Group financial
performance

Financial review of Group results

Group operating profit was $9,763 million, with operating profit from core operations of $9,102 million, 104% higher than 2009. This increase in operating profit was driven by the Kumba Iron Ore, Copper and Platinum business units, which benefited from strong market prices, partially offset by the strengthening South African rand and Australian dollar. There was an increase in realised prices across all export commodities, with a 34% rise in platinum, a 92% increase in export iron ore, a 32% increase in copper, a 25% rise in export metallurgical coal, a 48% increase in nickel and a 28% increase in export thermal coal.

Copper operating profit was 40% higher than 2009, with a 32% increase in the realised price of copper, partially offset by an 8% decrease in sales volumes owing to lower production and shipping constraints as a result of the failure of a shiploader in Patache port in December. Nickel recorded a significant increase in its operating profit, driven by improved nickel prices. Platinum operating profit was driven by higher metal prices and cost control programmes, partly offset by a stronger rand and lower sales volumes. Kumba Iron Ore’s operating profit was 128% higher than 2009, driven by a 6% increase in export sales volumes and a 92% increase in realised prices. Samancor’s strong performance was driven by higher manganese ore and alloy prices resulting from increases in world steel production and demand. Despite weather impacts in 2010 and a stronger Australian dollar, Metallurgical Coal increased its operating profit by 74% from 2009 due to higher average realised coking coal prices and record production of high-margin export products. Thermal Coal operating profit decreased by 2% due to the stronger rand, partly offset by a strong recovery in export thermal coal prices. De Beers Diamond Trading Company (DTC) revenue increased by 57% compared with 2009 in response to increased demand for rough diamonds during 2010, primarily driven by increased consumer demand in India and China.

Other Mining and Industrial’s operating profit increased in the Zinc, Scaw Metals and Copebrás businesses owing to higher metal and soft commodity prices, and tightly controlled costs. This was partially offset by lower profits from Tarmac due to difficult trading conditions in the UK and the sale of the majority of Tarmac’s European businesses during 2010. Lower operating profits at Catalão were due to lower niobium grades and overall recoveries.

Group underlying earnings were $4,976 million, 94% higher than 2009, which reflects the operational results above. Net finance costs, before remeasurements, of $244 million were $29 million lower than 2009. The effective tax rate, before special items and remeasurements and including attributable share of associates’ tax, reduced in the year from 33.1% to 31.9%.

Group underlying earnings per share were $4.13 compared with $2.14 in 2009, a 93% increase.

The Group’s results are influenced by a variety of currencies owing to its geographic diversity. In 2010, there was a negative exchange variance in underlying earnings of $687 million. The Group results suffered from the stronger Australian dollar and South African rand, which strengthened by 16% and 15% respectively in 2010 compared with 2009. There was a positive impact on underlying earnings from a significant increase in prices amounting to $3,260 million, reflecting higher prices across all commodities.

Operations considered core to the Group are Platinum, Diamonds, Copper, Nickel, Iron Ore and Manganese (Kumba Iron Ore, Iron Ore Brazil and Samancor), Metallurgical Coal, Thermal Coal, Exploration and Corporate Activities. The Operating profit table reconciles operating profit from core operations to total Group operating profit.

Underlying earnings

$ million Year ended
31 Dec 2010
Year ended
31 Dec 2009
Underlying earnings 4,976 2,569
Underlying earnings per share ($) 4.13 2.14
Profit for the financial year attributable to equity shareholders of the Company 6,544 2,425
Operating special items including associates 253 2,574
Operating remeasurements including associates (382) (734)
Net profit on disposals including associates (1,598) (1,632)
Financing special items including associates 13 7
Financing remeasurements including associates (106) 128
Special items and remeasurements tax including associates 112 (137)
Non-controlling interests on special items and remeasurements including associates 140 (62)

Special items and remeasurements

Total operating special items, including associates, amounted to a charge of $253 million in the year ended 31 December 2010. This included impairment and related charges of $122 million principally relating to accelerated depreciation of $97 million and assets written off within the Platinum segment of $20 million, partially offset by an impairment reversal at Dawson Seamgas (Metallurgical Coal segment) of $22 million. Accelerated depreciation of $73 million has been recorded at Loma de Níquel due to uncertainty over the renewal of three concessions that expire in 2012 and over the restoration of 13 concessions that have been cancelled.

Operating special items also include restructuring costs, principally retrenchment and consultancy costs, relating to amounts incurred in the Other Mining and Industrial segment of $71 million and the Platinum segment of $38 million.

Operating remeasurements, including associates, reflect a net gain of $382 million principally in respect of non-hedge derivatives of capital expenditure in Iron Ore Brazil. The net gain includes net unrealised gains of $144 million, net realised gains of $255 million and other remeasurement losses of $17 million.

