Release Date: July 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Anglo American PLC (AAUKF, Financial) achieved a resilient performance with an EBITDA of ZAR12 billion and a mining margin of 28%, despite challenging market conditions.
- The company implemented a ZAR5 billion cost-saving program for 2024, achieving ZAR2.9 billion in operational and overhead cost savings in H1.
- Refined PGM production increased by 5% to 1.78 million ounces, and sales volumes rose by 9% to 1.97 million ounces due to inventory drawdown.
- The company maintained a strong balance sheet with net cash of ZAR15 billion, including customer prepayments, and declared an interim dividend of ZAR2.6 billion.
- Anglo American PLC (AAUKF) is progressing well with its demerger process, aiming to become a standalone entity with a strong platform for future growth.
Negative Points
- Total PGM production was down 5% compared to the prior period, indicating operational challenges.
- The company faced significant cost pressures and geopolitical tensions, requiring decisive actions to maintain sustainability.
- The tragic loss of two colleagues at the Amandelbult's Dishaba mine in June highlighted ongoing safety challenges.
- Revenue dropped by 19% to ZAR52 billion due to a 24% decrease in the PGM basket price, partially offset by increased sales volumes.
- The company had to implement a difficult organizational restructure, impacting both employees and contracting companies, to improve productivity and sustainability.
Q & A Highlights
Q: What aspects of your business are reliant on Anglo American that you need to factor into your strategic imperatives as you break away?
A: We have commenced the demerger process with two workstreams: one focused on the demerger itself and the other on the standalone separation. We are identifying areas where Anglo American provides services, such as IT and supply chain, and will put arrangements in place to continue these services temporarily while we transition. We aim to complete this process by 2025.
Q: How sure are you that you are investing sufficiently into sustainability, given some operational challenges?
A: We have continued to invest in downstream processing and mining activities. For example, at Mogalakwena, we have optimized the open pit to reduce waste and improve cash flow. The Der Brochen project is progressing to replace infrastructure closures at Lebowa, ensuring meaningful production by 2025.
Q: Will the dividend policy remain as is with a 40% payout post-demerger?
A: We will maintain our balanced and disciplined capital allocation framework. The dividend is a key differentiator for us, and we will continue to assess it at each reporting period. The intention is to maintain a strong balance sheet and ensure appropriate returns to shareholders.
Q: What are the potential impacts of the revised stripping regime and mine plan at Mogalakwena?
A: The revised plan allows us to reduce waste removal by approximately 100 million tonnes over the next five years, improving cash flow and operational efficiency. While there will be a step-up in waste removal this year and next, the long-term impact will be a more optimized and efficient operation.
Q: How will the demerger impact your medium and long-term strategy?
A: As a standalone entity, our strategy will focus on operational excellence and extracting maximum value from our existing assets. We will continue to invest in our PGM business in a disciplined way, balancing investment with returns to shareholders.
Q: What are the expected costs of a secondary listing in London to mitigate flowback?
A: The costs of a secondary listing on the London Stock Exchange are relatively insignificant, given our existing governance structures and processes. The primary listing will remain in Johannesburg, and we will work to articulate the investment case for Anglo American Platinum to attract new shareholders.
Q: Can you provide more details on the increase in trading revenue?
A: The increase in trading revenue is primarily due to prices trading in a narrow range, allowing us to do greater volumes within our value-at-risk limits. This flexibility has driven the increase in trading volumes.
Q: What is the current status of your work-in-progress and finished goods inventory?
A: We have worked down our work-in-progress inventory from the Polokwane smelter rebuild and expect it to be at normalized levels by the end of the year, excluding converter slag material. Finished goods inventory is currently at a normalized level.
Q: Will there be a name change as part of the demerger process?
A: Our current focus is on ensuring a successful demerger and separation. Any potential name change will be considered in due course, but it is not a priority at this stage.
Q: How do you think about acquiring or selling assets once you have exited the parent company?
A: Our focus is on driving operational excellence from our existing assets and realizing their full potential. We are committed to PGMs and have no intention of diversifying into other metals at this stage.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
