Anglo scraps divi, to consolidate business units on tumbling commodities

‘Another one bites the dust’ or in this case a commodity payout. Anglo American CEO Mark Cutifani has scrapped the dividend, news many investors were expecting following Glencore’s strategy. Anglo is also looking to consolidate 6 of its business units into 3, and cut its staff level to 50,000 in the next few years in an attempt to reduce costs. Those who heeded the words of Warren Buffett and steered clear of an industry of price takers may be shedding a huge sigh of relief as the stock comes under renewed pressure, down over 8 percent. – Stuart Lowman

By Thomas Biesheuvel

(Bloomberg) — Anglo American Plc scrapped its dividend for the first time since 2009, announced further spending reductions and plans to consolidate its business units to three from six as it accelerated a fight against a collapse in commodities.

The company will suspend its payouts for the second half of 2015 and for 2016, it said in a statement Tuesday. Anglo is abandoning its practice of steadily increasing the dividend in favour of a system that allows the payment to rise and fall with the company’s profits, known as a dividend payout ratio.

A worker walks past a board outside Anglo American offices in Johannesburg, August 21, 2015. South Africa stocks ended weaker on Thursday, despite strong gains by resource stocks, with MTN the main loser among blue chips because most of its business is in emerging markets. Shares slumped across the board on the JSE as comments by U.S. Federal Reserve chair Janet Yellen, made after the close in Asia, Europe and South Africa on Wednesday, hit the markets on Thursday. REUTERS/Siphiwe Sibeko
A worker walks past a board outside Anglo American offices in Johannesburg. REUTERS/Siphiwe Sibeko

The producer reduced spending forecasts for 2015 to 2017 by $2.9 billion and increased the amount it plans to raise from asset sales to $4 billion from $3 billion, with its phosphates and niobium businesses confirmed for disposal, it said. Anglo expects impairments of $3.7 billion to $4.7 billion because of weak prices and asset closures.

Read also: Anglo American shares fall to record low in London, more pain in prospect

“We will be consolidating our six business unit structures into three — De Beers, industrial metals and bulk commodities – – providing further opportunity to reduce the cost burden on our business,” Anglo Chief Executive Officer Mark Cutifani said in the statement.

Cutifani is seeking to turn around the company’s fortunes in the face of metal prices at the lowest in at least six years. It has sold assets and cut jobs to preserve cash as the shares tumbled 70 percent this year, the second-biggest decline in the U.K.’s FTSE 100 Index.

The last time Anglo cut its dividend, during the depths of the global financial crisis in 2009, the shares plunged 17 percent in one day.

From Reuters

JOHANNESBURG, Dec 8 (Reuters) – Anglo American will sell more assets, suspend dividends until the end of 2016 and whittle down its business divisions to three from six in the face of severe commodity price falls, the mining company said on Tuesday.

Read also: Anglo to slash another 13% off its book value after R100bn iron ore folly

Anglo said it would cut its assets by 60 percent, reduce its workforce to 50,000 from 135,000 and form three divisions: De Beers for diamonds, Industrial Metals for platinum and base metals and Bulk Commodities for coal and iron ore.

The London-listed company aims to raise $4 billion through assets sales, up from an earlier target of $3 billion, and said it would press ahead with the sale of its Phosphates and Niobium businesses in 2016.

“While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action,” Chief Executive Officer Mark Cutifani said.

The rout in commodity prices is putting pressure on credit ratings and dividends across the mining sector, prompting reductions in capital expenditure, operational costs and jobs.

Read also: BHP rising dividend promise in tatters, cut on cards after mudslide tragedy

The fifth-biggest diversified global mining group by market value, Anglo is grappling with sliding commodity prices including iron ore, platinum and diamonds.

Anglo’s share price has fallen 70 percent so far this year as investors worry about the slow pace of turnaround efforts launched by Cutifani in 2013.

So far, Anglo said it had secured $2 billion in assets sales.

Anglo also suspended dividends for the remainder of 2015 and in 2016.

“Upon resumption, (our dividend) policy will change to pay-out ratio to provide flexibility through the cycle and clarity for shareholders,” Cutifani said, abandoning the company’s progressive dividend policy under which the payout rises, or is at least maintained.

Mining and trading giant Glencore has also suspended dividends and is selling assets to cut its debt and regain the trust of investors after its shares hit record lows.

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