Anglo American profits hit by Chinese slowdown

De Beers Millennium collection diamond ring at Sotheby's. Photograph: Peter Macdiarmid/Getty Images

Mining company Anglo American has seen profits hit by slowing Chinese demand for its coal, iron ore and precious metals, although losses were tempered by consumers' seemingly unshakeable faith in diamonds.

The group reported pre-tax profits of $1.9bn (?1.2bn) for the first half of this year, down 34% on the same time last year, in the first set of earnings data under new chief executive Mark Cutifani, since he took over the troubled mining group in April.

The group blamed its performance on "continuing weak global economic growth" and burgeoning supply of coal and iron ore that is pushing down commodity prices. In particular, Chinese demand for Anglo American's iron ore has dropped off, as the Chinese authorities cut steel production in an attempt to shift the focus of their economy from factories to consumers. "In China activity is slowing," the mining group said. "Over the next few years, China's economic growth rate should run well below the average rate of the last decade, which will be a drag on growth in other emerging economies."

Anglo American noted signs of life in the economies of US and Europe, but raised doubts about the durability of Japan's upturn under "Abenomics", its radical policy of monetary stimulus.

But the uncertain economic outlook shows no sign of dampening consumers' desire for diamonds. De Beers, now majority controlled by Anglo American, reported strong sales growth in its jewellery business in Asia and Europe. This year the jeweller opened two shops: in Kuala Lumpur, in Malaysia, and Baku, seat of Azerbaijan's government. Anglo American took a controlling stake in De Beers last August, which helped lift underlying profits in its diamond business to $571m, more than double last year's $249m. Total diamond production rose 6% to 14.3m carats as a result of better grades of the precious stone from the Debswana mine in Botswana.

Cutifani, an Australian miner, is the chairman of De Beers, and is investors' great hope for turning round Anglo American, which has been scarred by violent labour unrest in South Africa, as well as falling behind rivals Rio Tinto and BHP Billiton. On Friday, he announced an overhaul of the business by scaling back its 10 units into six. Tony O'Neill has been poached from AngloGold Ashanti, to become Anglo American's technical director, leaving the management committee at 12: eleven men and one woman.

Source: http://www.guardian.co.uk/business/2013/jul/26/anglo-american-profits-chinese-slowdown

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