Interim Results - Part 1
ANGLO AMERICAN PLC
8 September 1999
Part 1
Anglo American plc announces interim results
* Profit for the period increased by 4% to US$560 million
* Profit before exceptional items of US$514 million (1998: US$689 million)
* Total operating profit decreased by 17% to US$993 million, reflecting
generally lower commodity prices and the impact of the downturn in South Africa
* Strategic acquisitions - 40% of Australian Manganese (US$159 m), Amcor Fibre
Packaging (US$240 m), Reunion Mining (US$63 m) and 23% of Anaconda Nickel
(A$244m) (1)
* Approval of expenditure of US$ 240 million at Hudson Bay
* Disposal programme continues with gross proceeds of US$735 million in the
six months
* Interim dividend of 42 US cents per share
(1) Subject to satisfaction of conditions precedent.
Mr Julian Ogilvie Thompson, chairman of Anglo American plc, said: 'The
formation of Anglo American represented the culmination of a period of
significant restructuring principally of Anglo American Corporation of South
Africa (AAC) but also of Minorco. Having listed on the LSE in May and joined the
FTSE 100 index in June, Anglo American plc can now focus firmly on implementing
its programme of expanding and strengthening its key operating divisions,
further reducing costs and disposing of its non-core businesses.'
Highlights for the six months to 30 June 1999
30.6.98
Unaudited 30.6.99 pro forma
US$ million except per share amounts
Group and share of turnover of 10,529 11,155
associates and joint ventures
Total operating profit before 993 1,201
exceptional items
Profit on ordinary activities before 1,145 1,246
taxation
Profit for the period 560 541
Profit before exceptional items 514 689
Earnings per share (US$) 1.47 1.44
Earnings per share before exceptional 1.35 1.83
items (US$)
Overview of Results
This is the first financial report of Anglo American plc (Anglo American),
formed in May of this year by the combination of Anglo American Corporation of
South Africa (AAC) and Minorco. The company joined the FTSE 100 index in June.
In the interests of achieving an improved understanding of the Group by the
investment community, this first interim report provides significantly more
financial information than would be the norm at an interim stage.
The formation of Anglo American represented the culmination of a period of
significant restructuring principally of AAC but also of Minorco. The positive
reaction of the investment community to the new company was no doubt in part
attributable to the market's perception that commodity prices generally were
likely to improve during the remainder of the year. This view was based on the
combination of an improved outlook for the Far Eastern economies and the
ongoing and remarkable economic strength of the US.
The investment community's positive assessment of the company has led to an
improving trend in the share price since the company's listing. With these
milestones attained, Anglo American can now focus firmly on implementing its
programme of expanding and strengthening its key operating divisions, further
reducing costs and disposing of its non-core businesses.
The results for the six months to 30 June 1999 show an increase of 4% in
profit for the period to US$560 million. This improvement is influenced by the
impact of exceptional items - essentially profits or losses on the disposal of
non-core assets. As expected, profit before exceptional items decreased from
US$689 million in the first half of 1998 to US$514 million in the first half
of 1999. Total operating profit fell by 17% to US$993 million. This was the
result of generally lower commodity prices, the impact of the downturn in the
South African economy and, in particular, the impact of lower fertiliser
prices on Terra, our US agribusiness subsidiary.
An interim dividend of 42 US cents per share has been declared by Anglo
American. This is effectively an unchanged dividend compared with the US$1.24
per share estimated for 1998 referred to in the prospectus, assuming a final
dividend double that of the interim.
The Group has taken further steps both to strengthen its core businesses and
to divest its non-core investments. In December last year, a 40% shareholding
in BHP's Australian manganese operations was acquired for US$159 million, in
joint venture with Billiton. In January, Anglo American acquired the UK and
French corrugated packaging business Amcor Fibre Packaging Europe for US$240
million. In May, all of the shares of Reunion Mining were acquired for US$ 63
million. As a result, the Skorpion zinc deposit in Namibia is now wholly
owned. Together with Hudson Bay Mining and Smelting, the Lisheen zinc mine in
Ireland, which is in the process of being commissioned, and the US$1 billion
Gamsberg zinc project in South Africa, currently the subject of a feasibility
study, Anglo American has the potential to develop a significant position in
the zinc market. Anglo American also announced in early August that it had
reached agreement to purchase a 23% interest in Anaconda Nickel, the 60% owner
and operator of the Murrin Murrin dry laterite nickel project in Western
Australia, for A$244 million. It is pleasing that copper production at
Collahuasi has got off to such a good start.
