Mining stocks have seen a few losses recently, but Anglo American (LSE: AAL) bucked the trend Friday (20 February) as its shares edged up around 2% in early trading, on the back of what looked like generally positive full-year results.
De Beers soured the figures a bit, with a $2.3bn writedown for the struggling diamond business. Synthetic stones are increasingly seen as good enough these days, it seems, as Anglo said “we are progressing the separation of De Beers.” It’s the third cut in the De Beers valuation in the past three years, and it contributed to an overall net loss of $3.7bn.
Other than that, it’s been a “transformational year,” we were told. CEO Duncan Wanblad said Anglo “set the course for the future of our company by agreeing to merge with Teck to form a global critical minerals champion — as Anglo Teck.”
Are Anglo American shares set for a bright future now?
Earnings steady, dividend cut
The overall results came in better than expected. Revenue from continuing operations rose 5% to $18.5bn. And underlying EBITDA improved slightly to $6.4bn. Last year’s attributable free cash outflow of $209m reversed direction. And this time we saw an inflow of $790m.
Net debt is down, by $2.1bn to $8.6bn. The company attributed that, in part, to lower capital expenditure and disposals. And we should see further progress as disposals continue.
We’re not back to a positive bottom-line yet, as the previous year’s loss per share of $2.53 widened to $3.30. But that’s a bit better than hoped. And forecasters expect a return to positive earnings per share in 2026.
Despite that loss, Anglo did still announce a dividend — though at $0.23 per share it’s down 64%. It’s a yield of just 0.47% on the previous day’s close. So there’s some way to go to get back to any kind of meaningful attraction for income seekers.
Back on track?
This really could mark the turnaround point that shareholders have been waiting for. So why only a cautious share price response after these results? Well, it seems the upbeat news had been well anticipated.
Anglo American shares had already climbed 50% in the past 12 months. And they’ve more than trebled in price over 10 years, on the back of soaring demand. Prices of metals, including iron and copper, are up — along with a whole range of other key commodities.
Fully valued now?
The stock’s recent rise doesn’t make it appear screamingly cheap now. Even forecasts out as far as 2027 indicate a price-to-earnings (P/E) ratio of 20. Dividends should be better by then — but with a yield expected of less than 2%, based on the current share price.
Forecast valuations, however, do only go out a couple of years. We typically need to look a fair way further ahead in what is a notoriously cyclical business — and I do think we could have further share price gains here. But I see more attractive valuations elsewhere in this sector, which investors might want to consider.
