Wrap Text
AGL - Anglo American plc - De Beers Leads Diamond Recovery with Strong Sales
and Profit Growth
Anglo American plc
Incorporated in the United Kingdom
(Registration number: 3564138)
Short name: Anglo
Share code: AGL
ISIN number: GB00B1XZS820
("Anglo American plc" or "the company")
De Beers Leads Diamond Recovery with Strong Sales and Profit Growth
Strong price recovery, continued focus on costs, and exceptional demand in
China and India drive turnaround
2010 snapshot
Financial Summary
US Dollars millions
31 December 2010 31 December 2009
Total sales 5 877 3 840
EBITDA 1 428 654
Underlying earnings 598 (220)
Profit before finance 1 049 318
charges and taxation
Free cash flow 943 35
Net interest bearing 1 762 3 200
debt
2010 Operating Performance
2010 saw robust growth as De Beers continued to recover from the 2009
recession. Strong price growth throughout the year, a continuing focus on
cost efficiencies and cash management, together with strong demand from DTC
Sightholders combined to make De Beers highly cash generative and profitable.
* Total sales by the De Beers Group were US$5.88 billion for the full
year, a 53 per cent increase compared with 2009. Sales of rough diamonds
by the DTC were US$5.08 billion (2009: US$3.23 billion).
* EBITDA grew to US$1.43 billion, an increase of 118 per cent over 2009
(US$654 million).
* Strong demand drove a rebound in the prices of DTC rough diamonds by an
average of 27 per cent over the year to levels which are above those
which prevailed prior to the onset of the economic crisis.
* A considerably reduced cost base enabled De Beers to be highly cash
generative with a free cash flow of US$943 million (2009: US$35
million).
* Carats recovered in 2010 amounted to 33 million (2009: 24.6 million), an
increase of 34 per cent.
* Following subscription by its shareholders of US$1 billion in additional
equity, the Group successfully concluded a complex refinancing of all of
its international and South African debt on satisfactory terms. The
tenors of all facilities have been extended to August 2013.
* At the end of 2010, De Beers` third party (non shareholder) debt was
US$1.76 billion (December 2009: US$3.20 billion), and gearing on this
debt, excluding US$790 million in shareholder loans, was 29.5 per cent
(December 2009: 52.2 per cent).
DIRECTORS` COMMENT
2010 was an extraordinary year that saw De Beers rapidly move from
stabilisation to strong recovery. The price of rough diamonds has recovered
strongly as confidence returned to most parts of the diamond pipeline.
Notwithstanding this, the industry is not back to pre-recessionary levels in
terms of production or sales and a high degree of global uncertainty remains.
While restocking picked up throughout the year, it was also clear that
consumer demand rebounded, as evidenced by the extraordinary growth in China
and India and the better than expected retail performance in the US during
the Christmas buying period.
As demand from the industry increased, so too did De Beers` production from
its wholly-owned and joint venture operations in Botswana, South Africa,
Namibia and Canada. De Beers recovered approximately 33 million carats in
2010 compared with approximately 24.6 million carats in 2009. In Botswana,
Debswana commenced the Cut-8 expansion project at Jwaneng mine. Cut-8
represents the largest ever investment in Botswana and is expected to yield
100 million carats worth approximately US$15 billion over the life of the
mine, which will be extended until at least 2025.
De Beers continued to expand its proprietary diamond brand, Forevermark,
throughout Asia. Forevermark is now available in 348 doors globally (a 40
percent increase on the beginning of 2009), and will continue to expand in
the rapidly growing Chinese market in the year ahead. Forevermark, which
will launch into India in the first quarter of 2011, has commenced an
exploratory phase in the US, yielding positive early consumer research, and
will continue to assess the market opportunities during 2011.
During 2010, all operations within the De Beers Family of Companies focused
on making the savings achieved during 2009 a permanent part of De Beers`
operating culture. Through prudent cash management and a continuing focus on
costs, De Beers was able to maintain its new cost base, contributing to
improved margins. Additionally, Debswana began an operational review to
identify efficiency improvement opportunities to be delivered over the next
three years improving returns to the Government of the Republic of Botswana
and De Beers.
