London, England — 29 July 2013 – The new boss of Anglo American has vowed to scrap at least half its US$17 billion “constipated” project pipeline, after lambasting the mining giant’s “unacceptably poor” performance.
According to a report in “The Times” here, Mark Cutifani said the company needed to get its “arse into gear” as he delivered what amounts to a damning indictment of the tenure of his predecessor, Cynthia Carroll, who he replaced in April.
He pointed out that over the last two years, only 11% of the company’s operations had hit performance targets: “Our performance at the operating level, compared to our budgets, has been unacceptably poor.”
Cutifani denied that he had been shocked at the state of the business when he took over. “I’ve been in the industry for 38 years, mate — nothing shocks me,” he said.
At least half of the planned projects much vaunted by the previous management would not generate a high enough return and will be scrapped.
Under his turnaround plan, management layers will be axed to streamline its corporate structure and spending on early stage projects will be cut by a third. Cutifani promised to save US$1 billion this year and then US$800 million annually.
“It is not about wholesale or radical changes at the operating level, but it is about introducing a much more disciplined approach to planning, to execution and to delivery on the objectives we have,” he said.
The Anglo boss has also simplified the company structure, announcing plans to reduce 10 business units to 6 “’ undoing some of the changes brought in by Carroll “’ to create a more manageable structure.
Anglo has underperformed its peers for much of the past decade, most recently battling labour unrest in South Africa, where it still generates half its earnings, and multi-billion dollar cost overruns in Brazil.
The company reported a 7% drop in first half pre-tax profits to US$4.7 billion on revenues of US$16.2 billion. Analysts welcomed the plans and the increased focus on elements like marketing profit — where Cutifani said he aimed to emulate Glencore’s Ivan Glasenberg.
However, many said they needed more detail on Anglo’s two biggest headaches, the US$8.8 billion Minas Rio iron ore project in Brazil and Anglo American Platinum, which has been crippled by strikes and falling prices.
Source: “The Times”. For more information, click here.