All You Need To Know About The Performance Of Anglo-American Stock (AAL)

Overview

Anglo American PLC (AAL) was incorporated in the year 1917 with its headquarters in London. Its principal operations include mining, exploring and processing of metal and minerals globally. The group mainly Explore’s metals such as copper, platinum, diamonds, iron, nickel, manganese and thermal coal. The group has 69,000 employees working worldwide.

Key Management Team

• Stuart Chambers: Chairman of the Board
• Mark Cutifani: Chief Executive Officer
• Stephen Pearce: Finance Director

Financial Results and Review – Financial Year 2018 (US$, million)

(Source: Annual Report, Company Website)

Financial Commentary – Financial Year 2018

• The company revenue for the financial year 2018 increased by 5 per cent from $26.2 billion in 2017 to $27.6 billion in 2018, mainly because of increase polished diamonds demand from the US and Chinese retailers in the first half of 2018.
• The company generated underlying EBITDA of $9.2 billion in the financial year 2018, showing an increase of 4 per cent in comparison with the financial year 2017, due to reduced costs and increment in term of volumes of the company.
• The company reported $3.2 billion of attributable free cash flow in the financial year 2018, down by 36 per cent in comparison with the FY 2017, due to the increase in the sustaining capital expenditure and higher tax payments.
• The company delivered profit attributable to equity shareholders of $3.5 billion in the financial year 2018, representing an increase of 12 per cent in comparison with the last year.
• The company had reduced net debt to $2.8 billion in the financial year 2018, showing a 37 per cent decline since 2017. Disciplined capital allocation has helped the company to strengthen the balance sheet further.
• The company’s reported Earning per share for 2018 was $2.80 which is 13 per cent more than 2017 reported EPS of $2.48.

Ratios

(Source: Thomson Reuters)

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Ratios Commentary

• EBITDA margin of 28.50 per cent for the financial year 2018 stood considerably higher than the industry median of 20.40 per cent.
• Net margin reported was 15.80 per cent in the financial year 2018 which was significantly higher than the industry median.
• Return on equity stood at 15.20 per cent which was higher than the industry median of 13.00 per cent.
• At liquidity front, Anglo American PLC current ratio was higher than the industry median of 1.84, reflecting sufficient current assets to pay of its short-term obligations.
• On leverage front, the debt-equity ratio was significantly lower as compared to the industry median, reflecting the company is less levered as compared to its peers.

 Share Price Commentary

• On 22nd February 2019, Anglo American PLC shares closed at GBp 2,057.0 up by 3.38 per cent against its previous day closing price.
• Stock’s 52 weeks High and Low is GBp 2,071.93 /GBp 1,433.64. At the closing price, the share was trading 0.72 per cent lower than its 52w High and 43.48 per cent higher than its 52w low.
• From the previous three months, Anglo American PLC share price rose significantly by 25.18 per cent, and in the last one year, the stock has delivered 14.28 per cent returns.
• Stock’s average traded volume for 5 days was 4,099,938.00; 30 days - 3,810,520.13 and 90 days - 4,063,531.01. The average traded volume for 5 days was up by 7.60 per cent as compared to 30 days average traded volume.
• The company’s stock beta was 1.49, reflecting relatively higher volatility as compared to the benchmark index. The stock was trading at a trailing twelve months PE multiple of 9.9x.
• Total outstanding market capitalisation was around £28.89 billion and a dividend yield of 3.92 per cent.

Growth Prospects and Risks Assessments

• Positive economic forecasts for the global diamond jewellery business.
• Healthy demand for the polished diamonds from the US and Chinese retailers.
• Due to US-China trade tensions, slower economic growth and stock market volatility there is a decline of demand in the US and Chinese market.
• In India, the significant depreciation of the rupee reduced local demand in US dollar terms.

Conclusion

While broad-based challenges can be seen ahead of the group, given the current trading levels which indicate the stock movement towards 52-week high with support coming from few growth drivers like increase in the revenue growth, healthy demand for diamonds and favourable economic outlook for jewellery business, the market can keep a watch on Anglo American stock going ahead.

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