In regard to non-core investments, in June Terra disposed of its distribution
business, for US$390 million subject to an adjustment for working capital and
in July, AECI, the 53% owned industrial subsidiary in South Africa, sold its
40% interest in Polifin for some US$345 million.
It is with great sadness that the company pays tribute to Sir Alick Rankin, a
deputy chairman and the senior independent non-executive director of Anglo
American plc who died in August. His wise counsel was invaluable to his fellow
directors particularly in the run-up to and the early days of the listing of
the company.
For further information please contact:
London
Anglo American plc
Michael Spicer Nick von Schirnding
+ 44 171 698 8858 (w) + 44 171 698 8540 (w)
+ 27 83 227 1319 (mob) + 44 7771 737 055 (mob)
Misha Nagelmackers
+ 44 171 698 8567 (w)
Johannesburg
Anne Dunn Marion Brower
+ 27 11 638 4730 (w) + 27 11 638 3001 (w)
+ 27 82 448 2684 (cell) + 27 82 895 0698 (cell)
AA plc website: www.angloamerican.co.uk
Anglo American plc is a leading mining and natural resources company with its
primary listing in London and secondary listings on the Johannesburg Stock
Exchange and the Swiss Exchange.
Anglo American's mining assets include interests in AngloGold (1), the world's
largest gold producer, Anglo Platinum, the world's largest primary producer of
platinum, De Beers (2), the world's largest producer and marketer by value of
gem diamonds, Anglo Coal, one of the world's largest private sector coal
producers as well as a substantial spread of base metal operations and
projects. AA plc also has significant interests in industrial minerals,
ferrous metals and forest products and packaging activities.
(1)Anglo American's independently managed subsidiary
(2)Anglo American's independently managed associate
03/99
Operations review
The first half of 1999 saw the completion of the restructuring plans announced
in October 1998 which envisaged the creation of a global mining and natural
resource company with its primary listing in London.
During 1998, Anglo American Corporation of South Africa (AAC) initiated the
process with the buy-out of the minorities in both Anglo American Coal
Corporation Limited (Amcoal) and Anglo American Industrial Corporation Limited
(Amic), the purchase from De Beers of its interests in the underlying
subsidiaries and associates of AAC and, with Billiton, the buy-out of the
minorities in Samancor. Anglo American plc (Anglo American) was then created
by the combination of AAC and Minorco. Anglo American acquired all of the
shares in AAC in terms of a scheme of arrangement whereby the shareholders of
AAC received one new ordinary share in Anglo American for every ordinary share
held in AAC; and acquired Minorco on the basis of an offer of one new ordinary
share in Anglo American for every two Minorco shares with a cash alternative
of US$16 for each Minorco share. Holders of over 99% of Minorco's ordinary
shares elected to receive shares.
The new company was listed on the London Stock Exchange on 24 May 1999 and
admitted to the FTSE 100 index on 21 June 1999. Anglo American maintains
secondary listings on the Johannesburg Stock Exchange and Swiss Exchange.
In May, AAC acquired the minority interests in Anglo American Investment Trust
Limited (Anamint) and Anglo American Gold Investment Company Limited (Amgold).
These offers, which were satisfied by the issue of 22.4 and 16.4 million Anglo
American shares respectively, increased Anglo American's interest in De Beers
to 33.4% and in AngloGold to 53.4%.
On the day of the listing, Anglo American placed 12.6 million shares, held in
treasury. This step was taken in response to concerns expressed by
institutions about the availability of shares to the market.
Basis of Accounting
In order to provide shareholders with a basis for comparison, the financial
statements for the first half of 1999 are compared with pro forma financial
statements for the first half of 1998 and for the year ended 1998. These pro
forma financial statements have been adjusted to reflect the restructuring of
AAC and Minorco as if these transactions had occurred at the beginning of 1998.
The principal adjustments in 1998 comprise:
* The full consolidation of Minorco
* The acquisition of a further interest in Samancor
* The purchase of the minority interest in Amcoal
* The purchase of investments from De Beers
* The purchase of the minority interest in Amic
* The disposal of Minorco's gold interests and their acquisition by AngloGold
* The disposal of Engelhard Corporation
* The purchase of the minorities in Anamint and Amgold (the effects of these
purchases were not reflected in the unaudited pro forma combined financial
information contained in the Prospectus dated April 1999).
