Anglo American recently announced a significant decline in its full-year profit, leading to a 94% drop in net profit for 2023. The multinational miner recorded $2.1 billion in impairments, mainly from its diamond and nickel businesses, alongside lower prices for platinum and diamonds. This unexpected decrease in profit missed analysts' expectations of $2.44 billion.

Financial Performance Overview

The company revealed that underlying earnings before interest, taxes, depreciation, and amortization fell to $9.96 billion from $14.495 billion. The largest contributions came from copper and iron ore, generating $3.23 billion and $4.01 billion, respectively. Despite analysts' forecast of $9.83 billion in group earnings, revenue dropped to $30.65 billion from $35.12 billion.

Cost-Cutting Measures

In response to market challenges, Anglo American announced it would trim costs by $1 billion in 2024. Chief Executive Duncan Wanblad emphasized the company's commitment to meeting this target by reviewing assets and taking necessary actions to enhance competitiveness.

Market Impact and Future Outlook

Due to softer commodity markets, the miner experienced a 39% decrease in shares last year, primarily driven by the December update and a significant reduction in production targets. Since Wanblad took over as CEO in April 2022, Anglo American's market cap has plummeted by $43 billion to $29.51 billion. Despite these challenges, shares rebounded by 4.3% on Thursday to reach 1,784.40 pence at 0813 GMT.

Anglo American Platinum Announces Cost Savings and Restructuring

Earlier this week, Anglo American Platinum, the largest profit driver in the prior year, revealed plans for cost savings and restructuring which may result in approximately 3,700 job cuts. The platinum group metals sector faced a significant price rout last year, impacting South African companies particularly hard.

Financial Impact

  • Ebitda from the platinum group metals sector plummeted by 73% to $1.21 billion.
  • Underlying Ebitda from nickel decreased to $133 million from $381 million.
  • Diamonds saw their underlying Ebitda drop to $72 million from $1.42 billion.

Market Challenges

Nickel prices tumbled due to an oversupply from Indonesia, despite initial optimism surrounding demand from electric vehicles. Additionally, diamond prices suffered due to the increasing popularity of lab-grown diamonds, accounting for a significant portion of diamond sales by value.

Dividend Adjustment

In response to lower earnings and falling prices, Anglo American reduced its final dividend to 41 U.S. cents per share from 74 cents, resulting in a full-year payout of 96 cents compared to $1.98 previously.

Future Outlook

Despite current challenges, there is optimism for Anglo American's platinum group metals and diamonds businesses as global demand for metals and minerals continues to grow.

Partnership with Vale

In a separate announcement, Anglo American revealed a partnership with Brazilian mining giant Vale for the Minas-Rio iron-ore project in Brazil. Vale will provide its iron-ore resource Serpentina and $157.5 million in exchange for a 15% shareholding in the enlarged Minas-Rio, with the option to acquire an additional 15% stake. The deal is set to be finalized in the fourth quarter.

For more information, please contact Christian Moess Laursen.

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