Anglo American Annual Report 2012

OPERATING AND FINANCIAL REVIEW GROUP FINANCIAL PERFORMANCETax$ million (unlessotherwise stated)Beforespecialitems andremeasurementsYear ended 31 Dec 2012 Year ended 31 Dec 2011Associates’tax andnoncontrollinginterestsIncludingassociatesBeforespecialitems andremeasurementsAssociates’tax andnoncontrollinginterestsIncludingassociatesProfit before tax 5,610 208 5,818 10,626 401 11,027Tax (1,488) (202) (1,690) (2,741) (385) (3,126)Profit for the financial year 4,122 6 4,128 7,885 16 7,901Effective tax rate includingassociates 29.0% 28.3%In July 2012, the Group acceptedthe conditions of the CompetitionCommission and consequently theassociated assets of Tarmac QuarryMaterials were classified as held forsale and recognised at fair value lesscosts to sell. This resulted in a lossbeing recognised of $135 million.In December 2012 the Group agreedthe sale of its 70% interest in theAmapá iron ore system. The net assetshave been reclassified to held for saleand recognised at fair value less coststo sell. This resulted in a loss beingrecognised of $404 million.Non-operating remeasurementsThe non-operating remeasurementof $1,988 million (2011: nil) reflectsthe gain of $2,017 million, net oftransaction costs, resulting from theremeasurement to fair value of theGroup’s existing 45% shareholdingheld in De Beers at the date acontrolling stake was acquired.This includes a $2.7 billion uplift ondepreciable assets which will unwindthrough operating remeasurementsin the current and future years.Financing remeasurementsFinancing remeasurements reflecta net loss of $88 million (2011: gainof $205 million) and relates to anembedded interest rate derivative,non-hedge derivatives relating to debtand other financing remeasurements.Special items andremeasurements taxSpecial items and remeasurementstax amounted to a credit of$1,110 million (2011: charge of$118 million). This relates to a creditfor one-off tax items of $922 million(2011: credit of $137 million), a taxremeasurement charge of $189 million(2011: charge of $230 million) and atax credit on special items andThe completionof ouracquisition ofan additional40% interestin De Beers inAugust 2012resulted in acash outflow of$4,816 million,net of cashacquired.remeasurements of $377 million(2011: charge of $25 million).The credit for one-off tax itemsof $922 million (2011: credit of$137 million) relates principally to thenet deferred tax credit of $960 millionat Minas-Rio and a net deferred taxcredit of $70 million owing to thereassessment of deferred tax assetsas a result of changes in tax regimeswithin operating segments, partiallyoffset by the write-off of the deferredtax asset in Amapá of $108 millionfollowing the decision to sell the mine.Net finance costsNet finance costs, beforeremeasurements, excludingassociates, were $288 million(2011: $20 million). This increase wasdriven by a decrease in investmentincome of $71 million, owing to loweraverage levels of cash and a higherinterest expense of $103 million,reflecting the increase in debt duringthe year. Foreign exchange losses onnet debt also increased by $74 millioncompared with 2011.TaxThe effective rate of tax before specialitems and remeasurements includingattributable share of associates’ tax forthe year ended 31 December 2012was 29.0%. The increase compared tothe equivalent effective rate of 28.3%for the year ended 31 December 2011is due to the reduced impact of certainnon-recurring factors. The nonrecurringfactors in 2012 includefurther recognition of previouslyunrecognised tax losses and thereassessment of certain withholdingtax provisions across the Group. Infuture periods it is expected that theeffective tax rate, including associates’tax, will remain above the UnitedKingdom statutory tax rate.Balance sheetEquity attributable to equityshareholders of the Company was$37,657 million at 31 December 2012(31 December 2011: $39,092 million).This decrease reflects the loss for theperiod of $1,493 million. Investments inassociates were $2,177 million lowerthan at 31 December 2011, principallyas a result of De Beers becoming asubsidiary following the acquisition ofa further 40% shareholding. Property,plant and equipment increasedby $4,540 million compared to31 December 2011, as a result ofongoing investment in growth projectsand the acquisition of De Beers,partially offset by an increase indepreciation, the transfer of Amapáand Tarmac Quarry Materials to ‘heldfor sale’ and the disposal of ScawSouth Africa.Cash flowNet cash inflows from operatingactivities were $5,562 million(2011: $9,362 million). UnderlyingEBITDA was $8,686 million, adecrease of 35% from $13,348 millionin the prior year, reflecting weakerprices across the Group’s corecommodities and changes inoperational performance.Net cash used in investingactivities was $9,821 million(2011: $4,853 million). Purchasesof property, plant and equipment,net of related derivative cash flows,amounted to $5,678 million, adecrease of $86 million, reflecting theGroup’s disciplined approach to capitalallocation in the current economicenvironment while maintainingexpenditure on strategic growthprojects. Proceeds from disposals,principally the disposal of Scaw SouthAfrica (net of cash and cashequivalents disposed), were$100 million (2011: $533 million).Movements in non-controlling interestduring the year resulted in a cashinflow of $1,220 million mainly$1,907 million from the disposal of25.4% of AA Sur, partly offset by thepurchase of 4.5% of Kumba for$698 million.Net cash inflow from financingactivities was $1,950 million comparedwith $1,474 million in 2011. During theyear the Group paid dividends of$970 million to company shareholders,46 Anglo American plc Annual Report 2012