In March, following a successful US$1 billion subscription for additional
equity shares by its shareholders, De Beers concluded the refinancing of all
its international and South African debt on satisfactory terms, extending the
tenor of facilities to 2013. During November, the Group achieved normalised
terms in respect of debt and EBITDA measurements, some two years earlier than
planned - a consequence being that more flexibility now exists in respect of
the pursuit of growth strategies.
At the end of 2010, net debt excluding shareholder loans, had fallen to
US$1.76 billion compared with US$3.20 billion at the end of 2009.
While the Directors remain cautious about the diamond market in 2011,
continued positive growth is expected, albeit at a lower rate. The world is
not yet back to where it was prior to the onset of the economic crisis, and
risks to growth remain. For the foreseeable future, continued recovery in
global economic outlook and strong retail confidence are expected to underpin
positive growth in consumer demand for diamond jewellery in 2011. After a
better than expected Christmas retail season, the US market is expected to
continue its recovery and the exceptional growth seen in China and India is
expected to be sustained. Global economic expansion and retailer sentiment
are supportive of further DTC sales growth in 2011, during which time total
production for the De Beers Family of Companies is expected to reach 38
million carats, approaching full production which will, as planned, be
achieved in 2012.
In the longer term, the supply and demand dynamics of diamonds remain
attractive. Diamonds are a finite resource and western consumer markets are
recovering at the same time as demand growth in the emerging markets of China
and India is expanding rapidly.
Diamond Equity
De Beers is committed to the highest ethical and environmental standards so
that consumers can be proud of the diamonds that they own and wear.
As it has done since its inception, De Beers continued to support the
Kimberley Process. Furthermore, the DTC has offered guidance to its
Sightholders on the identification of potentially illegal and unethical
exports from Zimbabwe`s Marange region. While De Beers has no mining
interests in Zimbabwe, the group supports the ongoing dialogue between the
Government of Zimbabwe and the Kimberley Process Chair.
For a more detailed look at the Operating and Financial Highlights for 2010
please visit De Beers` Operating & Financial Review online at
http://www.debeersgroup.com/ofr2010
De Beers announces final results as follows:
De Beers Societe Anonyme
Consolidated Income Statement
for the year ended 31 December 2010
(Abridged)
US Dollar millions
Year Year
31 31
December December
2010 2009
5 877 3 840
Total sales (Note 1)
Less: cost of sales 4 983 3 513
Gross profit 894 327
Less: operating costs (Note 2) 416 402
Operating profit (loss) 478 (75)
Add:
Trade investment income 517 298
Foreign exchange gains 44 95
Profit before finance charges 1 039 318
and taxation
Less: net interest charges 176 225
(Note 3)
Profit before taxation 863 93
Less: taxation 225 125
Profit (loss) after taxation 638 (32)
Less: interests of outside 34 (1)
shareholder in subsidiaries
604 (31)
Own earnings (loss)
Add: share of retained (loss) (6) (6)
income of joint ventures
Net earnings (loss) before once- 598 (37)
off items
Once-off items (Note 4) (52) (706)
Net earnings 546 (743)
Underlying earnings (loss) 598 (220)
(Note 5)
EBITDA 1 428 654
Consolidated Balance Sheet
31 December 2010
(Abridged)
US Dollar millions
31 31
December December
2010 2009
Share capital and reserves 3 279 1 943
Interests of outside 144 229
shareholders
Total shareholders` equity 3 423 2 172
Shareholders` loans 790 759
Other net interest bearing 1 762 3 200
debt*
Other non-current liabilities 972 805
6 947 6 936
Fixed assets 2 908 2 795
Other non-current assets and 3 012 3 023
investments
Net current assets 1 027 1 118
6 947 6 936
Other net interest bearing debt includes short-term borrowings and is net of
cash
De Beers Societe Anonyme
Summary of cash flows
for the year ended 31 December 2010
