Business Maverick

Business Maverick

Anglo’s H1 earnings fall from record highs on sour prices and extreme weather 

Anglo’s H1 earnings fall from record highs on sour prices and extreme weather 
Anglo American's Los Bronces copper mine in central Chile on 10 October 2006. (Photo: Alejandra Parra / Bloomberg via Getty Images)

Duncan Wanblad’s maiden results as Anglo American’s CEO were restrained as interim earnings fell 28% from last year’s record performance in the face of lower prices and extreme weather events. They were still the second-highest half-year earnings in the company’s long history. Wanblad’s predecessor, Mark Cutifani, left Anglo in good nick and investors will welcome a silver-medal performance. 

Anglo American’s underlying EBITDA (earnings before interest, taxes, depreciation and amortisation) fell 28% to $8.7-billion in the six months to the end of June compared with the same period last year, the global mining giant said on Thursday. 

But in what has become a theme for Anglo’s results – its South African platinum and iron ore units, Amplats and Kumba, unveiled their earnings earlier this week – last year’s performance was a record one stemming from prices that hit historic highs.

So the company’s earnings are still comparatively huge by historical standards, and the upshot is that shareholders will get an interim dividend of $1.24 per share compared with last year’s $2.51 per share which included a special dividend top-up. 

Among other things, inflation – and the escalating production costs associated with it – is eating into Anglo’s bottom line, while mounting concerns about global economic growth have taken a shine off the commodities the group produces.

“The war in Ukraine… has resulted in higher prices for energy, agricultural and other commodities, exacerbating broader inflationary pressures across the global economy,” Anglo said. 

“While the medium- and longer-term demand outlooks for our products remain strong – not least given the role these play in sustaining global economic development for a growing population and enabling the decarbonisation of energy and transport systems – these deteriorating macroeconomic conditions are contributing to a weaker near-term outlook for demand.”

Another theme that has emerged from this week’s round of Anglo results is extreme weather, which has been literally raining on its earnings parade. 

“The impact of adverse weather and planned lower grades at many of our operations contributed to a 9% production decrease on a copper equivalent basis. Extreme rainfall in Brazil, South Africa and Australia affected iron ore production at Minas-Rio and Kumba, steelmaking coal at Capcoal and Dawson, PGMs (platinum group metals) production at Mogalakwena and nickel production at Barro Alto,” Anglo said. 

This all highlights the material risk that climate change poses to mining operations.

“If you look back at the big, strategic programmes that we’ve implemented from a technology and operations point of view, they have all been with a view that we need to secure the business in a more robust fashion to stand up to some of these trepidations that we are going to see impact us in the short run in terms of climate change,” Wanblad said on a media call. 

There are also opportunities galore for the mining sector as the battle heats up to address a changing climate which the vast majority of scientists link to greenhouse gas emissions. Copper, nickel and PGMs are all regarded in various shades as “green metals” that have a role to play in the ongoing energy transition from fossil fuels. Climate change poses risks while also offering rewards to companies such as Anglo. DM/BM

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