Anglo American tumbles as it scraps dividend, announces restructuring

Anglo American said it will suspend its dividend to investors this year and the next as it announced a "radical" portfolio restructuring and further material costs savings and capex reductions to combat declining commodity prices.

The miner said it will cut its number of assets by 60% as it looks to deliver free cash flow and greater returns through the cycle.

In addition, it will consolidate from six to three businesses: De Beers, Industrial Metals and Bulk Comodities.

Anglo also announced $1.6bn in cost savings to be delivered by the end of this year, $1.1bn in 2016 and $1bn in 2017.

The company said it intends to reduce capital expenditure by a further $1bn to the end of 2016 and raised its disposals target to $4bn, including sales from phosphates and niobium.

Anglo will suspend its dividend for this year and the next and upon resumptions, policy will change to pay-out ratio to provide flexibility through the cycle and clarity for shareholders.

Chief executive Mark Cutifani said: “While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action.

“We will set out the detail of the future portfolio in February, with the aim of delivering a resilient Anglo American and a step change in the transformation of the company.”

Goldman Sachs said the dividend cut was well flagged.

“The move to suspend the dividend could be viewed as a positive in the sense that it seems the board is taking all measures to support the balance sheet. Other measures are consistent with the existing strategy – cut costs and capex, focus on the best assets and exit the weaker assets.”

It added: “The key debate in the market looks set to be – is it enough to turn Anglo into a cash-generating entity?”

Michael Hewson, chief market analyst at CMC Markets, said news that Anglo American “has finally succumbed” to the inevitable and has decided to cut its dividend could well be the shape of things to come, with BHP Billiton and Rio Tinto likely to come into the firing line if iron ore heads inexorably towards $30 a tonne, after breaking below $40 earlier this week.

At 1427 GMT, shares in the miner were down 12% to 324.35p.