Anglo American’s 2022 Result Still Impressive Despite Lower Prices and Higher Costs

While down one third on 2021, diversified miner no-moat Anglo American’s AAL 2022 net profit after tax, or NPAT, of USD 6 billion, or about USD 4.90 per share, was still strong. Adjusted EBITDA of USD 14.5 billion was the second-highest ever and broadly similar to our estimates, albeit down 30% on 2021. Of the USD 6 billion reduction in EBITDA, lower sales volumes and higher costs—USD 4.2 billion—and lower average realized prices—USD 2.2 billion—were the main drivers, partially offset by a foreign exchange benefit of about USD 1 billion. A 15% rise in unit cash costs was a major headwind due to inflation and lower sales volumes, but we think cost increases will moderate in 2023, helped by higher sales volumes. Looking at the divisions, EBITDA was lower in iron ore (which halved to USD 3.4 billion), platinum group metals (down USD 2.7 billion), and copper (down 1.8 billion), partially offset by improvement in metallurgical coal (up nearly threefold, to USD 2.7 billion). Anglo realised a hard coking coal price of USD 310 per metric ton, up about 47% on 2021, on similar sales volumes. Illustrating Anglo’s diversification, 2022 EBITDA was split among platinum group metals (30%), iron ore (24%), metallurgical coal (19%), and copper (15%).

We retain our fair value estimate for Anglo-American of GBX 2,800 per share. The USD 0.74 per share final dividend brings total dividends for 2022 to USD 1.98, roughly half 2021 given lower earnings and no special dividends. The balance sheet is very strong, with net debt of USD 6.9 billion, about 0.5 times EBITDA. We forecast 2023 NPAT of about USD 5.6 billion or USD 4.55 per share, similar to 2022′s profit. Anglo targets a lower payout ratio than competitors such as BHP and Rio Tinto. We think this is appropriate given its growth options and also given that its assets tend to be higher cost and more capital intensive. We forecast a 2023 dividend of USD 1.82 per share consistent with the company’s base dividend target payout ratio of 40%.