Financial Performance
Difficult economic conditions and generally lower commodity prices in the
period resulted in total operating profit falling by US$208 million to US$993
million. This decline was partly offset by a reduction in the tax charge and
profit before exceptional items declined by US$175 million to US$514 million.
Profit for the period showed an increase over the prior period of US$19
million to US$560 million, reflecting a net gain on exceptional items in the
first half of 1999 compared with a net loss in the corresponding period of
1998. The net exceptional gains in the first half of 1999 arise principally
from the profit on the sale by AngloGold of its interest in Driefontein offset
by the loss arising on the sale by Terra of its distribution business. The
exceptional loss in the first half of 1998 arose principally from the sale and
restructuring of non-core assets.
Gold (Operated by AngloGold, the company's independently managed subsidiary)
Operating profits of AngloGold of US$239 million in the first half of 1999
were US$32 million lower than those of AngloGold and Minorco's gold operations
in the corresponding period last year. The spot price of gold averaged US$280
per ounce in the first six months of 1999 compared with US$297 per ounce in
the first half of 1998. The price plummeted to a 20 year low of US$257 per
ounce in the second quarter with the announcement by the British government of
its intention to sell part of its gold reserves by public auction. In contrast
to the aggressive selling of gold by speculators in the second quarter, the
physical market for gold showed encouraging growth. Demand in South Korea and
South East Asia increased by 50% compared with the second quarter of 1998.
Hedging activities ameliorated the impact of this downturn and AngloGold
realised a price of US$312 per ounce for the six months.
Total gold production at 3,445,000 ounces was 333,000 ounces lower than in the
first six months of 1998. The South African mines, which together account for
around 85% of AngloGold's business, experienced production problems and the
Matjabeng mine lost one and a half tonnes of gold production in the aftermath
of the severe earthquake which occurred in April. The North American mines had
a slower start but production improved in the second quarter. The South
American mines, which include for the first time the Cerro Vanguardia mine in
Argentina, and the Sadiola mine in Mali all had an excellent half year with
increased production and lower costs.
Platinum
Operating profits of US$207 million were US$18 million better than in the
first half of 1998. While sales volumes were lower than in the corresponding
period last year, this was more than offset by the impact of higher palladium
and rhodium prices and the favourable impact of lower US dollar costs mainly
arising from lower Rand exchange rates.
An average platinum price of US$359 per ounce was realised in the first half
of 1999 compared with a price of US$387 per ounce in 1998. The prices of both
palladium and rhodium, however, showed significant improvements.
Tonnes milled for the six months to June were 6% higher than in the same
period last year owing mainly to increased output at Potgietersrust following
the expansion project that was commissioned at the beginning of April. This
improvement was not converted into higher refined metal production owing
mainly to a temporary lock up of metal in the precious metal refinery in June.
This problem has since been resolved.
Development of the underground operations at the new Bafokeng Rasimone mine
proceeded according to plan and material from the open pit has already been
processed at the Klipfontein concentrator. The Bafokeng Rasimone concentrator
will be commissioned at the end of the year. This development together with
the Amandelbult UG2 and Middelpunt projects will add around 350,000 ounces of
platinum production per annum and will be fully on stream during 2002.
Diamonds (Operated by De Beers, the company's independently managed associate)
Operating profits from De Beers' diamond activities decreased by US$5 million
to US$89 million in the first half of 1999. The rough diamond market has shown
a significant improvement with a 44% increase in sales by the Central Selling
Organisation (CSO) for the first half. Quota delivery entitlement in 1999 from
producers contracted to the CSO commenced at 75% but increased progressively
with the improving CSO sales to 100% of current production. The retail market
continues to be reliant on the US but there are signs of improvement in South
East Asian markets, albeit from a low level.
De Beers had difficulties in South Africa in relation to the export of
diamonds. This did not affect the sales, as diamonds have been available from
non-South African sources to meet demand. However as anticipated, profits were
affected negatively by these problems.
Coal
Coal division operating profits at US$65 million were significantly lower than
the US$91 million recorded in the first half of 1998, owing mainly to a 13%
drop in the average US dollar price received for export coal. Coal sales at
30.7 million tonnes were 3.5 million tonnes higher than in the first half of
1998 as a result of the inclusion of the Gold Fields coal operations that were
acquired with effect from July 1998.
