Anglo American says it expects 2014 to be a tough year as it continues to restructure its asset base to meet market conditions.
Chief executive Mark Cutifani said the bulk of the benefits from the company’s asset review won’t be realised for another two to three years.
“While I expect headwinds to continue in 2014 as we reset the business, the benefits of much improved operational processes and performance will flow through largely in 2015 and 2016,” he said.
Addressing investors on Thursday Cutifani said the company has already begun rebuilding, including making management changes, operational improvements, overhead reductions and reducing early stage project spend.
“In the immediate term, we have already delivered significant sustainable improvements,” he said.
Anglo has set a target to boost return on capital employed to more than 15 per cent by 2016.
“We have identified approximately 85 per cent of the incremental EBIT necessary to achieve the level of return we expect from the business and we are working on the areas where we see additional potential,” Cutifani stated.
“Our commercial model, targeting a $400 million annual EBIT uplift by 2016, is up and running and already delivering enhanced margins.”
Looking to increase earnings, Anglo has tightened controls around its capital allocation process, a move which has seen it abandon its Alaskan Pebble copper mine, and shrinking its project pipeline.
“Preserving our resource optionality for the future remains a priority within our project development pipeline and capital allocation analyses,” Cutifani said.