Global mining and paper and packaging group Anglo American Plc reported a four percent fall in year profits on Wednesday, battered by a storm on currency markets, but predicted good growth in 2004.
Profits, powered mainly by its diamond, platinum and paper interests, were held back by two of the world's most rampant currencies, the South African rand and Australian dollar, but came in within market expectations.
"It was quite a solid result," said James Wellsted, Johannesburg-based mining analyst at investment bank J.P. Morgan.
He and other analysts said Anglo had cut deeper than expected into costs, raising the prospect of modest upgrades to earnings estimates for 2004. But Anglo shares failed to shine, falling about 0.7 percent to 13 pounds in morning trade.
Analysts said a lower-than-expected tax rate appeared to have flattered the net result, which came in at $1.694 billion before goodwill amortisation and exceptional items, a touch above the market's average forecast for $1.684 billion.
The stronger rand and Australian dollar inflated Anglo's costs, a large part of which are incurred in these currencies, and crippled earnings despite a 22 percent rise in revenues.
Currency movements gouged $578 million from profits before goodwill and exceptionals, almost all due to the rand which jumped 28 percent against the dollar last year. But cost savings totalled $335 million in 2003, well above a $200 million target, and Anglo said it was targeting another $250 million in 2004.
"Operating performances were generally very good across the board, though the group's South African and Australian operations were impacted by a substantially weaker US dollar," Chief Executive Tony Trahar said in the results statement.
But he issued an upbeat outlook, noting a recent surge in metal prices fed largely by Chinese demand. "On the basis of prevailing commodity prices and exchange rates, the group should achieve good growth in 2004," Trahar added.
Backing up this outlook, the firm raised its annual dividend for 2003 to 54 US cents per share, up six percent on 2002 and above market expectations for a dividend of about 52 cents.
Anglo has fared better in 2003 than major rivals BHP Billiton, Rio Tinto and Xstrata, due to its different mix of commodities.
Its portfolio includes diamonds, which sparkled in 2003, and big, stable businesses in paper, packaging and industrial minerals.But this mixture, which made its shares more appealing while base metal prices were in the doldrums, is less coveted by investors now copper prices are trading near eight-year highs.
Since mid-2003, Anglo shares have lagged their big UK-listed peers that boast larger base metal operations.
Though some of its rivals reported earnings growth between the first and second halves of 2003, Anglo's profits dipped.
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