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Article Excerpt
CYNTHIA CARROLL, CEO, ANGLO AMERICAN PLC: Okay. Good morning, everyone. And welcome to our results presentation for the full-year 2008.
Today, I'll start with a brief overview of our 2008 results, followed by a detailed look at some of the key measures we've taken to ensure that Anglo American is well positioned through the current downturn. Rene will then follow and go through the Group's financials. And then I'll briefly cover our longer term growth options and outlook. We'll then be happy to take questions.
2008 was a record year, but it was a year of two halves. The first half produced the strong performance from all of our businesses. But in stark contrast, the second half saw most metal prices decline severely as the global economic downturn accelerated. Despite this, we generated record operating profit of $9.8 billion.
But before I review our operating results, I'd like to outline some of the year's highlights. I'm delighted to announce that our drive for zero harm across our operations is starting to make real progress, and I'll update you on the Group's safety performance in a few minutes.
As we reported at the half-year, we were awarded new order mining rights across our South African mining operations. This provided an even stronger platform for the Group's long-term development project in South Africa, and for the many black empowered businesses.
We have driven our asset optimization program through the organization, and this morning we announced a new $1 billion AOS profit improvement target by 2011.
We have continued to focus on our coal mining businesses, and have made further disposals. We've sold Namakwa Sands, and a 26% interest in each of Black Mountain and Gamsberg, Tarmac Iberia, and our stake in Shenhua. We have also reduced our stake in the AngloGold Ashanti to 11.8% since the start of this year.
During 2008, we also advanced our long-term iron ore growth strategy by securing 100% ownership of the multi-phase Minas-Rio iron ore project in Brazil.
But to position Anglo American through the current market -- difficult market environment, we've taken a number of decisive actions. These have been done to ensure that we're well placed as a business to benefit from the next upturn in the cycle.
First, we've reduced our CapEx for 2009 by 50% to $4.5 billion. Second, we have accelerated many of our cost reduction programs, and I'll cover these later. And finally, we have made the extremely difficult decision to suspend the dividend. We believe it's absolutely critical to safeguard our balance sheet flexibility while preserving the Group's growth options. We believe this is the responsible and the right course of action.
As I've said, this wasn't an easy decision and we clearly recognize the importance of dividends to our shareholders. But given the horrendous market conditions which are likely to materially impact our 2009 earnings, any other decision would have been wrong. It would have put our balance sheet under undue pressure. We are committed to resuming dividend payments as soon as market conditions allow.
I'd like now to return to the all important subject of safety. I'm pleased to report that last year we saw a major safety improvement across the Group. In 2008, we saw the number of fatalities at our managed operations reduced by one-third, and our lost time injury frequency rate saw a year-on-year improvement of 17%.
We had extended periods of incident-free safe production. Some of our operations, in particular, have excelled and I'd like to mention just a few of those.
Anglo Platinum's Union Mine in South Africa has achieved more than 6 million fatality-free shifts. The Barro Alto nickel project in Brazil has worked for 966 days without a lost time injury. And again, in Brazil, Anglo Ferrous Brazil has recorded 3.5 million hours without a lost time injury.
All of these achievements are the result of improved safety practices in 2007, and a renewed commitment to a new level of safety performance. They're also being driven by the safety initiatives that we're rolling out to ensure a systematic approach to managing safety and preventing accidents. I know there's a still long way to go, but we are making great strides in the right direction.
I now would like to quickly review our operations. And as I said at the start, it was an excellent year. Most business units performed strongly, but our world started to change dramatically in July. That was when the commodity markets went into freefall, and I'll come back to this a bit later.
Looking at each of the businesses, Platinum delivered an operating profit of $2.2 billion. That was a 17% reduction due to lower sales volume, planned lower ore grades, and higher input cost. On the production side, the second half of the year saw a strong improvement on the first half. The second half produced 1.39 million ounces for a total of 2.39 million ounces.
Like the rest of the Anglo American Group, Anglo Platinum is taking measures to adjust the business to the current market. Reduced CapEx, reduced headcount, further cost cutting initiatives, and lower input costs are all planned for 2009. These measures are expected to maintain positive margins at the planned reduced production level of 2.4 million ounces in 2009.
Anglo Platinum expects the platinum market to be balanced in 2009. This should ensure a price above $1,000 per ounce on average for the year. Falling platinum production, stock level, and the anticipated fall in industrial demand are expected to be offset by increased jewelry and investment demand.
We will continue to monitor the price and demand, and we will make further production cuts as necessary. The long-term fundamentals are sound in this business. Platinum remains a strategic industrial and premier jewelry metal.
In Diamonds, the Group's share of De Beers operating profit increased 5% to $508 million. This was driven by strong first half sales at the Diamond Trading Company and [Element Six]. Production of 48.1 carats was 6% lower than 2007, and is expected to be reduced significantly in 2009.
In Base Metals, despite higher production at Los Bronces, Mantoverde and Collahuasi, operating profit of $2.5 billion was 42% lower than 2007. This was due to a number of factors. These included sharply lower base metal prices, a $591 million loss on provisional pricing of copper, lower sales volumes, and increases in key input costs.
But any improvement in demand would support a sustained price recovery, helped by persistent supply trends -- supply side constraints in the case of copper, and the closure of operations and...
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