Net profit on disposals of $1,598 million, including associates, was recognised, chiefly as a result of the Group’s ongoing divestment programme. The Group completed the disposal of its 100% interest in Moly-Cop and AltaSteel (Other Mining and Industrial segment), generating a profit on disposal of $555 million, its undeveloped coal assets in Australia (Metallurgical Coal segment), generating a profit on disposal of $505 million, and its 100% interest in the Skorpion zinc mine (Other Mining and Industrial segment), generating a profit on disposal of $244 million.

The Group completed the disposal of Tarmac’s Polish concrete products business in March 2010, its French and Belgian concrete products business in May 2010, and its aggregates business in France, Germany, Poland and the Czech Republic in September 2010, resulting in combined net cash inflows of $472 million. Tarmac is included in the Other Mining and Industrial segment.

In addition, net gains were recognised on transactions in Platinum and Thermal Coal. In April 2010 the Group sold its 37% interest in the Western Bushveld joint venture (Platinum segment) for consideration of $107 million. In November 2010 the Group realised a gain of $546 million as a result of the Bafokeng-Rasimone Platinum mine transaction (Platinum segment). In June 2010 the previously announced black economic empowerment (BEE) transaction to dispose of a 27% interest in Anglo American Inyosi Coal (Proprietary) Limited (Thermal Coal segment) was completed. The amount recognised on disposal principally relates to an IFRS 2 Share-based payment charge of $78 million.

Financing remeasurements, including associates, reflect a net gain of $106 million principally due to preference share investments, and an associated embedded interest rate derivative. In addition, financing remeasurements also include net gains on non-hedge derivatives of debt of $17 million.

Special items and remeasurements tax, including associates, amounted to a charge of $112 million. This relates to a tax remeasurement credit of $122 million and a tax charge on special items and remeasurements of $234 million.

  Year ended 31 December 2010 Year ended 31 December 2009
$ million Subsidiaries
and joint
ventures
Associates Total Subsideries
and joint
ventures
Associates Total
Operating special items (228) (25) (253) (2,275) (299) (2,574)
Operating remeasurements 386 (4) 382 638 96 734
Operating special items and remeasurements 158 (29) 129 (1,637) (203) (1,840)
Net profit on disposals 1,579 19 1,598 1,612 20 1,632

Summary income statement

$ million Year ended
31 Dec 2010
Year ended
31 Dec 2009
Operating profit before special items and remeasurements 8,508 4,377
Operating special items (228) (2,275)
Operating remeasurements 386 638
Operating profit from subsidiaries and joint ventures 8,666 2,740
Net profit on disposals 1,579 1,612
Share of net income from associates (see reconciliation below) 822 84
Total profit from operations and associates 11,067 4,436
Net finance costs before remeasurements (244) (273)
Financing remeasurements 105 (134)
Profit before tax 10,928 4,029
Income tax expense (2,809) (1,117)
Profit for the financial year 8,119 2,912
Non-controlling interests (1,575) (487)
Profit for the financial year attributable to equity shareholders 6,544 2,425
Basic earnings per share ($) 5.43 2.02
Group operating profit including associates before special items and remeasurements(1) 9,763 4,957
Operating profit from associates before special items and remeasurements 1,255 580
Operating special items and remeasurements (29) (203)
Net profit on disposals 19 20
Net finance costs (before special items and remeasurements) (88) (28)
Financing special items (13) (7)
Financing remeasurements 1 6
Income tax expense (after special items and remeasurements) (315) (286)
Non-controlling interests (after special items and remeasurements) (8) 2
Share of net income from associates 822 84
  • (1)Operating profit before special items and remeasurements from subsidiaries and joint ventures was $8,508 million (2009: $4,377 million) and attributable share from associates was $1,255 million (2009: $580 million). For special items and remeasurements, see note 5 to the Financial statements.

Operating profit

$ million Year ended
31 Dec 2010
Year ended
31 Dec 2009
Platinum 837 32
Diamonds 495 64
Copper 2,817 2,010
Nickel 96 2
Iron Ore and Manganese 3,681 1,489
Metallurgic Coal 783 451
Thermal Coal 710 721
Exploration (136) (172)
Corporate Activities and Unallocated costs (181) (146)
Operating profit including associates before special items and remeasurements – core operations 9,102 4,451
Other Mining and Industrial 661 506
Operating profit including associates before special items and remeasurements 9,763 4,957
Underlying earnings – core operations(1) 4,454 2,166

Net finance costs

Net finance costs, excluding a net remeasurement gain of $105 million (2009: loss of $134 million), decreased to $244 million (2009: $273 million). This was primarily the result of a reduction in interest and other finance expense of $92 million driven by lower gross debt across the Group, partially offset by the full year effect of interest expense on bonds issued during 2009.

Tax

IAS 1 (Revised) Presentation of Financial Statements requires income from associates to be presented net of tax on the face of the income statement. Associates’ tax is therefore not included within the Group’s income tax expense. Associates’ tax included within ‘Share of net income from associates’ for the year ended 31 December 2010 was $315 million (2009: $286 million). Excluding special items and remeasurements this becomes $313 million (2009: $235 million).

