* H1 underlying operating profit $3.3 billion vs $3.1
* Cuts 2013 spending by $1 billion
* Targets cash flow uplift by 2016 of $1.3 billion, ROCE of
over 15 percent
* Shares up 1 percent
(Writes through after analyst call, adds Minas Rio detail,
By Clara Ferreira-Marques
LONDON, July 26 Anglo American's new
boss laid out his blueprint for a turnaround of the
underperforming miner on Friday, vowing to cut costs, halve a
$17 billion project pipeline and revive lagging mines to boost
cash and returns by 2016.
A straight-talking Australian engineer who joined Anglo from
South African gold producer AngloGold in April, Mark
Cutifani outlined his first plans alongside better-than-expected
half-year results that still showed a 15 percent drop in profit.
Anglo, the smallest of the major diversified miners, has
trailed behind its peers for much of the past decade, most
recently battling labour unrest in South Africa, where it still
generates half its earnings, and multi-billion dollar cost
overruns in Brazil.
"Are we tapping the potential we have as a group? The answer
is no," Cutifani told investors and analysts, branding Anglo's
performance as "unacceptably poor".
"Over the last eight (quarters) only 11 percent of
operations are delivering consistently against their targets -
we have to up that."
The shake-up offered no quick fix for woes that have
accumulated over decades at Anglo, or specific solutions for
either of its two worst headaches - South African platinum and
the much-delayed Minas Rio Brazilian iron ore project.
But analysts welcomed plans to streamline a cumbersome
corporate structure, cut 2013 capital spending by $1 billion -
largely from Minas Rio - and do more to get better prices for
its commodities by boosting marketing. That last element alone
should provide an annual $500 million boost.
"It is not about wholesale or radical changes at the
operating level, but it is about introducing a much more
disciplined approach to planning, to execution and delivery on
the objectives we have," Cutifani said.
Anglo has seen total capital employed more than double since
2007, but the rate of return on that capital has more than
halved. It will now target a return on capital employed (ROCE) -
a measure of the value a company gets from its assets - of 15
percent by 2016 - compared to 11 percent in the first half and 8
percent for the year to date on spot prices.
To get there, it will need to boost its cash flow by an
annual $3.5 billion - $1.3 billion of that was detailed on
Friday to include cutting overhead costs and slashing by a third
the amount spent on projects not yet approved by the board.
Cutifani did not detail the remaining $2.2 billion, though
much will come from improving performance at its mines, and even
asset sales. Businesses, he said, would have to "pay their way".
Analysts said there remained questions around divestments,
execution and Anglo's balance sheet as debts rise. Anglo shares
climbed by as much as 2 percent against a flat FTSE 100 index in
London before settling 0.9 percent up at 1210 GMT.
"There has been good progress on the cost cutting. The key
issue going forward will be to see that is realised," analyst
Paul Gait at Sanford Bernstein said.
Anglo, like many of its peers, said it would also consider
opportunistic asset sales, though Cutifani said there would be
no "bazaar sale". He confirmed the group was searching for a
partner at $8.8 billion Minas Rio, adding there had been a lot
of inquiries, though having "stubbed its toe" on the project
Anglo was now not under pressure to sell. The financial woes of
existing partner Eike Batista, should he fail to pay his share,
would cost Anglo a maximum of $300 million, he said.
Cutifani will also seek to simplify the group by cutting its
10 business units to 6 - undoing changes brought in by previous
chief executive Cynthia Carroll. That will involve merging
thermal and metallurgical coal together, and base metals.
Cutifani's former right-hand man at AngloGold, Tony O'Neill,
also joins Anglo as group director for - among other things -
mining technology, business performance, asset optimisation and
Anglo, the first of the diversified majors to publish
results, said underlying operating profit fell in the six months
to $3.3 billion, ahead of a consensus estimate of $3.12 billion.
Underlying earnings per share (EPS) came to $0.98.
Anglo held its interim dividend at 32 cents per share.
(Reporting by Clara Ferreira-Marques; Editing by Patrick