Anglo, the company that is ingrained in South Africa’s history, has been through the wringer over the past two decades. It’s been an absolute humdinger. This short history goes like this: Anglo decides just before the turn of the millennium to jettison South Africa and change its nationality by listing on the London Stock Exchange, a fateful decision obviously.
Its reception in the global centre is disappointing, a shock for its upper-class executives, who are very, well, Anglo. But BHP and Rio Tinto, two other Anglo-Australian outfits, are already there and well connected. Once a king in South Africa, Anglo suddenly becomes a bronze medallist in the UK.
Enter new CEO Tony Trahar in 2002, an estimable person, but at heart cautious, not least because the company is heavily under the radar of the London investment community, a forceful and sceptical bunch. Trahar introduces some important changes, but is accused of effectively missing the commodity boom of the late 2000s, which puts a rocket under BHP and Rio. Anglo entered the UK around the same size as Rio and a bit smaller than BHP. It’s now half the size of Rio and a third the size of BHP.
Enter the first American CEO, Cynthia Carroll, no less an estimable character, in 2007. Carroll, conscious of the criticism levelled at her predecessor, pushes the company in exactly the opposite direction. Anglo undertakes a huge new iron ore project in Brazil, Minas Rio, and the project, like many huge projects, quickly goes Eskom-shaped. Billions of dollars are written off, leaving Anglo with a great asset but debt up to its ears.
Enter Mark Cutifani, Australian and so different from his two predecessors. The British-styled haughtiness ingrained in the culture of Anglo since its Oppenheimer days is gone. Cutifani is personable, practical, approachable and sensible. But he almost immediately faces a crisis – the accumulated debt, along with the fallout from the 2008 financial crisis, make Anglo’s balance sheet look a bit wobbly.
The unthinkable has happened. Anglo, the company that once controlled 60% of the value on the South African stock exchange, is in an existential crisis. Anglo announced it would cut almost 200,000 jobs, two-thirds of its workforce, and consolidate its six divisions into three. The dividend was suspended. And in the first half of 2015, the company lost $3-billion. Shocker.
Soon afterwards, in 2017, British Indian industrialist Anil Agarwal buys 20% of the company, a prelude, surely, to a takeover bid. Agarwal had the desire but didn’t quite have the wherewithal, and, in 2018, he sold his stake for a decent profit.
But through it all Cutifani soldiers on.
In a short interview, I ask him rather bluntly about how he felt about leaving. “Sad. Being in South Africa changed me,” he says, attesting to a transformation journey. “You do see the complexity and the resilience of the country. There is still a great will for it to succeed.”
I suggest to him that there must have been politicians along the way to whom he would have liked to have applied the boot and, of course, he denies it. Whatever else, SA politicians remained accessible, and the characters are unique and appealing, he says. “Tito Mboweni, I just love him.”
Quietly, in the past five years, Anglo has at last turned the corner. Cutifani took over 68 assets and they have declined to 28. Yet, in volume terms, Anglo has actually increased output. Costs are down 25%, earnings have doubled, as has productivity per employee, and return on capital has quintupled. Anglo’s share price is up 66% since he took over, outpacing its rivals. Anglo is even delivering a huge new Peruvian copper mine, Quellaveco, on time and on budget.
But even after all of this, Anglo is still trailing, by some financial metrics, both Rio and BHP, yet the gap is now tiny and Cutifani says it will close entirely in the foreseeable future. In some ways, the numbers are unfair because the Australian miners churn out enormous amounts of iron ore from the Pilbara region in Australia with enormous efficiency. But there is an argument that, after being the king of metals for two decades, the future of iron ore is diminishing. If so, the relative dominance of iron ore for Rio and BHP could become a comparative detractor.
In its report on the new CEO Duncan Wanblad, the Financial Times commented that “today Anglo is the darling of analysts and investors and has led the sector in rolling out technology to reduce the carbon footprint and intensity of mining”. I honestly didn’t think I would ever see those words in print. Wanblad consequently takes over a company in fairly good nick. Of course, there will be new challenges, but his problems seem, at least now, a shadow of Cutifani’s. Cutifani really does deserve a Bells. DM168
This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.