Anglo scraps final dividend, shares tumble

Mining group Anglo American scrapped its 2008 final dividend on Friday to conserve cash and said it will cut 19 000 jobs as it posted a 1% fall in profit, missing analysts’ forecasts.

Anglo shares, which have underperformed the UK mining index by 25% so far this year, tumbled in London by 11,4% on Friday morning, versus a 6,5% fall in the mining index.

The firm—the world’s dominant platinum producer and fourth-largest iron ore exporter—said it planned to cut 19 000 jobs by the end of the year. This accounts for 10% of the workforce of 190 000, based on figures on its website.

“As we begin 2009, the economic outlook remains weak, with limited visibility and we are continuing to experience volatility and downward pressure on commodity prices,” chief executive Cynthia Carroll said.

“Notwithstanding the other measures we have taken, the board has decided to suspend dividend payments in order to preserve the group’s strategic growth options.”

With the final 2008 dividend scrapped, the total payment for 2008 will consist of the interim dividend of 44 cents per share, down 65% from the total of $1,24 in 2007. Payments will resume as soon as possible, Anglo said.

Carroll told a conference call that although the firm was keeping an eye out for possible takeover opportunities, its planned mine expansions were the priority.

“We compare on a regular basis our internal opportunities with those we assess externally.
What we would say today is based on those comparisons, we think that the internal growth prospects that we have before us are most attractive.”

She said Anglo was not currently planning to invest in Australia’s Fortescue Metals Group, which said on Wednesday it had held talks with both Anglo and China’s sovereign wealth fund about possible investments.

Profit slips
Anglo, the world’s fourth-biggest diversified mining group by market value, posted earnings per share before exceptional items of $4,36, down from $4,40 in 2007 and compared to $4,96 expected by seven analysts surveyed by Reuters.

The group, which focuses on Southern Africa, said operating profit fell 0,3% to $10,09-billion.

Chief financial officer Rene Medori said the dividend move and actions already taken to cut costs would mean that the firm would not have to ask shareholders for cash.

“The actions that we have taken in terms of cash flow preservation and the level of debt that we have, we don’t believe that we need to contemplate a rights issue,” he told the conference call.

Anglo’s confidence about not needing to raise funds was in contrast with rivals Xstrata and Rio Tinto, which are more highly geared than Anglo and have recently unveiled plans for a rights issue and assets sales.

Net debt at the end of 2008 was $11,04-billion and Anglo said it had undrawn bank facilities and cash of over $7-billion.

The group has raised $434-million so far this year by further cutting its stake in former majority-owned AngloGold Ashanti to 11,88% from 16,3%.

The group, which also mines industrial metals like copper, coal and diamonds and platinum, said on December 17 it was cutting capital spending in 2009 by more than half to $4,5-billion and postponing some mine projects to conserve cash.

The firm would cut platinum production by 300 000 ounces and reduce thermal and coking coal output each by two million tonnes, Carroll said on Friday.

Bulk of job cuts in SA
According to Carroll, the bulk of the job cuts announced on Friday is likely to be in South Africa.

She said the reductions in the workforce will be in line with the group’s revised growth plans.

“This was a very difficult decision for us to reach,” Carroll added.

She said that the group was still in negotiations with governments and trade unions over the retrenchments.

Making up half of the planned job cuts is the reduction in Anglo Platinum’s workforce by 10 000.

Anglo Platinum, the world’s largest platinum producer, is majority owned by Anglo American.

The platinum producer said earlier this month that it was cutting jobs to lower costs amid a drop in platinum prices, which have fallen more than 50% from a record high last year.

Anglo Platinum produced 2,39 million ounces of refined platinum in 2008 and said output would remain flat in 2009 if platinum demand remained the same.

De Beers, which is 45% held by Anglo American, has also announced retrenchments.

Employing 3 500 people in South Africa, De Beers is reportedly planning to cut 1 415 positions or about 40% of its workforce.—Reuters, I-Net Bridge

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