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RPT-UPDATE 3-Coronavirus hits Anglo American's profit but recovery in sight

Thu, 30th Jul 2020 13:33

(Repeats with no changes to the text)

* Diamond sales, profits slump on COVID-19

* Anglo sees recovery in second half

* Anglo beats consensus on profits, dividend

By Zandi Shabalala

LONDON, July 30 (Reuters) - Diversified miner Anglo American
on Thursday told its investors it was on track for a
second-half rebound after a 39% dive in profits in the first six
months when lockdowns paralysed production.

The London-listed miner, with its extensive African
exposure, has been the hardest hit of its peers by lockdowns
that halted mining in South Africa, Botswana and Namibia. The
company also suffered operational issues.

"The year has been like nothing I have ever seen in my 43
years in the industry," CEO Mark Cutifani said on a call.

But he said the company was operating at nearly full
capacity and expected a recovery in prices and sales of its
products.

"We have done the right things in the first six months and I
think we have laid the foundation for the recovery in the second
half of the year," Cutifani said.

Anglo posted underlying earnings before interest, tax,
depreciation and amortisation (EBITDA) of $3.4 billion for the
six months to June 30, beating a consensus of $3 billion from
nine analysts compiled by Vuma.

It declared an interim dividend of 28 cents per share, down
55% from a year earlier, but in line with its 40% payout policy
and beating consensus estimates for a 20 cents payout.

Net debt rose by $3 billion to $7.6 billion in the first
half as it continued to spend on mines and projects.

The share price fell 3.3% by 1040 GMT versus a 2.4% fall in
the wider sector as metals markets dipped on Thursday.

Analysts said the shares were pricing in this year's
weakness but they believed Anglo was well-placed for recovery.

"We believe Anglo will benefit from a continued cyclical
recovery in most commodity prices, ongoing strength in iron ore
prices, and operational improvements after the very difficult
first half," Jefferies analysts said in a note.

Earlier this month, Anglo maintained most of the full-year
production targets it set in April.

Apart from the impact of lockdowns, Anglo had operational
incidents at its platinum unit in South Africa and at its
Australian metallurgical coal mine, which were to an extent
offset by performances at its Brazilian iron ore and Chilean
copper operations.

The diamond sector faced weak demand even before the
pandemic and a collapse in sales in the first half cut profits
at Anglo's De Beers unit to $2 million from $518 million a year
ago.

Cutifani said De Beers will begin a consultation process and
inform employees on how they plan to transform the business on
Monday.

He said, however, diamond sales were beginning to rise in
China and also predicted a recovery in the leading U.S. diamond
market in the second half.

Other miners are also banking on China, the world's biggest
commodity market.

Larger rival Rio Tinto on Wednesday declared a
first-half dividend in line with expectation and said it saw a
V-shaped recovery in China.

(Reporting by Zandi Shabalala, additional reporting by Muvija M
in Bengaluru; editing by Edmund Blair, Jason Neely and Barbara
Lewis)

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