plate with the commissioning of some of the new production and a turnaround that is going on at Kumba,” Cutifani said, referring to the company's South African iron ore division.
Anglo reported a 6 percent rise in underlying operating profit to $6.6 billion, ahead of a $5.6 billion Thomson Reuters I/B/E/S analysts' forecast and a consensus forecast provided by the company of $6.3 billion.
The net loss narrowed to $961 million compared with a $1.5 billion loss in 2012.
Price declines for many of the commodities Anglo produces such as copper and coal were offset by higher output.
A weaker South African rand also helped, as Kumba and Anglo's other operations in South Africa pay their costs in rand but sell their products in dollars.
“The robust fourth-quarter production results followed by strong financial performance increases our confidence in efficiency measures taken by the company,” Citi analysts said in a note to clients.
Last month Anglo reported a rise in fourth-quarter output of all its main metals, a sign efforts to improve performance at its mines are starting to pay off.
“However we think the company's balance sheet remains under pressure,” the analysts said.
Anglo's net debt increased to $10.7 billion at the end of December from $8.5 billion a year earlier.
Shares in Anglo American were 0.1 percent higher by 13:28 SA time after rising by about 2 percent in early trade.
SOUTH AFRICA STRIKES
Anglo American's iron ore division Kumba, by far the largest contributor to group profits, posted a 24 percent jump in underlying full-year earnings earlier this week and said it had been granted a license to start an expansion of Sishen, its largest mine.
This was a sharp recovery from a wave of illegal strikes that hit Kumba and South Africa's mining sector in 2012.
However industrial action, particularly related to platinum, remains a serious concern for Anglo.
Its platinum division Amplats, the world's largest producer of the precious metal, swung back to profit in 2013 but its recovery is threatened by new labour unrest across South Africa's platinum belt.
Members of South Africa's Amcu union said they will continue with a wage strike that has hit output at the world's three biggest platinum producers until employers meet their demands.
Anglo, grappling with rising costs, lower prices and declining productivity, argues that accepting the hefty salary increases demanded by the union would make the business unprofitable and unsustainable.
“Clearly I am disappointed with the strikes in platinum but at the end of the day we have to change our approach and stand fast and make it very clear that we stand for a new future in platinum,” Cutifani said. - Reuters