London 16/02/2016 - Commodity prices will remain under pressure given current supply dynamics, Anglo American CEO Mark Cutifani warned.
Oversupply and a slowdown in global growth have hampered metal prices, with copper holding around its cheapest since 2009 and nickel at 2003 lows.
"Markets generally are still demanding our products, particularly in consumer areas, less so in infrastructure, but demand generally is still strong," Cutifani said in a Q&A session after reporting its financial results on Tuesday.
"What has changed in the last two or three years is the amount of supply that's come on in certain commodities. And I think both of those trends will still probably hold during 2016 and 2017," he added.
The company lost $5.62 billion in 2015 compared with a loss of $2.51 billion in the previous year amid a continued slump in commodities, forcing the company to look at it business structure and put assets up for sale.
"The fact that prices declined last year wasn't a surprise for us. What I think surprised us and the industry was the severity and the speed of the reduction late in the year," Cutifani said.
Anglo will consolidate into three business units from six and sell more of its assets, it said in December - the new company will comprise De Beers, industrial metals and bulk commodities.
As the operational portfolio is streamlined, the number of employees will drop to fewer than 5,000, down almost 60 percent from 11,500 currently, bringing cost savings of an estimated $250 million.
"Right across the portfolio we've been making significant improvements in the business and that's helped us weather that storm. We've still got a long way to go... you'll see that we've taken the bit between our teeth and we see lots of opportunities to keep that trajectory moving in the right direction," Cutifani said,
Disposal processes have started in its nickel, niobium and phosphates and the Moranbah and Grosvenor metallurgical coal assets.
Following today's financial results, the company’s share price fell 5.91 percent to 369.83p.
Moody's has cut the corporate credit rating of Anglo American to 'junk' and assigned a negative outlook for the company’s new rating, stressing that the current downturn in commodities prices will be worse than previous price dips.
(Editing by Mark Shaw)