Anglo American in line with expectations but economic concerns remain

As mining giant Anglo American announces full year results, Sheridan Admans, investment research manager at The Share Centre explains what they mean for investors. 

“Anglo American’s full year results this morning were roughly in line with market consensus. Higher output of iron ore, coal and diamonds has helped support underlying earnings per share, with dividends seeing a full year overall increase of 14%. Full year net profits fell by 6%, partially due to a one off exceptional charge.

“Looking ahead, earnings should see some support from its iron ore, copper and nickel business. Three of the four flagship projects were completed in the last financial period which should see a higher output.

“However, we expect the European debt situation to persist throughout 2012. A sustainable solution to resolving the problems continues to have a number of challenges as the potential risk of default has risen significantly recently.

“We are also concerned over demand from China, as its economy could suffer a hard landing. Although any loosening of monetary policy by the Chinese government could make quite a difference. We suspect underlying prices for commodities to remain very volatile in light of these issues. The company remains upbeat however on the expectation of robust demand from emerging markets and signs of recovery in the US economy. 

“We continue to recommend investors ‘hold’ Anglo American for now, however some valuation metrics are starting to look more encouraging. We continue to prefer others in the sector, such as Rio Tinto and BHP Billiton.  

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2012-02-17 13:54:53 © Moneyextra.com