(Alliance News) - Anglo American PLC on Thursday announced a slump in production in the first half due to Covid-19, leading to a drop in revenue, poor profit margins and a reduced dividend.
For the six months to June 30, underlying earnings before interest, tax, depreciation and amortisation was down 39% to GBP3.35 billion from GBP5.45 billion year on year. This was due to a decrease in price for the Anglo American's basket of products and the impact of Covid-19 on production across its southern African assets. These two factors is said to have decreases the underlying Ebitda by USD1.10 billion.
Profit attributable to equity shareholders of the company also took a massive knock of 75% to GBP471 million from GBP1.88 billion.
Chief Executive Mark Cutifani said: "The pandemic did materially impact production, with varying degrees of lockdown being the main driver for our 11% overall reduction in output and 16% decrease in revenue, alongside operational incidents at PGMs and Met Coal. These reductions were partially offset by strong performances from our Brazilian iron ore and Chilean copper operations."
The mining company's revenue in the first half was down 16% to GBP12.47 billion from GBP14.77 billion the year prior.
Owned-mine platinum production decreased by 27% to 488,100 ounces with palladium production decreasing by 21% to 406,300 ounces, owed to the impact of lockdowns, the company said.
At the height of lockdowns in the second quarter ending June 30, diamond output was down 54% annually to 3.5 million carats, the largest decline by commodity. Platinum fared slightly better with output slumping 41% to 307,000 ounces. Palladium and thermal coal were both down 34% at 228,000 ounces and 4.4 million tonnes, respectively.
Anglo American's first half saw De Beer rough diamond production down 27% to 11.3 million carats.
For the whole of the first half, Anglo American reported that only nickel, with a rise of 11% and Minas-Rio, showing a 17% hike, had annual output jumps.
Cutifani said: "By the end of June, we were back at approximately 90% capacity across the portfolio and the significant transformation of our underlying operational capabilities that has made the business more resilient helped to deliver USD3.4 billion of underlying Ebitda."
Anglo American cut its interim dividend 55% following poor profit margins to USD0.28 from USD0.62 year on year. This however was still in line with the company's policy to pay out 40% of underlying earnings.
Looking ahead, the company plans on investing in the Quellavec copper project in Peru and in Woodsmith for fertiliser.
Concerning the Quellavec copper project, the company will be focused on the construction of a 95km water pipeline as well as startiing pre-stripping activities to remove surface waste material and the construction of mills.
In May, the company set out its plans to exit its remaining South African thermal coal operations.
The company said: "The current market outlook is highly uncertain owing to the possibility of a second wave of Covid-19 infections, the ability of fiscal and monetary measures to continue to support employment and businesses in consumer countries, as well as the shape and strength of the global macro-economic recovery.
Anglo American shares were down 3.6% at 1,902.80 each on Thursday morning in London. In Johannesburg, the shares were down 1.5% at ZAR415.23.
By Greg Roxburgh; gregroxburgh@alliancenews.com
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