With the words: “you can’t sit there” I was welcomed to Anglo American’s Johannesburg HQ for the presentation of their latest financial results for the half-year to June. Recently-installed CEO Mark Cutifani made a few jokes about himself being an Australian and his CFO a Frenchman. “You have the smooth and sophisticated – and you have the Frenchman," he quipped. Cutifani suggested he wants more cash flow growth from the business, an almost doubling of the return on capital employed to 15%, and he came over as relaxed, confident, with a clear vision and strategy for the company. “For us it’s about making sure the engine is working and delivering to its potential…..The opportunities for improvement are significant. In terms of our project pipeline, we are constipated,” he said. This is just one of the areas where he is shaking up Anglo, and one wonders whether there had been too much complacency until his arrival? Certainty there has been a shake-up of management which should already make the company leaner and meaner. On South Africa: “the uncertainty conversation is still a legitimate concern … There need to be conversations about regulatory certainty and social cohesion. The relationship has to change. There is a lot of work we have to do.”His best quip was: “I know what a mine looks like, so I have an advantage over many leaders in the industry.” Which woman could he have been thinking of?
NB. ZA Confidential was annoyed last week when we were told the media would be barred from Cutifani’s presentation. And even though it was being beamed from the company’s London HQ, I am glad the company’s spin doctors changed their mind and let me in. He is an impressive presenter, and I walked away impressed.
Craig Pheiffer from Absa Investments:
Anglo American’s interim results were slightly ahead of expectations. Higher costs and weaker commodity prices run across the global mining industry and so it was no surprise that earnings for the period were lower. The market was indeed expecting lower earnings but underlying operating profit and bottom line earnings did beat the consensus earnings outlook. Key to the positive surprise were the better than expected results from thermal coal, diamonds and copper divisions (some driven by lower than expected costs). The net debt position of $9,8bn was better than expected as net operating cash flow surprised and capex for the year was less than forecast. With Anglo American adopting a progressive dividend policy, an unchanged dividend of US32c for the period was probably the best we should have expected given the lower earnings result (underlying operating profit -15% and underlying earnings -28%). New CEO Mark Cutifani has implemented a new organisational structure in a bid to improve organisational effectiveness and eke out more efficiencies in the business (only 11% of Anglo’s operations are consistently meeting their targets). A key driver going forward will be the allocation of capital. Cutifani has taken to heart the market’s concerns around value-destroying M&A and there will be a sharp focus on capital allocation and value going forward. In a pedestrian global growth environment where commodity prices are under pressure, fine-tuning the business model is essentially what will drive the bottom line in the short-term (and pave the way for longer-term returns when the commodity markets do turn). That may still be some time away.
Ron Klipin from SA Stockbrokers:
Mark Cutifani is a man of steel with around 38 years experience in the industry. He is a hands-on operator. He is CEO of Anglo SA as well, which means he is engaging directly with the unions and the government. He is conducting an asset review, with results out in November, and there are no sacred cows. It looks like major changes are still to come at Anglo in terms of cost cutting, delivery and asset optimization
The jury is still out but Anglo now has a leader with balls.
Tweets of the Day:
Estiaan Keuler (@ThatAwesumShowi): *During sex, I suddenly stop moving* She: "What are you doing?" Me: "Shhh its oky, I’ve seen this on Pornhub, its called Buffering."