London - Miner Anglo American [JSE:AGL]
posted a 38% jump in first-half profits and forecast an “even stronger” end to 2011, but came in just shy of forecasts as weaker copper production, tough weather conditions and cost pressures weighed.
Anglo, the first of the UK-listed diversified miners to report first-half earnings, said operating profit came in at $6.0bn, slightly below a market forecast of $6.3bn, according to Thomson Reuters I/B/E/S/, but broadly in line with the company’s own consensus of analyst expectations.
“As we have seen across many major mining regions, there were also a number of factors that negatively affected performance, including weather conditions in Australia and South Africa, further dollar weakness, input cost pressures and lower ore grades,” said Chief Executive Cynthia Carroll
“However, I am pleased to report that where we are able to mitigate against these factors, we have done so and we expect a stronger second half to the year,” she added.
Earnings per share jumped 40% to $2.58 a share, again slightly missing estimates.
Shares in the group fell almost 3% at the open to trade down 2% at 2939 pence in morning trade, compared to a 1.4% drop in the broader sector.
“They are weaker than expected, operating profit is about 7% below (forecasts),” analyst Tim Dudley at Collins Stewart said.
“But while that’s a little negative, overall the company is going in a strong direction. The slight miss is unlikely to dampen support for the stock, which is trading at a discount to the four big miners.”
Other analysts pointed to a miss in copper production, down 8%, where Anglo was hit by lower grades and heavy rains affecting its Collahuasi operation in Chile.
Anglo units Kumba Iron Ore [JSE:KIO]
, Anglo Platinum [JSE:AMS]
and De Beers had already reported numbers either in line or above expectations, with De Beers beating consensus by almost 50 percent on the back of an unprecedented rise in diamond prices. Rising costs
Anglo joined the chorus of miners that have so far pointed to costs having a dampening effect on its bottom line. Brazilian mining giant Vale said on Thursday that its costs rose 39% year-on-year in the second quarter.
“There is no question - we have seen electricity prices increase by 35% in Chile, 26% in South Africa, we have seen sulphuric acid going up over 100% - and we really don’t see much of that changing,” Carroll said.
Anglo said operating profit from its iron ore operations, dominated by Kumba, climbed 54%, supported by strong prices in a market Anglo said was unlikely to return to balance before 2015. The impact of heavy rains on its South African iron ore production was offset by sales from stockpile.
Operating profit at Anglo’s copper business, the second largest contributor to its earnings, climbed 18% to $1.4bn, helped by copper prices hitting a record high in February and helped offset lower output.
Like other coal producers, Anglo was badly hit by heavy downpours and flooding across the southern hemisphere at the start of the year. Floods in Queensland cut metallurgical coal production at rivals BHP, Rio and Xstrata down by more than a quarter.
Anglo posted an 87% increase in operating profit from metallurgical coal, used for steelmaking, thanks to prices driven higher by weather conditions. It said its Queensland production returned to normal operating levels in June.
Anglo also said it had decided to retain its Copebras phosphates business in Brazil, previously earmarked for sale as part of plans to streamline the business.