Anglo American: Financial Activity - Essay Example

Anglo American’s Financial Report Anglo American’s Financial Report The Anglo American is among the largest mining companies in the world; however, the company has since diversified into other markets especially following its inception. The Anglo American is listed within the London Stock Exchange and it is among the FTSE 100 of the London’s share price index. Anglo America has diverse mining portfolio operation interests with its current operations concentrated on precious metals (diamond and platinum), base metals (nickel, copper, phosphorus, and zinc), ferrous metals (steel, manganese, and steel), coal, as well as industrial minerals. It should be noted that between 2007 and 2008, the world faced the financial crisis followed by the 2008 financial crisis. This periods were considered to be the worst financial crisis the world economies ever faced. The same crises could not even be compared to the 1930s great depression. The financial crisis led to the collapse of numerous large financial institutions and downturn of numerous stock markets. This crisis affected institutions across the globe (Mirza and Nandakumar, 2013; Pg. 98). However, during the same period especially in 2007, Anglo America Plc. Had an operation profit summing to over $10 billion (USD) and a total earning of nearly $6 billion (USD). The base metal turned to be the most significant metal for this company. In its operating group profits, it constitutes to nearly 45 percent followed by platinum that constitutes 28 percent of the company’s operating group profit. However, diamond, which is operated De Beers, holds 45 percent of the company shareholdings. Nonetheless, Anglo American Company leads in the production of platinum globally and it currently accounts for more than one third of new production of platinum in the world. The mineral division of the company comprises of the UK based construction and highway material constructors (Tarmac) that also comprises diverse construction branches. Notably, in 2005, the Anglo American company decided to streamline and rationalize its business portfolio that led to its relinquishing of Samancor Chrome, Vanadium, Highveld Steel, and Boart Longyear (Braund, 2009). It also reduced its production of Anglo American Ashanti, Mondi’s demerger, and Exxaro with diverse interest in paper and packing. Anglo American’s Financial Results The company’s total revenue has since ranged from R26.3 billion which was 4 percent higher than the 2012 when it was R25.2 billion. This change in revenue was cautioned mainly by the weakening of Rand. Notably, the rand changed at 1H2013:R9.19 that is in 2013 compared to 1H2012: R7.93. However, the same was offset partially by 25 percent domestic sales and 3 percent export sale volumes. During the same period, it should be noted that iron ore recorded 7 percent lower than other years. Since this company has its most financial and trading activities done in Rand; hence, working on dollar is vital for universal trading and financial cording (Braund, 2009). However, in the FTSE indices, the market capitalization uses weighted prices to determine shares using the basic formula given by Anglo American among other big companies have different index compared to the small companies. The big companies use free float adjustment factor to present the percentage of shares issued available for trading. This factor is rounded up to the nearest 5 percent multiples. The company uses this factor to find market cap then multiplying the same with its free float factor. The main disadvantage of the free float capitalization is that it does not incorporate restricted stocks especially the shares held by company insiders. Financials 2011 2012 2013 Income Statement Turnover 19,676.98 17,643.80 17,793.81 Operating Profit 6,820.02 -984.31 1,459.67 Net Profit 5,097.48 -346.97 258.34 Reported EPS 314.65 -71.98 -45.48 Balance Sheet Current Assets 12,420.05 11,072.29 9,799.27 Non Current Assets 34,193.42 35,674.56 33,357.19 Total Assets 46,613.47 48,684.71 43,156.46 Current Liabilities 5,262.21 5,314.06 5,064.28 Total Liabilities 18,823.11 21,777.30 20,497.88 Total Equity 27,790.36 26,907.41 22,658.58 Cash Flow Operating Cash Flow 7,398.49 4,533.99 4,687.08 Net Change in Cash 3,849.82 -1,417.41 -748.94 Table 1. Financial Records (Braund, 2009) Graph 1. Graph 2. The above graphs show that the annual revenue of Anglo American company are not stable neither are they on gradual increment. There are irregular due to changes in sales of different produce. Other risks that are affecting this company’s financial performance include the prices of the metals. The price of the prices are uncertain with the same uncertainty caused by fluctuations in prices of metal and this may have diverse effects earnings of the current and future earnings (Correia, 2007; Pg. 187). Additionally, the foreign currency is also a risk to the Anglo American’s financial performance. As had been noted, Anglo America especially the Anglo platinum usually operate globally but transacts on South African rand. Therefore, fluctuations in the exchange rates eventually affects the company’s turnover, costs, capital expenditure, and earnings. Finally, the fiscal risks are also posing to be to the company’s financial risks. These include the government fiscal policies that impact profitability of the company in countries that it operates. For instance, the South African “Mineral and Petroleum Resources Royalty Act” of May 2009 affected the company’s operation profit of the same year (Mirza and Nandakumar, 2013). The same can be shown using the charts below. References Top of Form Bottom of Form Top of Form Top of Form Top of Form BRAUND, K. E. H. (2009). Deerskins & duffels: the Creek Indian trade with Anglo-America, 1685-1815. Lincoln, University of Nebraska Press. Braund, Kathryn E. H. Deerskins & Duffels: The Creek Indian Trade with Anglo-America, 1685-1815. Lincoln: University of Nebraska Press, 1996. Print. CORREIA, C. (2007). Financial management. Cape Town, Juta. MIRZA, A. A., & NANDAKUMAR, A. (2013). Wiley international trends in financial reporting under IFRS including comparisons with US GAAP, China GAAP, and India accounting standards. Hoboken, N.J., John Wiley & Sons. Bottom of Form Bottom of Form Bottom of Form Top of Form Bottom of Form Read More