Anglo American Annual Report 2012

OPERATING AND FINANCIAL REVIEW GROUP FINANCIAL PERFORMANCEFINANCIALPERFORMANCEUNDERLYING OPERATING PROFIT(2011: $11.1 bn)$6.2 bnUNDERLYING EARNINGS(2011: $6.1 bn)$2.8 bnUNDERLYING EARNINGSPER SHARE(2011: $5.06)$2.26(LOSS)/PROFIT ATTRIBUTABLETO EQUITY SHAREHOLDERS(2011: $6.2 bn)$(1.5) bnREVIEW OF GROUP RESULTSAnglo American reported underlyingearnings of $2.8 billion, comparedwith $6.1 billion in 2011, withunderlying operating profit of$6.2 billion, 44% lower than 2011.This decrease in underlying operatingprofit was mainly driven by thePlatinum, Metallurgical Coal, Iron Oreand Manganese and Copper businessunits, whose financial performancewas affected by lower prices andhigher costs, with the exception ofMetallurgical Coal where costsdecreased. There was a decline inrealised prices across the majority ofcommodities produced by the Group.Iron Ore and Manganese generatedan underlying operating profit of$2,949 million, 33% lower. Within thiscommodity group, Kumba Iron Orereported an underlying operatingprofit of $2,980 million, 34% lowerthan 2011, owing to lower averageprices, the unprotected strike atSishen and an increase in wastestripping, partially offset by the rampup of Kolomela mine. Samancorreported an underlying operatingprofit of $103 million, 38% lower,driven by lower ore prices, partiallyoffset by lower costs.Metallurgical Coal delivered anunderlying operating profit of$405 million, a 66% decrease,primarily due to lower realised exportselling prices, partially offset by recordproduction and higher sales.Thermal Coal’s underlying operatingprofit of $793 million was 36%lower, mainly as a result of lowerexport thermal coal prices for bothSouth African and Colombian coaland, in South Africa, above inflationcost increases. This was partiallyoffset by increased sales volumes,mainly from the full incorporation ofZibulo as an operating asset, anddespite the closure of high costproduction sections.Copper delivered an underlyingoperating profit of $1,687 million,31% lower, as a result of lower realisedsales prices, lower by-productquantities and higher operating,exploration and study costs, partlyoffset by increased sales volumes.Nickel reported an underlyingoperating profit of $26 million, 54%lower, due to lower realised pricesand an extended export ban imposedby the Venezuelan government fromthe beginning of June 2012 resultingin the cessation of production inSeptember 2012, partially offset by aself-insurance recovery of $59 million.Platinum generated an underlyingoperating loss of $120 million, due tolower metal prices, higher unit costsand the illegal strike that significantlyaffected production and sales duringthe final four months of the year,partially offset by a $172 millionpositive stock adjustment.Diamonds underlying operating profit(on a 100% basis) fell by $676 millionto $815 million, 45% lower, reflectingthe impact of difficult tradingconditions brought about bypredominantly weaker demand andchanging product requirements fromSightholders. Anglo American’s shareof De Beers underlying operating profittotalled $496 million, a decrease of25%, the overall reduction being partlyoffset by Anglo American’s highershareholding.Other Mining and Industrial Coredelivered a combined underlyingoperating profit of $169 million, adecrease of 8% compared to theprior year. This was driven by higherlabour costs at both the Phosphatesand Niobium operations and lowerphosphate prices, partiallyoffset by an increase in sales volumesof both phosphates and niobium.Production change% change versus 2011(8%)(11%)1%4%11%10%35%-20 -10 0 10 20 30 40Kumba Iron OreMetallurgical CoalThermal CoalCopperNickelPlatinumDiamondsProductionincreases weredelivered atthe KumbaIron Ore,MetallurgicalCoal, ThermalCoal, Copper,Nickel, and thePhosphatesand Niobiumbusiness units.42 Anglo American plc Annual Report 2012