LONDON Global miner Anglo American (AAL.L) said an overhaul of its business should gather pace in the next two years after initial improvements at its copper and iron ore mines helped annual operating profit beat forecasts.
However, a $1.9 billion impairment charge related mainly to its Barro Alto nickel business in Brazil and its strike-hit platinum division in South Africa, meant Anglo, the smallest of the major diversified miners, made its second consecutive annual net loss last year.
After years of sector-lagging returns, Anglo has embarked on an initiative to improve the operation of major mines under Chief Executive Mark Cutifani, who joined the company less than a year ago.
Cutifani said on Friday that most of the improvements were still to come.
"As we go into 2015-2016 we expect a continuing improvement and will start to really step up the plate with the commissioning of some of the new production and a turnaround that is going on at Kumba (KIOJ.J)," Cutifani said, referring to the company's South African iron ore division.
He warned more strikes in South Africa and a rising supply of metals such as iron and copper weighing on prices were risks for the current year.
Anglo reported a 6 percent rise in 2013 underlying operating profit to $6.6 billion, ahead of a $5.6 billion Thomson Reuters I/B/E/S analysts' forecast and a consensus forecast provided by the company of $6.3 billion. The net loss narrowed to $961 million compared with a $1.5 billion loss in 2012.
Price declines for many of the commodities Anglo produces were offset by higher output.
Last month Anglo reported a rise in fourth-quarter output of all its main metals, a sign efforts to improve performance at its mines are starting to pay off.
A weaker South African rand also helped, as Kumba and Anglo's other operations in South Africa pay their costs in rand but sell their products in dollars.
"The robust fourth-quarter production results followed by strong financial performance increases our confidence in efficiency measures taken by the company," Citi analysts said in a note to clients.
"However we think the company's balance sheet remains under pressure," the analysts said.
Anglo's net debt rose to $10.7 billion at the end of December from $8.5 billion a year earlier and Anglo forecast it would peak in 2015 at around $15-16 billion.
The company's spending is expected to peak this year at $7.0-7.5 billion from $6.3 billion in 2013, mainly due to the costs of its Grosvenor coking coal project in Australia and the large Minas Rio iron ore project in Brazil.
The $8.8 billion Minas Rio has been a sore spot, due to delays and cost overruns, but Anglo said it was now 85 percent complete and on track to deliver its first iron ore shipment by the end of this year.
Shares in Anglo American, which have gained 20 percent in the last month, were down 1.3 percent by 1557 GMT on Friday.
SOUTH AFRICA STRIKES
Anglo American's iron ore division Kumba, by far the largest contributor to group profit, posted a 24 percent jump in underlying full-year earnings earlier this week.
That was a sharp recovery from a wave of illegal strikes which hit Kumba and South Africa's mining sector in 2012.
However industrial action, particularly related to platinum, remains a concern.
Anglo's platinum division Amplats (AMSJ.J), the world's largest producer of the precious metal, swung back to profit in 2013 but its recovery is threatened by new labor unrest.
Anglo is hammering out a restructuring plan for Amplats, which includes mothballing unprofitable plants and cutting thousands of jobs.
Members of South Africa's AMCU union have said they will continue with a wage strike that has hit output at the world's three biggest platinum producers until employers meet their demands.
Anglo, grappling with rising costs, lower prices and declining productivity, argues that accepting the hefty salary increases demanded by the union would make its business unprofitable.
Operating profit at Anglo's majority-owned diamond miner De Beers rose 112 percent as output increased.
(Editing by Erica Billingham)