The effective rate of tax before special items and remeasurements including attributable share of associates’ tax for the year ended 31 December 2010 was 31.9%. This was broadly in line with the equivalent effective rate of 33.1% for the year ended 31 December 2009. In future periods, it is expected that the effective tax rate, including associates’ tax, will remain above the United Kingdom statutory tax rate.

Taxation

  Year ended 31 December 2010 Year ended 31 December 2009
$ million (unless otherwise stated) Subsidiaries
and joint
ventures
Associates Total Subsideries
and joint
ventures
Associates Total
Profit before tax 9,109 322 9,431 4,422 234 4,656
Tax (2,699) (313) (3,012) (1,305) (235) (1,540)
Profit for the financial year 6,410 9 6,419 3,117 (1) 3,116
Effective tax rate including associates (%)     31.9%     33.1%

Balance sheet

Equity attributable to equity shareholders of the Company was $34,239 million compared with $26,121 million at 31 December 2009. This increase is primarily the result of profit for the year of $6,544 million and the balance sheet impact of strengthening exchange rates relative to the US dollar (in particular, the rand).

The increase in property, plant and equipment of $4,612 million is primarily the result of additions and foreign exchange gains, partly offset by depreciation, assets transferred to disposal groups and assets disposed as part of the Group’s divestment programme.

Investments in associates on the balance sheet increased by $1,588 million, mainly due to the Group’s $450 million contribution towards De Beers’ $1 billion rights issue in March 2010, improved earnings in both De Beers and Samancor, and the recognition of an associate following the Bafokeng-Rasimone Platinum mine transaction.

Assets classified as held for sale, net of associated liabilities, were $188 million at 31 December 2010 and represent zinc assets.

Cash flow

Net cash inflows from operating activities were $7,727 million compared with $4,087 million in 2009. EBITDA was $11,983 million, an increase of 73% from $6,930 million in 2009.

Proceeds from the sale of subsidiaries and joint ventures were $2,795 million and primarily include proceeds from the sale of Other Mining and Industrial assets, the sale of undeveloped coal assets in Metallurgical Coal and proceeds from the Bafokeng-Rasimone Platinum mine transaction.

Purchases of property, plant and equipment, net of associated derivatives, amounted to $4,994 million, an increase of $236 million. This spend was focused on the four key near term strategic growth projects (Barro Alto, Los Bronces, Kolomela and Minas-Rio).

Net cash used in financing activities was $2,400 million, compared with $1,680 million in 2009. During the year, the Group used cash to repay $2,338 million of short term borrowings, partially offset by the issuance of senior notes during the year.

Liquidity and funding

Net debt, including related hedges, was $7,384 million, a decrease of $3,896 million from 31 December 2009. Cash and cash equivalents, excluding the impact of exchange, increased by $2,857 million, reflecting operating cash flows and disposal proceeds, offset by investments in associates, purchase of property, plant and equipment and a net repayment of borrowings.

Net debt at 31 December 2010 comprised $13,439 million of debt and the closing liability position on related derivatives of $405 million, partly offset by $6,460 million of cash and cash equivalents (including amounts in disposal groups). The debt ageing profile has remained consistent with the prior year, with 89% of the total debt being due after more than one year (2009: 90%). Net debt to total capital(1) at 31 December 2010 was 16.3%, compared with 28.7% at 31 December 2009.

In July 2010 the Group replaced a $2.5 billion facility maturing in March 2012 with a $3.5 billion facility maturing in July 2015.

In September 2010 the Group raised $1.25 billion through the issuance of senior notes (US bonds). The senior note offering comprised $750 million 2.15% senior notes due 2013 and $500 million 4.45% senior notes due 2020.

At 31 December 2010 Anglo American had undrawn committed borrowing facilities of $11.1 billion. In January 2011 the Group repaid $1.1 billion drawn on its $2.25 billion revolving credit facility, maturing in June 2011. The Group subsequently cancelled this facility.

The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate within the level of its current facilities for the foreseeable future.

  • (1)Net debt to total capital is calculated as net debt (including related hedges) divided by total capital. Total capital is net assets excluding net debt.

Group corporate cost allocation

Corporate costs which are considered to be value adding to the business units are allocated to each business unit, and costs reported externally as Group corporate costs only comprise costs associated with parental or direct shareholder related activities.

Corporate costs (after cost allocations) of $181 million (2009: $146 million) were incurred in 2010, an increase of $35 million. The increase was mainly due to insurance cost increases resulting from increases in new claims, the impact of the stronger rand and inflation.

Dividends

Anglo American’s dividend policy will provide a base dividend that will be maintained or increased through the cycle. A final dividend of 40 US cents per share has been declared, thereby establishing Anglo American’s new base annual dividend per share at 65 US cents, subject to shareholder approval at the Annual General Meeting to be held on 21 April 2011.

Taking into account the Group’s substantial investment programme for future growth, its future earnings potential and the continuing need for a robust balance sheet, any surplus cash will be returned to shareholders.

Analysis of dividends

US cents per share 2010 2009
Total dividend 65
Interim dividend 25
Recommended final dividend 40