Anglo American sees strong H2, to step up buybacks

Tag : base metals

By Eric Onstad
LONDON (Reuters) - Miner Anglo American Plc posted a 14 percentrise in first-half underlying profit on Thursday on higher outputand prices and forecast a strong second half when it will step upthe pace of share buybacks.
The firm said despite an uncertain economic outlook due to aslowdown in many developed economies, commodities continued to seestrong demand, especially from China.
"We expect a strong second half to the year driven by increasedproduction, further improvements in our operational performance androbust pricing," Chief Executive Cynthia Carroll said in astatement.
Anglo, the world's fourth-biggest mining group by market value, isthe first major miner to report during the current results season.
Analysts said the numbers, at the top end of forecasts, wouldlikely calm investors jittery over soaring mining costs andfaltering economies.
"Given investor nervousness over cost escalation and the macrobackdrop, in-line numbers and a positive outlook statement mayoffer some comfort to the sector as a whole," analyst Simon Toyneof Numis Securities said in a research note.
"At today's level of a consensus 2009E PER of 7x, the valuation of(Anglo) is a very attractive stand alone," analyst MichaelRawlinson at Liberum Capital said.
Anglo shares, which have underperformed the UK mining index by 5percent this year, rose 2.8 percent to 2,991 pence by 0840 GMTcompared to a 2.1 percent rise in the mining index.
SHARE BUYBACKS
Anglo posted underlying profit for the first six months of 2008 of$3.48 billion, up from $3.06 billion in 2007.
Forecasts for underlying profit, which strips out effects ofminority interests and special items, from six analysts polled byReuters were in a range of $3.21 billion to $3.52 billion.
Operating profit grew 30 percent to $5.97 billion as productionincreased in copper, iron ore, manganese ore, coal and phosphates.
The best performing units were ferrous metals, including iron oreand manganese, where operating profit shot up 80 percent, and coalwhich jumped 129 percent. The firm proposed an interim dividend of44 cents a share, up 16 percent.
Finance Director Rene Medori told a conference call that the firmwould step up the pace of Anglo's $4 billion share buybackprogramme, which is only 35 percent complete and had been sloweddown in the first half due to payments for acquisitions.
"I would expect us to come back at a higher level than what we haveseen over the last several months, but not to the quite aggressivelevel that we saw in 2007," said Medori.
When asked about a long-standing option held by Chile to buy 49percent of Anglo's copper assets in the south of the country,Carroll told the call that she met the Chilean minister of minesabout a month ago. "There's no formal interest expressed on thepart of the Chilean government to exercise that option."
Chile's Codelco, the world's largest copper producer, said on June23 it was studying the option owned by smaller state miner Enami.
The properties accounted for 35 percent of Anglo's base metals unitearnings last year, an analyst said. The option, which can beexercised every three years, was originally granted in 1978 whenEnami sold the deposit to Exxon
Anglo said it was still exploring options to sell its UK-basedaggregates and asphalt company Tarmac, which analysts estimate isworth more than $6 billion. Anglo said in February it was delayingthe sale until the credit crisis improved.