Anglo American PLC (LON:AAL) saw its 2017 underlying earnings jump by 45% as its free cashflow surged and it halved its net debt reflecting production efficiencies at the mining giant, although its shares retreated as the mining sector fell on US rate hike worries.
For the year ended 31 December 2017, the FTSE 100-listed miner reported adjusted underlying earnings (EBITDA) of US$8.823bn, up 45% on the previous year’s US$6.07bn.
READ: Anglo American boosts overall production by 6%
The group saw its free cash flow increase by 93% to US$4.9bn, and it halved its net debt to US$4.5bn.
Mark Cutifani, Anglo American’s chief executive said: "These strong financial results benefit from transformed productivities and efficiencies across our business - including a 28% productivity improvement in 2017 alone - together with our portfolio upgrading and improved prices for many of our products.”
He added: "While we have already driven a material operational turnaround, we believe there is significant additional upside within the business both through further operating gains and from selected organic growth options.
“As part of how we run the business, we are therefore targeting an additional $3-4 billion annual run‑rate improvement by 2022 from production volumes, productivity improvements and cost reductions."
The company is paying an increased dividend of 54 US cents per share for the second half, equal to 40% of underlying earnings for the period.
“What a difference two years makes”
Nicholas Hyett, equity analyst at Hargreaves Lansdown commented: “Two years ago Anglo was in pretty dire straits. Debt was almost three times cash profits, at a fraction below $13bn, while earnings were tumbling and the commodity crash that pulled the rug from under the group showed little sign of relenting.”
He added: “What a difference two years makes. Net debt of $4.5bn is even lower than the market had expected and profits are soaring.
“Of course some of this is money for nothing - resurgent commodity prices have added $2.4bn to cash profits and are totally outside the group’s control.
“Nonetheless management have delivered significant improvements in operating performance, with cost cutting and productivity gains more than offsetting the inflationary headwinds that are buffeting the sector.”
In early trading, however, Anglo American shares were down 2.6% at 1,749.4p.