Anglo American restructuring plan includes asset sales, consolidation

By Lisa Kerner

Charlotte, N.C., Dec. 8 – Anglo American plc’s “accelerated” and “radical” restructuring plan is expected to result in up to $3.7 billion of cost and productivity improvements through 2017.

The company expects to deliver $1.6 billion of improvements for the full year 2015 and is targeting improvements of $1.1 billion in 2016 and $1 billion in 2017, according to an investor presentation on Tuesday.

“While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action,” said chief executive officer Cutifani in a news release.

The plan is focused on the company’s “priority 1” assets, or those that “deliver free cash flow through the cycle and constitute the core long-term value proposition of Anglo American,” according to the CEO.

“We are increasing our targeted disposal proceeds to $4 billion and will be progressing the sale process for the Phosphates and Niobium businesses during 2016,” Cutifani said.

Anglo American will also benefit from the closure of its Thabazimbi operations and the care and maintenance of its Snap Lake facility.

Cap ex reductions

As part of the plan, the company is reducing its 2015 and 2016 capital expenditures by an additional $1 billion for a total $2.9 billion reduction from original guidance for 2015-2017. The company reduced its 2017 cap ex by 55% to $2.5 billion.

Anglo American expects its free cash flow to be a negative $1 billion in 2016 after cap ex.

Dividend payments have been suspended through 2016, also as part of the plan.

As a result of the restructuring, Anglo American expects to reduce its assets by about 60%, consolidate to three businesses from six, and cut its headcount to fewer than 50,000, from 135,000 employees.

Debt and liquidity

The London-based mining company maintains about $15 billion of liquidity, including $7 billion of cash.

Debt maturities include $1.6 billion in 2016, $2.6 billion in 2017 and $3.4 billion in 2018, according to the presentation.

Net debt guidance for 2015 remains unchanged at $13 billion to $13.5 billion.

© 2015 Prospect News.
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