JOHANNESBURG: Anglo American and BHP Billiton are expected to report far weaker earnings following the commodity price slide than their rivals among the top five global miners.
The global commodity rout, which has seen crude oil and copper prices hit multi-year lows this year, has forced Anglo, Glencore and Vale SA to sell assets and cut dividends and capital spending to preserve cash and reduce debt. Within the five top miners, Rio Tinto is seen as the standout in the pack, but it is also set to face problems further down the road, analysts say.
Anglo started paring back its operations in 2013 but progress has been slow, and Chief Executive Mark Cutifani has said the company would now take "bolder action". It is expected to post annual earnings before interest and tax of $1.5 billion on Feb. 16, according to Thomson Reuters I/B/E/S analysts' forecasts, down 70 percent year-on-year.
"The question now is which will manifest itself first: a successful restructuring, or exhaustion of shareholder patience?" Bernstein analysts said in a note.
"Cutifani will need to reassure investors at full-year results."
BHP is expected to book its first net loss in more than 16 years when it reports results on Feb. 23, hit by a $4.9 billion write-down after tax on its US shale assets, which it flagged last month.
With plunging crude prices hurting its oil assets, BHP now has to decide whether to cut its dividend, ending a long-held policy to maintain or raise payouts. The market is expecting it to halve its first-half dividend to $0.31 a share.
"The company is highly protective of its balance sheet and rating which can only mean one thing - the dividend is unsustainable and is vulnerable to a cut. The question is, by how much?" SP Angel analysts said. Brazil's Vale has already said it would recommend to its board that no dividend is paid this year.
It reports on Feb. 25 and is expected to post a 47 percent drop in earnings before interest tax, depreciation and amortisation (EBITDA) to $7.1 billion, according to Thomson Reuters I/B/E/S. Rio Tinto is the only miner expected to raise its dividend.
But investors and analysts say Rio will also soon face the same issue as BHP around its dividend, given weak commodities prices and a looming credit rating downgrade.
Rio's annual underlying earnings for 2015 are expected to drop 50 percent to $4.6 billion. Its full-year dividend is forecast to rise to $2.21 from $2.15 a year earlier.
The company reports on Feb. 11. Commodities trader and miner Glencore is forecast to report a 33 percent fall in annual EBITDA to $8.58 billion on March 1.
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