Company Profile - Anglo American - Q1 2013


SWOT Analysis

Strengths

  • Anglo American's net income came in at US$6.2bn in 2011, above the five-year average of US$5.5bn due to elevated metal prices and increased production.

  • As one of the world's largest mining companies, Anglo American has the capital and expertise to develop some of the largest deposits. Indeed, the company is developing the Collahuasi mine in Chile which could become the largest copper mine in the world by 2015.

  • The company's diversified portfolio leaves it relatively insulated from fluctuations in the price of one metal.

  • Anglo is looking to increase its exposure to copper, one of the metals we expect to outperform over the medium term.

Weaknesses

  • Unlike Rio Tinto and BHP Billiton, the company possesses little of its own energy assets and thus is more susceptible to elevated oil prices, which we expect to remain in place in 2013.

  • Out of the largest miners, Anglo American has the greatest presence in the platinum and palladium sectors, where we expect oversupply and weakened demand to weigh on prices over the next few years.

Opportunities

  • Anglo plans to significantly expand coal output in South Africa, thus benefitting from expected increases in coal demand from China and India.

  • Out of the majors, Anglo American is the least exposed to our expectation for a slowdown in Chinese economic growth given its lesser reliance on iron ore.

Threats

  • Anglo American's profits at its projects in Chile, Peru and Brazil could be reduced by proposed increases to taxes on mining companies' profits in those countries.

  • In the short term, Anglo's copper output could decline due to falling grades at the Collahuasi copper mine in Chile, which accounts for 35.2% of the company's copper production.

  • The proposed merger of Glencore and Xstrata could leave Anglo exposed as a potential takeover target from one of the majors.

  • We are particularly bearish on the outlook for South Africa's mining industry given wage increases and government regulation. Anglo is particularly exposed to this as South Africa accounts for almost half of the company's revenues.

Company Overview

Anglo American is one of the world's largest diversified mining groups. Its portfolio of mining assets and natural resources includes precious, base metals and bulk commodities in 45 countries across all continents. The company's platinum and palladium operations are handled through its subsidiary Anglo Platinum, which is the world's largest producer of platinum and second largest palladium miner. The company is also a significant player in the diamond market following its acquisition of De Beers in 2011.

Strategy

Anglo American has a key advantage over its peers due to its highly diversified portfolio and relatively limited reliance on China and iron ore, two areas that we are less positive towards than market consensus. In addition, Anglo American has expanded its diamond sector and is set to benefit from continuing growing demand for diamonds in China and India. The company is also set to benefit from its coal assets, as we expect Asian demand to remain robust, but growth in Indonesia and Australia to decline, leading to a tightening market.

Financial Data

2006 2007 2008 2009 2010 2011
Source: BMI, Bloomberg
Revenue (US$bn) 25.0 25.5 26.3 20.9 28.0 30.6
- % chg y-o-y -15.1 1.9 3.3 -20.7 34.0 9.4
EBITDA (US$bn) 9.7 10.4 10.0 6.5 10.3 11.9
- % chg y-o-y 26 7.1 -4.2 -35 58 15
Net Income (US$bn) 6.2 7.3 5.2 2.4 6.5 6.2
- % chg y-o-y 76 18 -29 -53 170 -6.1
Profit Margin (%) 24.8 28.7 19.8 11.6 23.4 20.2
Debt to EBITDA 0.6 0.8 1.4 2.2 1.3 1.1
P/E Ratio 13.9 15.1 5.2 21.7 9.6 7.2

Company Details

  • Anglo American plc

  • 20 Carlton House Terrace,
    London,
    SW1Y 5AN,
    UK

  • +44 (0) 20 7968 8888

  • www.angloamerican.com

This article is tagged to:
Sector: Mining
Geography: Venezuela, South Africa, Venezuela, South Africa, South Africa

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