WORLDVIEW: How Anglo American gained from following Machiavelli’s advice

By Alec Hogg.Niccolo Machiavelli, author of The Prince, advised us 500 years ago to never waste the opportunity of a good crisis. Such rare events, he said, create an environment to attack complacency with a legitimate opportunity to attack the status quo – and unlock creativity..___STEADY_PAYWALL___.South African-centred mining group Anglo American Plc has taken full advantage of its own crisis. Last February its share price hit £2.26 in London, an astonishing 93% below where it had traded five years earlier. That sparked a panicky statement from the group promising to offload everything except its highest quality diamond, platinum and copper assets..Looking back, it was the equivalent of hacking into corporate bone after Anglo's operations had already been chopped from 68 to less than 50 in three years. But management warned the group faced an "existential" threat that required cutting its 135,000 workforce down to a modest 50,000. My conclusion at the time was that Anglo was "fighting for its very life"..The group's 2016 annual report released yesterday provides an altogether different picture. Asset sales have stopped; the staff complement has stabilised at 78,000, some 60% above what had been anticipated. Profit has rebounded, debt cut to $1.5bn below the $10bn target and CEO Mark Cutifani justifiably describes the group as being in robust shape..With hindsight, both Cutifani and outgoing chairman Sir John Parker identify February 2016 as the lowest point in the commodity cycle. In typically understated British style, Parker describes the recovery as "remarkable". Calling it spectacular would be more appropriate. On the JSE, the shares trebled from R55 to R191 while in London, pushed by a weaker Sterling, they quadrupled. The stock was the LSE's number one performer for 2016..There is much for investors – and other business executives – to learn from the Anglo experience. It's always best to avoid getting into trouble in the first instance. It helps to ignore the hype (remember the "commodity super-cycle"?). But once you're in a hole, nothing beats a deep swig of reality and appointing the best leader money can buy..Australian mining engineer Cutifani, who took over in April 2013, is rated by South African peers as the best in the business. Even before February's "existential" announcement he displayed the required backbone by slaughtering herds of the century old group's holy cows..But his most memorable attribute was using Anglo's crisis most effectively. Cutifani has driven through hefty cost and productivity improvements; strengthened the balance sheet by offloading assets and shedding employees; and brought new discipline to capital allocation. That will stand the group in good stead for decades to come..I've always bought Warren Buffett's view resource stocks are for traders; that investing in shares is to leverage human ingenuity, not a bet on an inanimate object. Mark Cutifani is proving the exception to this sensible rule. Given the right circumstances, human ingenuity can triumph in the most unlikely of places. Even commodities companies.

WORLDVIEW: How Anglo American gained from following Machiavelli’s advice

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