Anglo American is to slash its global workforce by 19,000 and scrap its dividend, as it targets cost savings of $2bn (£1.4bn) amid a global slump in demand for the industrial use of minerals and metals.
The mining giant yesterday said it would axe a further 9,000 jobs in 2009, in addition to the 10,000 previously unveiled at AngloPlatinum in South Africa, to bring it in line with lower production and growth plans. But Anglo American declined to comment on where the 9,000 job cuts would fall.
The group’s pre-tax profit fell by 2.8 per cent to $8.6bn for the year ended 31 December. Anglo American warned of a sharp fall in demand in the second half from the accelerating global industrial downturn.
The results from Anglo American followed similarly gloomy updates from other mining companies this year, including Xstrata and Rio Tinto, which have both unveiled different plans to raise capital to pay down debts.
Cynthia Carroll, the chief executive of Anglo American, said: “From global automotive production to construction activity in emerging markets, there was a marked contrast between the first and second halves of 2008, when commodity prices fell sharply. As we begin 2009, the economic outlook remains weak, with limited visibility, and we are continuing to experience volatility and downward pressure on commodity prices.”
Of its core divisions, base metals, platinum and industrial minerals were the worst performers. Its platinum operation, AngloPlatinum, posted a 17 per cent fall in operating profit to $2.5bn. The world’s largest producer of the metal is being hit by higher input costs and a fall in demand for platinum, which is used in cars’ catalytic converters. Last week, AngloPlatinum said it was cutting 10,000 jobs in South Africa.
Anglo American’s base metals business delivered a 17 per cent fall in operating profit to $2.2bn, due to “sharply lower” copper, nickel, zinc and lead prices, lower overall sales volumes and a rise in input costs.
Operating profit at Anglo American’s UK industrial minerals’ business, Tarmac, tumbled by 52 per cent to $228m, as demand for materials, such as sand and gravel, suffered from the slump in the UK housing market. But its ferrous metals and coal operations generated stronger performances, boosted by record production of coal and iron ore.
The mining giant’s coal operation reported a record operating profit of $2.2bn, up 105 per cent, over the year, primarily driven by high prices for thermal and metallurgical export coals and higher production.
Following its full-year results and dividend cut, 16.9 per cent was wiped off Anglo American’s market value, as its shares fell by 209p to 1,090.5p.
Of the $2bn cost savings it hopes to produce by 2011, Anglo American said it plans to deliver $1bn from its asset optimisation programme and the remainder from its procurement and shared services initiatives.
To preserve cash in other areas, Anglo American has halted its share buy-back programme. It is also slashing its capital expenditure for 2009 by more than 50 per cent to $4.5bn. Ms Carroll said: “We have taken decisive action to position Anglo American through the downturn.”
Anglo American is suspending dividend payments, which means its full-year dividend will be entirely made up of the interim dividend of 44 cents a share. Johan Rode, an analyst at Citi, said: “We believe this [final dividend cut] was expected by the market, but may be taken as a sign of cash-flow weakness. Net debt was slightly higher than forecast of $10.3bn at $11bn.”