Procurement mitigates Anglo American cost pressures

17 February 2012

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17 February 2012 | Angeline Albert

Anglo American has recognised the contribution of procurement to help the company mitigate the impact of falling demand and extreme weather on profits.

According to the international mining group, effective cost management had lessened the impact of production disruption on profits. Problems included disruption to operations caused by extreme weather and safety stoppages, industry-wide cost pressures and economic uncertainty that led to a fall in commodity prices at the end of 2011. This affected operating profit and resulted in lower production volumes and in higher unit costs of production across the group.

“The impact of this negative global trend was mitigated by the continuing positive performance of our embedded asset optimisation and procurement programmes,” said the company’s annual results published today.

The financial report revealed a 14 per cent rise in operating profit to £7 billion ($11.1 billion) compared with 2010 at the business.

"Anglo American delivered an impressive financial and operational performance in 2011, as we continued to capture the benefits of operational improvements and disciplined cost management," said CEO Cynthia Carroll.

Exports of metallurgical coal, used in the production of steel, fell by 9 per cent in 2011 compared to the previous year, primarily as a result of heavy rainfall and subsequent flooding around the start of last year in Australia. Copper production was 4 per cent lower than in 2010 due to extreme wet weather and operational issues at Collahuasi in Chile. Diamond production also decreased by 5 per cent reflecting the impact of maintenance and excessive rainfall in southern Africa during the first half of the year.

The company also issued a warning for the year ahead: “Costs are likely to continue to be affected by strong producer currencies and increasing prices for key inputs.”


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