In Colombia, a major achievement was the execution of agreements, in January,
whereby Cerrejon secured the right to transport coal on the existing rail line
from Cerrejon Norte to and through Puerto Bolivar. The first coal was
transported through the system in May 1999 and a modest expansion of rail and
port capacity is underway which should enable Cerrejon to increase output to 3
million tonnes per annum in 2000. The feasibility study on the major Cerrejon
expansion is scheduled to be completed in the first half of 2000.
Base Metals
The base metals division recorded an operating profit of US$57 million, which
was US$13 million higher than in the corresponding period last year. In
depressed market conditions, the emphasis has been on cost reduction and good
progress has been achieved in this regard.
The copper operations produced 212,000 tonnes of copper in the first half and
reported operating profits of US$50 million, up US$22 million on last year.
The LME cash price of copper averaged 65 US cents per pound in the first six
months of 1999 compared with a first half 1998 average of 78 US cents per
pound. The impact of these lower prices, however, was more than compensated by
the start up of the Collahuasi mine in Chile. The final project cost for
Collahuasi was US$1,890 million and, despite some initial problems in the
sulphide circuit, production amounted to 218,700 tonnes in the first half at
cash costs of below 40 US cents per pound. Anglo American has acquired a 50%
interest in the Compagnie Miniere Seksaoua (CMS), a copper mine in Morocco,
and has the opportunity of increasing its interest to 60% in association with
any expansion of operations in the area.
The nickel operations produced 9,500 tonnes of nickel in the first half and
reported operating profits of US$10 million, some US$9 million better than the
first half of 1998. While the nickel price averaged US$2.24 per pound in the
first half compared with US$2.36 per pound in the same period in 1998, the
operations benefited from currency weakness, reducing local costs in US dollar
terms. Delay in the supply of structural steel has led to Loma de Niquel
running three months behind schedule, with first production now scheduled for
the middle of next year.
The zinc and lead operations, which produced 60,000 tonnes of zinc and 38,000
tonnes of lead in the first half continued to suffer from depressed prices and
broke even in 1999. The LME cash price of zinc averaged 46 US cents per pound
in the first half of 1999. Black Mountain, acquired in the second half of
1998, has been substantially integrated into the division and work has
commenced to delineate incremental reserves so as to extend mine life. Lisheen
is in the process of being commissioned. At Hudson Bay, the development of the
777 ore body and the expansion and upgrade of existing surface processing
facilities will extend the life of the operation to 2016 at a cost of around
US$240 million. The feasibility studies on the Gamsberg and Skorpion projects
are progressing well.
Namakwa Sands recorded an operating loss of US$6 million against an operating
profit of US$3 million in the same period of last year. With the successful
commissioning of the new ilmenite smelting furnace early in the current year,
the capitalisation of pre-commissioning costs ceased. In addition depreciation
charges on the new assets were brought to account in the current half year.
These two factors accounted for a swing of some US$6 million. Further, the
demands for and price of the majority of Namakwa Sands' products weakened
considerably so that the full benefit of increased production in the first
half of this year was not realised.
Industrial Minerals
The operating profits of the industrial minerals division fell from US$67
million in the first half of 1998 to US$48 million in 1999. This resulted
primarily from the sale of the Copebras carbon black business in 1998, and
from operational problems at Cleveland Potash, which was adversely impacted by
an unexpected brine inflow into the mine at the beginning of the year.
Additional pumping capacity has enabled the situation to be contained and
production should revert to normal levels by the last quarter of this year. At
Copebras, sodium tripolyphosphates sales were 30% higher than in the prior
period. Profits benefited from a decline in the value of the Real against the
US dollar. The European building materials activities of the division
continued to encounter tight trading conditions in the first six months of
1999. In the UK the position varied by region, with encouraging signs emerging
in some parts, but always against a backdrop of low government infrastructure
spending. In Germany, the construction industry suffered a further decline
with a significant downturn in the major Berlin market. Operations in Spain
benefited from a substantial increase in government spending on infrastructure
projects.
Ferrous Metals
Operating profits of the ferrous metals division at US$46 million in 1999 were
significantly lower than the US$80 million profit recorded in the first half
of 1998, reflecting the current weakness in global markets for the division's
products, as well as a worse than expected economic downturn in South Africa.
Highveld had a disappointing six month period recording an operating loss of
US$6 million against a prior period profit of US$31 million. During the period
under review, world steel production fell by close to 5% against 1998. The
South African economy reflected a similarly weak position exacerbated by
record levels of imports. Vanadium demand was weaker as a result of the
reduced steel production and an oversupply situation materialised with the
return of Russian production. Consequently, vanadium prices fell to an average
of US$2.09 per pound, levels last seen in 1992/1993. Steel and vanadium
production was reduced as a result of the market circumstances.
