An­glo’s Cu­ti­fani in­tent on cost-cut­ting spree

Finweek English Edition - - IN THE NEWS - BY DAVID MCKAY

One of the first steps taken by Mark Cu­ti­fani on join­ing An­glo Amer­i­can as its CEO in 2012 was to sell the group’s fancy $64m cor­po­rate jet – a trade­mark Cu­ti­fani move, as it fo­cused at­ten­tion to the kind of strat­egy he wanted to run at the com­pany.

Two years down the line, and with An­glo’s share price still un­der­per­form­ing its peers BHP Bil­li­ton, Rio Tinto and Glen­core, Cu­ti­fani has em­barked on a new wave of cost-cut­ting with the group’s of­fices, de­scribed by UK news­pa­per The Sun­day Times as “sump­tu­ous”, ear­marked for ra­tio­nal­i­sa­tion.

Ac­tu­ally, what’s in­tended ac­cord­ing to the pa­per is for An­glo to pre­ma­turely end the lease on its St James premises – 20 Carl­ton House Ter­race – a prop­erty near Buck­ing­ham Palace de­signed by Re­gency ar­chi­tect John Nash. The lease for the of­fices runs un­til 2020.

There is no planned re­turn of An­glo’s head of­fice to South Africa, how­ever – a de­vel­op­ment that would no doubt de­light gov­ern­ment, which has been crit­i­cal of its want­away firms (An­glo was founded in SA with UK and US money 98 years ago). This is notwith­stand­ing the fact that Cu­ti­fani has had him­self elected to the chair­man­ship of An­glo Amer­i­can South Africa.

“It is clear that An­glo is pur­su­ing all op­tions to cut costs,” said Investec Se­cu­ri­ties, while a source told The Sun­day Times: “The mes­sage is that the civil ser­vice-style days of An­glo are over.”

Re­lo­cat­ing the UK head of­fice is but the tip of the ice­berg for the cost-cut­ting at An­glo.

Should An­glo Amer­i­can divest of its non-core Rusten­burg plat­inum mines, as planned, and dis­pense with many of its Eskom-ded­i­cated coal mines, as stated by Cu­ti­fani, the group’s SA cor­po­rate costs will also have to be cut back as it will have hun­dreds of peo­ple em­ployed for only about nine mines in the coun­try.

Said Cu­ti­fani in a re­cent in­ter­view with Min­ingmx: “We are re­build­ing our busi­ness and its com­pet­i­tive po­si­tion. Our tough re­al­ity is SA has a very high inf la­tion and so to com­pete we have to con­tinue to re­duce our over­heads and other costs.

“Yes, as we do re­shape the port­fo­lio, there will be im­pli­ca­tions for the sup­port struc­tures re­quired to sup­port those min­ing oper­a­tions, so an el­e­ment of ‘right-siz­ing’ will be re­quired,” he said. “Of course, any changes to the shape of the or­gan­i­sa­tion will be un­der­taken in full con­sul­ta­tion with all rel­e­vant stake­hold­ers.”

The abil­ity of Cu­ti­fani to take costs out of the sys­tem at An­glo is be­com­ing more cru­cial than ever be­cause net debt is chal­leng­ingly high at $13bn. The sale of the group’s 50% stake in in­dus­trial firm La­farge Tar­mac is in­tended to take some pres­sure off the debt pile, but it looks in­creas­ingly likely that it won’t be able to divest of 100% of its Rusten­burg mines and that a list­ing for the mines is be­ing pre­pared.

But a list­ing is some­what prob­lem­atic be­cause An­glo will have to re­tain a stake in the com­pany, ex­pos­ing it­self to po­ten­tial short-term losses, while it ’s also pos­si­ble gov­ern­ment could re­quest the en­tity be debt-free as it did when An­gloGold Ashanti at­tempted to de­merge lo­cal mines into a sep­a­rate com­pany. “This would re­quire Am­plats re­tain­ing sig­nif icant debt, another head­wind for the stock,” said Gold­man Sachs in a re­port.

Cu­ti­fani said: “We’re still in our dual track process of eval­u­at­ing the best way for­ward for Rusten­burg and Union. There’s a lot of work we have put in to re­struc­ture these mines into a sus­tain­able stand­alone busi­ness − prof­itable and cash­gen­er­a­tive.

“We’ve re­ceived ex­pres­sions of in­ter­est and as I said ear­lier we’re only in­ter­ested in selling for value. We are still eval­u­at­ing which route to take and will make an an­nounce­ment by mid-year.”


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