Anglo writes down $3.9bn of assets as prices

Eroding FY profit by more than 17%.

Anglo American Plc, which produces metal and minerals from Africa to Brazil, wrote down assets by $3.9 billion after commodity prices fell, eroding full-year profit by more than 17%.

Underlying earnings slid to $2.22 billion, or $1.73 a share, in 2014 from $2.7 billion, or $2.09, the London-based company said Friday in a statement. The average of 21 analyst estimates compiled by Bloomberg was for a profit of $2.1 billion. Anglo net loss widened to $2.51 billion in 2014 from $961 million the previous year.

Anglo lowered by $3.5 billion the value of its Minas Rio iron-ore unit, which began output in October after delays and cost overruns. It also recorded a charge of almost $500 million at its coal units. Prices of iron ore slid 47 percent last year as a wave of new supplies from Australia compounded a glut of the steel-making raw material.

Chief Executive Officer Mark Cutifani (pictured) plans to increase the return on capital to 15% in 2016 and sell assets that are dragging down the average. Anglo is seeking to sell some of its coal interests in South Africa and Australia, along with four platinum mines in South Africa and three copper mines and a smelter in Chile. Last year, it wrote down $1.9 billion of the value of its assets.

“2014 was a year of significant operational improvement against sharp commodity price declines amid generally adverse market conditions,” Cutifani said in the statement. “We delivered on our major operational and portfolio commitments to shareholders, including delivering Minas-Rio, defining our future platinum business and resetting the performance of our operations.”

Full-year sales fell 6 percent to $30.9 billion. Anglo will pay a total dividend of 85 cents, the same as last year. Net debt climbed to $12.9 billion at the year-end from $10.7 billion.

Anglo increased production at its Kumba iron ore unit by 14 percent to 48.2 million metric tons in 2014, it said Jan. 28. It also produced 688,000 tons at Minas Rio, which seeks to raise its annual output to 26.5 million tons in 2016 at an operating cost of $33 to $35 per wet metric ton.

Anglo in 2013 raised capital expenditure for Minas Rio to $8.8 billion after an original estimate of $2.6 billion and wrote down $4 billion of the asset’s value.

©2015 Bloomberg News

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