Anglo American is planning to buy back up to $1 billion of its shares as profits surged on record metal prices in the half-year to June.
The group said yesterday that it would return the cash to its shareholders after posting the best half-year results since 2011 thanks to rocketing iron ore prices which have significantly boosted its balance sheet.
Anglo American chief executive Mark Cutifani said the buy-back programme was a vote of confidence in the board’s confidence in the business. “With a strong balance sheet in place, we then consider the appropriate balance of options for any discretionary capital, in terms of growth investments and additional returns,” said Cutifani. Group financial director Stephen Pearce said the share buyback had come at the right time with the group’s net profit jumping by 46 percent to $1.88 billion in the half-year to June from $1.29bn a year earlier.
Pearce said the share buy-back “builds on the $3.4bn in cash we will have returned to shareholders since reinstating the dividend in mid-2017.” It said the programme aims to reduce Anglo’s issued share capital and is scheduled to begin immediately until the end of March 2020. The company said it would be executed in two tranches of up to $500 million (R6.95bn) each. Independent analyst Johann Biermann said the company was giving shareholders cash to take full advantage of the strong commodity price environment.
“We have had very strong commodity prices in the last 12 months, that would have helped their cash position,” Biermann said. Anglo American’s Kumba Iron Ore, which operates mines in the North West, reported that underlying earnings before interest, tax, depreciation and amortisation (Ebitda) had more than doubled to $1.4bn for the first half of the year, after realising a 57 percent iron ore export price of $108 a ton for its material. The record iron ore prices and the weak exchange dollar exchange saw Kumba triple its net profit to R13.2bn in the six months ended June 30 compared with R3.9bn last year.
Minas Rio, Ango American’s iron ore operation in Brazil reported Ebitda of $693m, compared with a loss of $74m in the year-earlier period. Minas started ramping-up operations in December after a pipeline leak prompted a shutdown last April. The iron ore price has soared this year, hitting the highest level in more than five years on the expansion of Chinese demand, the bad weather in Australia that has curtailed shipments, and the tailings dam disaster in Brazil. Rocketing prices of palladium and platinum coupled with the weak rand have also contributed to the bumper profit raked in by Anglo American Platinum, a unit of the company.
The performance of the iron ore and platinum divisions came as De Beers, which is 85 percent owned by Anglo, reduced output to the bottom end of its 31 to 33 million-carat target to match weak market conditions. Anglo-American shares rose 1.03 percent on the JSE to close at R381.78.