‘Anglo’s targeted returns too ambitious’

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ANGLO American might fall short of earnings targets because of accelerating inflation in its markets, an extensive capital spending plan and over-dependence on asset sales, brokerage Liberum Capital said yesterday.

Chief executive Mark Cutifani, who began a review of operations from Australia to Brazil after joining the London-based diversified mining company in April last year, has set a goal of at least a 15 percent return on capital employed (ROCE) by 2016 by selling as many as 16 assets, cutting costs and lifting profit.

“We believe it is too ambitious,” Liberum analysts Ben Davis and Richard Knights said in a note to clients. “Our estimated 10.8 percent ROCE in 2016 will disappoint investors and with Anglo’s bleak earnings outlook, weak yield and significant project risk, we remain conviction sellers.”

On July 21, Anglo put four platinum mines and potentially two ventures in South Africa up for sale, but Liberum said “a speedy disposal of Anglo’s underperforming assets should not be taken for granted”. – Bloomberg

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