Anglo American plc (ADR) (OTCMKTS:NGLOY) announced today that it is set to initiate massive restructuring.
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He added: ‘While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action’. The number of job cuts rose to 85,000. Anglo American didn’t say when it expected its workforce to reach 50,000.
Anglo has already been cutting jobs in recent years, with the workforce standing at 162,000 in 2013.
“As a next step and as we determine the future portfolio, 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”. The company said it would then change to a dividend payout ratio, as opposed to a regular increase, to “provide flexibility” amid the shaky commodities market, which has suffered as China’s economic slowdown has reduced demand.
He said the business would make further writedowns of up to $4.7bn to reflect lower prices and unprofitable assets that are to be closed. The FTSE 350 Mining Index fell 7.1 percent.
“We are reducing 2015 and 2016 capex by an additional c.$1-billion and have reduced our 2017 capex to $2.5-billion, a c. 55 percent reduction versus our 2014 expenditure”. There are worries that Anglo-Swiss Glencore Plc won’t be able to cover its current debt burden because of low commodities prices, and its stock dropped 9 percent on Tuesday.
The weak demand situation has been worsened by a supply glut blamed on rising output by leading miners, including BHP Billiton and Rio. Its products include iron ore, diamonds, coal and copper. The South African company also noted that it has about $15 billion of liquidity, while refinancing obligations for 2016 are a “limited” $1.6 billion.
It will cut costs by £2.47 billion ($3.7 billion) by the end of 2017.
The price of iron ore tumbled to $39.60 Tuesday, a multi-year low, after peaking near $200 a tonne in 2011.
Critics have said large miners such as BHP and Rio raise output despite falling prices to try to flood the market and drive smaller competitors out of business.
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However local analysts have said buyers for Anglo’s Australian mines would be hard to find because with the downturn in commodities as other major miners are also looking to diversify out of assets.
