Anglo Makes Its Case – US-FOREX.US
Cynthia Carroll has much to prove. The chief executive of Anglo American has rebuffed a no-premium, merger of equals proposal from rival Xstrata and is fighting back against shareholder criticism that she’s not doing enough to cut costs after a string of acquisitions during the commodities boom. Anglo now seems to be making a strong case on cost cutting, but even that might not be enough to counter sliding demand.
Anglo American
revealed Friday that half a year in, it had saved 450 million in costs as part of a two-year, 2 billion cost-saving plan. The company had also trimmed its workforce by 15,405, as part of a goal to cut 19,000 jobs by the end of 2009.But the company had missed expectations on underlying net profit, bringing in 1.1 billion against the 1.8 billion that had been expected by analysts, according to TradeTheNews.com. Net profits had fallen by 58%, as the price of metals like iron ore, platinum and copper more than halved from a year go. Anglo’s shares slipped 1.2% to or 23.5 pence , to 18.82 pounds on Friday morning in London.Another worrying factor for Anglo: the miner said its net debt had risen by 292 million from the end of 2008 to 11.3 billion, and that it could rise further towards the end of the year as it spent about 4.5 billion on projects in Latin America. Still, it could be worse. Rival miner Rio Tinto
is in the middle of slowly shifting a 38 billion debt pile, built up after its acquisition of Canada’s Alcan. Carroll said that Anglo expected demand to “remain soft in the near term.” China was still growing strongly and was “key to demand, particularly for iron ore, copper and platinum.”
She added that while there had been some recovery in metal prices, the economic outlook still looked uncertain in the short term, while longer term, fundamentals were “highly attractive.”Anglo American rebuffed a “merger of equals” bid from Xstrata
in June. Since the companies have yet to get to the stage of even talking about a deal premium-which analysts say could go up to 30% for about 22 pounds a share for Anglo American-it could be many more months, if not more than a year before the two ootentially seal a deal. Shareholders of Anglo American have also rejected the current merger offer on hopes for better terms. But it looks unlikely that Xstrata, which is also expected to post sharply lower profits next week, will sweeten its offer when it reports, and will more likely talk up the strategic merits of the deal.