Interactive Investor

ii view: income play Anglo American targets decarbonisation

11th April 2022 11:49

Keith Bowman from interactive investor

Exposure to platinum group metals and a forecast future dividend yield of over 5%. Buy, sell, or hold?

Full-year results to 31 December 2021

  • Revenue up 63% to $41.55 billion
  • Profit attributable to shareholders down 310% to $8.56 billion
  • Final dividend up 64% to $1.18
  • Final special dividend of $0.50 per share 
  • Net debt down 31% to $3.84 billion

Chief executive Mark Cutifani said:

"In a year of two distinct halves, we recorded strong demand and prices for many products as economies recouped lost ground, spurred by government stimulus. Copper and PGMs - essential to the global decarbonisation imperative - and premium quality iron ore for greener steelmaking, supported by an improving market for diamonds, all contributed to a record financial performance."

ii round-up:

Headquartered in London, Anglo American (LSE:AAL) is a major diversified mining company.

Its commodity products include iron ore, copper, thermal and metallurgical or coking coal, along with Platinum Group Metals (PGM) and diamonds via its major shareholding in De Beers. 

For a round-up of these latest results, please click here

ii view:

Founded in 1917, Anglo American today has operations in Brazil, South Africa, Chile, Peru, Colombia, Botswana, Namibia, and Australia. A constituent of the FTSE 100 index, it employs just over 100,000 people. PGMs generate its largest slug of profit at around 34% of overall adjusted group earnings, closely followed by iron ore at around 33% and copper at about 19%. Current group expansion projects include its Quellaveco copper mine in Peru and its Woodsmith polyhalite project in the UK. Polyhalite is used to make farming fertilisers. 

For investors, increased geopolitical tensions, economic uncertainty and ongoing pandemic challenges cannot be ignored. China, like rivals such as BHP Group Ltd (LSE:BHP) and Rio Tinto (LSE:RIO), is a major group customer. China’s ties with Russia, pandemic lockdowns across parts of the country, and the impact which expected rising global interest rates could have on it all warrant consideration.    

On the upside, its diversity of commodities contrasts with the more focused portfolios at rivals such as Antofagasta (LSE:ANTO) and Fresnillo (LSE:FRES). A push towards climate change friendly products and away from fossil fuels like thermal coal has been underway, while its health and safety record has in more recent year’s been high on management’s agenda. In all, and with shareholder returns a clear focus and the shares now standing on a future estimated dividend yield of over 5.5%, income seeking investors appear to have good reason to stay patient. 

Positives: 

  • A basket of commodities helps even out prices rises & falls across the portfolio
  • Targeting volume growth of 35% over the next decade

Negatives:

  • The total dividend in 2020 was cut from 2019
  • Economic and pandemic outlook uncertainty

The average rating of stock market analysts:

Buy

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