Good progress was made at Columbus Stainless, which is one-third owned by
Highveld and one-third owned by Samancor, with overall saleable production 22%
higher than the corresponding period last year. Unfortunately, the production
gains were more than offset by weaker demand, with the exception of the
automotive catalytic converter business, and poor international prices. The
average price realised by Columbus for stainless steel to June 1999 was
US$1,014 per tonne compared to US$1,283 per tonne for the same period in 1998.
These prices are at their lowest levels in 30 years.
Samancor's operating profit increased from US$22 million to US$24 million
owing to lower operating costs which more than offset reduced prices.
Manganese alloy prices fell to 10 year lows as a result of weaker demand
following the decrease in world steel production. Lower stainless steel
production had similar effects on ferrochrome prices, with the benchmark price
falling from 47 US cents per pound in June 1998 to 37 US cents per pound in
June 1999. Manganese alloy production from South Africa was 10% up on the
prior half year, while manganese alloy production from Australia of 120,000
tonnes was in line with expectations. South African and Australian manganese
ore production was adjusted to meet market requirements, with the latter
operating at two-thirds capacity. Chrome ore production was maintained.
Catalao, one of the three principal niobium producers in the world, recorded
an increase in operating profits, benefiting from local currency weakness.
Forest Products
The forest products division contributed US$113 million to operating profits
compared with US$129 million in the first half of 1998. This decline was
largely the result of difficult trading conditions in the global pulp and
paper markets. The results of the South African operations were marginally
lower than the comparable period last year despite improved results from the
kraft and paper divisions. The weaker results were mainly due to the depressed
state of the South African economy which affected domestic demand for both
paper and solid wood products, where low offtake of mining timber and
extremely poor demand for structural lumber reduced the profitability of the
timber division. Rationalisation and restructuring costs also had a negative
impact on results.
The profits of the European operations reflected reduced contributions from
Frantschach Packaging, Pols, and Swiecie, partially mitigated by the
acquisition of Amcor Fibre Packaging, renamed Mondi Packaging (Europe) and the
inclusion of its results for the first time. Mondi Brazil, which holds an
11.8% stake in Aracruz Celulose, showed a significant improvement over the
prior year owing to increased sales volumes and lower costs in both Real and
US dollar terms.
Industries
The operating profit of the Industries division of US$209 million was US$79
million lower than in the same period last year, owing to a US$94 million
reduction in operating profit at Terra.
Terra contributed a disappointing operating profit of US$26 million for the
first six months of this year compared with an operating profit of US$120
million in the corresponding period last year. Nitrogen products reported
increased ammonia sales volumes (17%) over last year which have replaced
nitrogen solutions as the preferred fertiliser in Terra's markets. Nitrogen
solutions and urea sales volumes were down 7% and 11% respectively. All three
products experienced price declines compared with last year. The distribution
business was sold with effect from June.
At AECI, sales of explosives to the mining industry increased and higher sales
of detonators improved margins. Nitrogen products continue to suffer with
historically low urea and ammonia prices. Polifin reported lower earnings
owing to adverse price and local volume variances.
The Tongaat Hulett Group reported stronger operating profits for the period.
The Sugar division expects a full season decline of 8% to 845,000 tonnes in
production compared with last year's 918,000 tonnes. The Aluminium division
has delivered continued improvements in performance in the extrusion business
and maintained satisfactory operating results in rolled products. The rolled
products expansion project is meeting cost and time budgets.
Mine closures, production cutbacks and exploration budget reductions have
combined to reduce the volume of business available to Boart. However, there
are some positive signs of new orders being received in Europe and the Far
East. Restructuring continues with closures in Chile and consolidation in some
South African operations.
Notwithstanding the depressed state of the South African economy, LTA's
operations reported solid results to June. This was due in part to the
acquisition of McConnell Dowell, which was effective 1 January 1999, and the
company's increased capacity to earn profit in hard currency. Foreign-based
earnings now account for more than half of LTA's total earnings.
