Anglo American share price surges despite drop in earnings

Key Takeaways:

• The production of copper at Quellaveco was successful, with 319,000 tonnes produced at a unit cost of 111 c/lb.
• Anglo American is on track to reduce annual costs by $1bn and capex by $1.6bn over the next three years.
• Despite high inflation, underlying EBITDA decreased by 31%, mainly due to the impact of low prices for PGMs (platinum group metals) and diamonds, resulting in a revenue impact of $5.5 billion.
• The profit attributable to equity shareholders was $0.3bn and the net debt was $10.6bn, with a leverage ratio of 1.1x.
• A final dividend of $0.41 per ordinary share will be paid to shareholders, with amounts specified in United States currency, South Africa currency, and Botswana currency.
• Additionally, Anglo American has acquired the Serra da Serpentina high-quality iron ore resource from Vale SA to integrate into its Minas-Rio mine in Brazil

Anglo American Plc has released its preliminary financial results for the year ended December 31, 2023, and despite facing some challenges, the company has shown resilience and strategic acumen that may be of interest to traders looking for long-term investment opportunities.

A key highlight from the results was the full ramp-up of the Quellaveco mine, which produced an impressive 319,000 tonnes of copper at a unit cost of just 111 cents per pound. This achievement demonstrates Anglo American's capability in efficiently scaling up operations and controlling costs.

Anglo American's commitment to cost reduction is further emphasized by its trajectory to decrease annual costs by around $1bn and capital expenditure by $1.6bn over the next three years. This planned reduction in spending is indicative of a strategic approach to financial management that aims to enhance shareholder value.

Despite a 31% decrease in underlying EBITDA $10bn, largely attributed to the revenue impact from cyclical lows in platinum group metals (PGMs) and diamonds, the company still managed a 2% volume increase while keeping unit costs to a modest 4% rise amidst high inflation. This demonstrates the company's resilience in the face of market volatility—a trait that can be reassuring to traders who value stability.

Profit attributable to equity shareholders stood at $0.3bn. The board has decided to declare a final dividend of $0.41 per ordinary share which aligns with Anglo American's 40% payout policy.

Acquisition announcement

In addition to the financial results, Anglo American has also secured a significant strategic advantage by acquiring and integrating the Serra da Serpentina high-quality iron ore resource from Vale SA (NYSE: VALE) into its Minas-Rio operation in Brazil. This acquisition not only bolsters Anglo American's resource base but also ensures the company's control over the expanded operation, with potential for future growth.

Comments

Anglo American's latest financial results and strategic initiatives paint a picture of a company that is navigating market challenges with a clear focus on operational efficiency, cost management, and strategic growth.

Analyst ratings and price target

Based on 12 Wall Street analysts (as of the 22nd of February 2024) offering 12-month price targets for Anglo American in the last 3 months. The average price target is 2392.47p with a high forecast of 2896.74p and a low forecast of 1716.59p. The average price target represents a 39.28% change from the last price of 1717.74p.