Furnace slag is cooled at Anglo American Platinum's Polokwane smelter. A five-month strike at the platinum unit hit profit. Photo: Supplied

Anglo American would focus on reducing production costs as part of a strategy to turn the group around after weak commodity prices and the five-month strike on the platinum belt hit underlying profit in the six months to June, the mining house said on Friday.

In a mixed bag of interim results, Anglo posted underlying earnings of $1.3 billion (R13.7bn), a 3.3 percent increase on the corresponding period last year. Underlying operating profit declined by 10 percent to $2.9bn as Australian export metallurgical coal prices declined by 23 percent and achieved iron ore prices dropped by 17 percent at Kumba Iron Ore.

Group revenue was barely changed at $16.1bn and Anglo declared an interim dividend of 32 US cents. The stock rose 3.08 percent to close at R291.01 on the JSE on Friday.

“From our point of view, we are in good shape,” chief executive Mark Cutifani told Bloomberg Television.

“Operating earnings are improving. The balance sheet is in good shape. Certainly while we are still making capital investments, we are increasing the debt. But we expect that to be in the range of $10 billion to $12 billion by 2016. No major problems there.”

Last year the group said only 11 percent of operations consistently met their targets. Cutifani said in May that of the 69 assets held by the group, 31 were delivering just 2 percent of earnings before interest and tax, Bloomberg reported. The new management team had seen signs of improvement in 15 of these 31 assets in the past year, while 16 “still have a lot of work to do”, he said.

The company is restructuring the two levels of its management team following the renewal of the board in 2009, in an attempt to ensure the organisation follows the right strategy for each commodity.

De Beers, the biggest diamond producer by revenue, contributed a solid set of results, with underlying profit growing by 34 percent to $765 million, driven by demand from China, its key market.

The platinum subsidiary was the worst performer, posting a $1m underlying loss compared with a $187m profit in last year’s first half. The copper business’s underlying profit grew by 20 percent to $760m as a result of higher sales.

The iron ore and manganese business and the coal business put in dismal underlying profit performances, with iron ore and manganese falling 26 percent to $1.2bn and coal sliding 25 percent to $260m.

Cutifani said the Minas-Rio iron ore project in Brazil was on track and was expected to deliver its first iron ore shipment at the end of the year.

Anglo previously announced a target of 15 percent by 2016 across the group for its return on capital employed (Roce), the ratio that measures the efficiency and profitability of its capital investment. On Friday, Cutifani maintained the Roce target.

The group’s attributable Roce declined to 10 percent in the six months to June compared with 11 percent a year earlier, mainly due to lower operating profit at Anglo American Platinum, Kumba and Coal Australia and Canada.

The company said it would stop leakages in capital allocation, partly by reducing costs by $500m a year through 2016.