US Dollar millions
Year Year
31 31
December December
2010 2009
Cash available from operating 1 160 226
activities
Less: investing activities
Fixed assets - stay-in-business 204 150
- expansion 31
Investments 13 10
217 191
Free cash flow 943 35
Less: financing activities
Ordinary dividends (including 6 105
payments to outside shareholders)
Cash flow 937 (70)
Add (Deduct):
Shareholder equity subscription / 1 000 553
advances
Redemption of preference shares (107)
Non cash movements in debt and (392) (131)
movements attributable to changes
in exchange rates
Decrease in other net interest 1 438 352
bearing debt
Notes
1. Total sales of natural rough 5 082 3 233
diamonds (including joint
ventures)
2. Operating costs include:
- Exploration, research and 96 93
development
- Sorting, selling and 133 131
marketing
- Group technical services 187 178
and corporate overheads
416 402
3. Net interest charges include 11 11
preference dividends amounting to
4. Once-off items comprise:
Costs in respect of a class 1
action settlement agreement
Costs in respect of restructuring 28 25
of debt
Impairment in respect of Canadian 696
mining assets
Net costs in respect of 24 (16)
restructuring
52 706
5. Underlying earnings* (loss) is
calculated as follows:
Net earnings (loss) before 598 (37)
once-off items
Adjusted for special items
and re-measurements:
Asset disposals (net) (2) 6
Re-measurement gains on 2 (189)
financial instruments (net)
Underlying (loss) earnings 598 (220)
* Underlying (loss) earnings comprise net earnings attributable to
shareholders adjusted for the effect of any once-off or special items and re-
measurements, less any tax and minority interests. Special items include
closure costs, exceptional legal provisions and profits and losses on the
disposal of or impairments of assets. Special items which are considered to
be significant relative to the results are categorised as being once-off. Re-
measurements are recorded in underlying earnings in the same period as the
underlying transaction against which these instruments provide an economic,
but not formally designated, hedge.
De Beers Societe Anonyme
Other information
Year Year
31 31
December December
2010 2009
Exchange rates
US$ / ZAR average 7.37 8.25
US$ / ZAR period end 6.63 7.43
US$ / C$ average 1.03 1.15
US$ / C$ period end 1.01 1.06
Production summary
Tons Treated 000`s:
DBCM 17 069 11 321
Debswana 24 439 17 845
De Beers Canada 3 602 2 466
Namdeb 9 434 3 477
54 544 35 109
Carats recovered 000`s
DBCM 7 556 4 797
Debswana 22 218 17 734
De Beers Canada 1 751 1 140
Namdeb 1 472 929
32 997 24 600
Contacts:
De Beers London:
Lynette Gould +44 20 7 430 3509 / +44 (0) 7740 393 260
De Beers South Africa
Tom Tweedy +27 11 374 7173 / +27 (0) 83 308 0083
Visit the official De Beers group website for more information on the Company
and where you can view and download a selection of images -
www.debeersgroup.com .
About De Beers:
De Beers, established in 1888, is the world`s leading rough diamond company
with unrivalled expertise in the exploration, mining and marketing of
diamonds. Together with its joint venture partners, De Beers operates in more
than 20 countries across six continents employing more than 16,000 people,
and is the world`s largest diamond producer with mining operations across
Botswana, Namibia, South Africa and Canada. As part of the company`s
operating philosophy, the people of De Beers are committed to Living up to
Diamonds by making a lasting contribution to the communities in which they
live and work. In the countries in which we have mining operations, this
means carrying out profitable business, whilst at the same time helping
Governments achieve their aspirations of turning natural resources into
shared national wealth. De Beers encourages sustainable working to ensure
long-term positive development for Africa, and returns more than US$2.0
billion to the continent every year. For further information about De Beers
visit www.debeersgroup.com .
11 February 2011
Sponsor: UBS South Africa (Pty) Ltd
Date: 11/02/2011 09:16:46 Supplied by www.sharenet.co.za
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