Anglo American Plc took another writedown on its struggling De Beers diamond unit, and posted a slide in profit, as the miner moves ahead with a radical overhaul of its business.
Last year Anglo, in the process of fending off a $49 billion approach from BHP Group, announced a restructuring that would leave its business focused on iron ore and copper. So far, the plan has gone well. Anglo has agreed to sell its coal and nickel mines and is on course to exit platinum later this year. That just leaves De Beers to go.
Yet the diamond industry is in the midst of a crisis. Demand has collapsed in China, a crucial market, and lab-grown gems continue to win share in some segments. Anglo said Thursday it was taking a $2.9 billion impairment on the value of De Beers after last year taking a $1.6 billion writedown.
Anglo said it hopes to progress its planned De Beers exit — which could be either a trade sale or a listing — in the second half of the year.
“Given the state of the market, given the shape of the business as it stands right now, I’m really not expecting much traction or progress in the first half, but picking up in the second half,” chief executive officer Duncan Wanblad said on a call with reporters.
The scale of the problems were laid bare by the unit’s performance last year, when it posted an underlying loss of $25 million. It made a profit of just $72 million the year before.
What started as a post-pandemic slowdown has spiralled as inflation hit customer purchases, before a collapse in China’s luxury market further eroded demand. Rough diamond prices have plunged nearly 50 percent in the past two years, while the price of polished stones has fallen about 35 percent.
De Beers has dramatically cut production to try and limit the supply glut, but so far prices have remained subdued.
Anglo reported a 15 percent fall in underlying earnings to $8.46 billion, while cutting its final dividend by 46 percent from the same period in 2023. Copper and iron ore, the businesses that will underpin Anglo’s future, contributed 76 percent of its profit. Net debt remained stable.
The company also announced a deal with Chile’s state mining company Codelco to jointly develop their adjacent Los Bronces and Andina operations as Anglo seeks to improve a mine that has struggled in recent years. Jefferies LLC said the deal could be a source of value for Anglo that the market had not anticipated.
“We are encouraged by Anglo’s operational improvements and continued progress on the company’s restructuring,” said Chris LaFemina, an analyst at Jefferies. “We believe further progress on the restructuring makes Anglo more attractive on a standalone basis and a compelling potential acquisition target.”
Anglo’s shares gained as much as 4.1 percent in London trading.
The company joins its mining peers — Rio Tinto Group, BHP and Glencore Plc — in reporting declining earnings this week. Iron ore has been under sustained pressure from China’s property crisis, while coal — a key Glencore earner — has slumped in the face of a supply glut.
By Thomas Biesheuvel
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