LONDON, July 24 (Reuters) – Anglo American’s new boss will lay out his stall on Friday after four months in the job and while investors are not counting on a quick fix, they are betting his plans will include cost cuts, more disciplined spending and potential asset sales.
Anglo, the smallest of the major diversified miners, has underperformed its peers, most recently battling labour unrest in South Africa, where it generates half its earnings, and multi-billion dollar cost overruns in Brazil.
Investors piling into BHP Billiton, Rio Tinto and Anglo in 2006 would have made more than one and a half times their money at BHP and seen returns of 65 percent at Rio. But they would have lost money at Anglo – a negative total return of around 16 percent, according to Reuters data.
Anglo posted its first loss in a decade in 2012, a year of hefty writedowns and CEO departures across the industry. According to Citi, last year Anglo’s return on equity, a measure of profitability, hit its lowest level since the 1930s.
So while the market may not be preparing for what some analysts called a “big bang” menu of asset splits or a radical and frequently debated platinum spin-off – all are demanding change from boss Mark Cutifani, an Australian former miner and engineer who joined from bullion producer AngloGold.
“People talk about Anglo pulling a rabbit out of a hat and I wonder if that is overly optimistic given the challenges (Anglo) faces. Even if Mr Cutifani can make progress it will take time,” said analyst Chris LaFemina at Jefferies.
Some problems date back years, including those at its Anglo American Platinum (Amplats) arm which sank to a loss last year after a wave of violent strikes in South Africa. The miner is now pushing through production and job cuts.
Amplats is seen as pivotal to Anglo’s recovery: it contributed $92 million to Anglo’s underlying earnings in the first half, compared to $850 million in the first half of 2008.
But also vying for the top of Cutifani’s to-do list will be Anglo’s $8.8 billion Brazilian iron ore project, Minas Rio, dogged by cost overruns and delays.
“(Cutifani) will focus on where Anglo has been weak – project delivery, capital discipline, cost control, productivity – setting out his stall for the sort of thing he thinks Anglo ought to be able to do,” said analyst Des Kilalea at RBC Capital Markets in London.
“(Former CEO) Cynthia Carroll did quite a lot, but Anglo has been a work in progress for about 10 years. It has never really broken free from the mistakes it made historically.”
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