Anglo American resumes dividend payments early as net debt falls

Anglo American said on Thursday that it was resuming its dividend payments early after it managed to reduce its debt to well below its year-end target, as it reported a 68% jump in earnings.

In the six months to the end of June, the company was able to reduce its debt by 27% to $6.2bn, which is well ahead of its year-end target of $7bn, driven by $2.7bn free cash flow.

Anglo generated underlying earnings before interest, tax, depreciation and amortisation of $4.1bn, up from $2.5bn in the first half of 2016. Meanwhile, profit attributable to equity shareholders came in at $1.4bn from a loss of $800m a year ago.

It has now resumed its dividend at 48 cents per share for the first half, equal to 40% of underlying earnings.

Chief executive Mark Cutifani said: "The benefits of our relentless focus on driving efficiency through the operations and on upgrading the quality of our portfolio have resulted in a step-change in operational performance and profitability. In the first half, we have delivered a further 20% increase in productivity, a 68% increase in underlying EBITDA and $2.7bn of attributable free cash flow - the outcome of extensive self-help work and tightly controlled capital expenditure, within a stronger price environment.

"Our materially improved balance sheet strength, with gearing at 19% and net debt to annualised EBITDA of 0.8x, has supported the decision to resume dividend payments six months early, establishing a payout policy at a targeted level of 40% of underlying earnings."

Shore Capital said: "AAL reported much improved financial results for H1 2017, with said results generally slightly ahead of our expectations and that of consensus."

Meanwhile, RBC Capital Markets said: "Very strong free cash flows and the early return of the dividend in H1 17 results should act as a trigger to tighten some of the discount that we see in Anglo’s share price versus peers."

At 1125 BST, the shares were up 3.7% to 1,239.50p.