Financial Services
Anglo American has accrued an unchanged contribution to operating profits from
the FirstRand Group for the six months ended 30 June 1999 amounting to US$67
million. The results for the first half of 1998 related to a combination of
First National Bank (FNB) and The Southern Life Assurance Company in the first
quarter, and of the new merged FirstRand group in the second quarter. The
figures for the year to 31 December 1998 comprise the above, plus the
contribution of the combined FirstRand group for the six months to 31 December
1998. Considerable progress has been made in re-organising, rightsizing and in
incorporating the new group's business philosophy. On 1 July this year,
FirstRand announced that its activities had been divided into two distinct
entities, FirstRand Insurance Group and FirstRand Bank Holdings.
Rand Merchant Bank (RMB) and FNB will continue to operate as autonomous
divisions, using their respective brand names. The intention being to use the
FNB brands for retail, commercial and corporate banking, with the RMB brand
employed in merchant and investment banking as well as treasury operations.
Liquidity and financial position
Net cash provided by operating activities fell by US$368 million to US$605
million, principally owing to the lower operating profits in this six months.
Capital expenditure at US$604 million was virtually unchanged from the prior
period. Major projects include the Bafokeng Rasimone mine in the platinum
division and Loma de Niquel and Lisheen in the base metals division. At 30
June 1999 cash and current asset investments amounted to US$3,970 million,
while loans and short term debt amounted to US$4,669 million. The ratio of net
debt to the total capital was 4%.
Acquisitions and disposals
In December last year, a 40% shareholding in BHP's Australian manganese
operations was acquired for US$159 million, in joint venture with Billiton. In
January, Mondi Minorco Paper acquired the UK and French corrugated packaging
business Amcor Fibre Packaging Europe for US$240 million. Amcor produces a
full range of corrugated products from 15 plants in the UK and six plants in
France. Amcor, which has around 10% of the UK market, was subsequently renamed
Mondi Packaging (Europe). Also during the period, Swiecie Box acquired BZWP, a
corrugated packaging operation in southern Poland. In April, Minorco announced
an offer, subsequently successfully completed, to acquire all of the shares of
Reunion Mining PLC for an aggregate consideration of US$63 million. Reunion
concentrated on mineral exploration and mining in Africa and its principal
asset was a 60% interest in the Skorpion zinc project in Namibia. In August,
Anglo American announced an agreement with Anaconda Nickel Limited, an
Australian listed company, in terms of which Anglo American will purchase 77.3
million newly issued Anaconda shares for a cash amount of A$244 million. The
purchase consideration could increase by a further A$77 million if the
Anaconda share price exceeds certain agreed levels during the next three
years. Anaconda is a nickel mining and exploration company currently
developing the lateritic nickel deposit of Murrin Murrin in Western Australia.
Following these transactions, Anglo American will own 23% of Anaconda.
On 30 June, Terra sold its distribution business to Cenex/Land O'Lakes
Agronomy Company for US$390 million subject to an adjustment for working
capital. The sales proceeds were used to reduce funding requirements and will
strengthen the long term viability of the company. Effective 26 June 1999,
AECI Limited reached agreement to sell its 40% stake in Polifin Limited to
SCI, a wholly owned subsidiary of Sasol Limited for US$345 million. This
continues the process of unlocking value from the investment in AECI with the
ultimate objective of exiting this non-core business.
Year 2000
Anglo American has implemented a strategy to achieve acceptable levels of Year
2000 compliance throughout all business operations by the end of September
1999. The programme included preparing a comprehensive inventory of systems
and components, an analysis of their criticality to the business and testing
to ascertain the extent of compliance. The programme provides for the
necessary corrective actions in respect of non-compliant systems and
components. Steps have also been initiated with suppliers and customers to
mitigate against possible disruption involving third parties. The programme is
now well advanced and progress to date has confirmed that the Year 2000 issue
should not have a material impact on the group. Testing and remedial actions
are virtually complete at most group companies and resources are increasingly
focusing on contingency planning, including measures to mitigate risks from
outside parties. The costs of Year 2000 activities are normally written off to
the profit and loss account except where modifications to software enhance
rather than maintain the existing service potential. The cost of the total
Year 2000 project is anticipated to be around US$40 million of which US$11
million is expected to be incurred after 30 June 1999.
Outlook
The global economic situation remains variable with continued growth in the US
and encouraging signs in Europe and Asia. This situation has had a mixed
impact on commodity prices - some showing the first signs of improvement,
albeit from very low levels, while the remainder, such as coal, show little or
no indication of a likely change for the better. In South Africa, the
reduction in interest rates should help stimulate demand and result in some
improvement in business performance in the second half of the year.
More to follow
IR CCOCDDDKBFCK
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