Anglo American PLC

Under our calculations, those results will translate into pre-dividend FOCF of about $1.5 billion on average in each of 2020 and 2021, which are likely to be distributed in full to Anglo American's shareholders given the group's low net debt position ($7.6 billion as of June 30, 2020). We consider that the projected credit metrics, the low absolute reported net debt, and positive FOCF, together with adherence to the shareholder distribution policy, provide ample headroom within the current rating level to absorb a material decline in commodity prices. The stable outlook on Anglo American reflects our view of the limited upside, due to the South Africa's sovereign rating, but at the same time, limited downside given the comfortable financial headroom.

...After a record year in 2019, we expect Anglo American to post lower results in 2020, and excess cash flows to continue to be distributed to shareholders given the low leverage. In the first half of 2020 the company reported an underlying EBITDA of $3.4 billion, negatively impacted by COVID-19 and operational issues (aggregate impact of about $2.0 billion). However, we expect the company to present much higher results in the second half of the year supported by healthy iron ore and Platinum Group Metals (PGM) prices, as well as the benefits from the depreciation of the South African rand and the Brazilian real, and the low oil prices. Under our base-case scenario, we expect Anglo American to report an underlying EBITDA of $7.5 billion-$8.0 billion in 2020, compared to the peak of $10.0 billion in 2019. At the same time, the forecasted results take into account the current softness in copper and coal prices, and a very weak year for the diamond industry. Under our calculations, those results...

Full Report