Anglo American plc Returns To Profit

Anglo American plc (LON: AAL) unveils net-profit of £1bn after losses 12 months ago.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 14 February, 2014 10:55 am GMT

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The shares of Anglo American (LSE: AAL) (NASDAQOTH: AAUKY.US) increased 1% to 1,549 this morning, after the miner announced a 6% growth in underlying profit to £4bn, boosted by currency gains which offset weaker commodity prices. The stock had previously dropped 24% over the last 12 months.

The company said a sharp fall in the South African rand, where it has a number of major projects, as well as operating improvements across its copper, coal and diamonds businesses, led to the improvement in profit. The group posted a pre-tax profit of £1bn compared with a loss of £103m the year before.

Anglo American’s single largest investment, the Minas-Rio iron ore project in Brazil, is 84% complete and remains on track to deliver its first shipment by the end of 2014. Total capital expenditure increased from £3.6bn to £3.8bn. In 2014 capital expenditure is again expected to increase to between £4.2bn and £4.5bn.

The chief executive, Mark Cutifani, commented:

“We are making headway on our strategy that sets the path for Anglo American to deliver sustainable returns to shareholders. We are doing so through a change programme called ‘Driving Value’, which has focused on revitalising our business and laying the foundation for long-term success”

“We have set demanding but achievable targets and we are determined to meet them by working efficiently and effectively to drive significantly greater value from our asset base. We are seeing early progress, including in our Platinum and Metallurgical Coal businesses, across our Commercial initiatives and in reducing early stage project evaluation costs by $200 million in 2013 alone. Our pathway to increase margins and returns by 2016 is clear.”

Today’s results statement revealed earnings equivalent to 125p per share and a dividend equivalent to 51p per share.

After this morning’s price movement the shares may therefore trade on a P/E of 12 and offer a potential income of 3.3%

The decision to ‘buy’ — based on those ratings, today’s results and the wider prospects for the mining sector — is, of course, entirely your decision.