Anglo H1 drops, sees $1 bln cost savings in 2009
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Anglo H1 drops, sees $1 bln cost savings in 2009 UPDATED 31 Jul 2009 | 07:01  
Anglo H1 drops, sees $1 bln cost savings in 2009

By Eric Onstad

LONDON (Reuters) - Miner Anglo American, which has rejected an unwanted merger approach from Xstrata, posted a sharp fall in first-half profit and said it had achieved $450 million of its planned $2 billion in cost savings.

Anglo, the world's fourth-biggest diversified mining group by market value, has been under pressure to show it does not need a marriage with Xstrata and can create value alone.

Anglo American Plc, which rebuffed a "merger of equals" proposal from Xstrata on June 22, said on Friday underlying earnings per share for the six months to the end of June fell 69 percent to 91 cents on 38 percent lower revenue of $11.1 billion.

This was higher than a consensus forecast of 81 cents compiled by the company from 11 analysts.

Anglo, which mines platinum, iron ore, coal and copper, last year launched a plan to cut $2 billion in costs by 2011, half from boosting efficiency and the remainder through procurement.


"I am pleased that we are on track with our asset optimisation and procurement programmes, generating combined benefits of over $450 million in the first half, and we are now expecting to deliver over $1 billion for the full year," Chief Executive Cynthia Carroll said in a statement.

Xstrata has said a merger would result in $1 billion in lower costs on top of Anglo's own programme.

As part of its belt tightening during the economic downturn, Anglo said it was ahead of its target of shedding a total of 19,000 jobs by the end of the year and had already cut 15,405.

Anglo said it was on track with its three strategic growth projects in iron ore, copper and nickel in Latin America.

At one of the projects, the Los Bronces copper project in Chile, Anglo said it had made two new discoveries, which together boosted copper resources by about 50 percent.

Anglo was wary about recovery in commodity markets, despite recent gains in exchange-traded metals such as copper, which has rebounded by nearly 80 percent this year.

"We expect demand to remain soft in the near term until OECD countries begin to recover materially," Carroll said. "While we have seen some recovery in metals prices, macro economic indicators are mixed, and the economic outlook remains uncertain in the near term."

Anglo, which came under some criticism by shareholders for suspending its dividend earlier in the year, said a priority would be to reinstate it when market conditions improve.

The company still regarded its Tarmac road material business as non-core, but said it did not expect to sell it in the current economic climate.

Anglo shares closed 4.5 percent higher at 1,905.5 pence on Thursday. They have underperformed against Xstrata's shares by about 40 percent this year, but have outperformed them by 70 percent since the market hit a peak last year.


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