FINANCIAL STATEMENT ANALYSIS

Financial Statement Analysis



Financial Statement Analysis

Introduction

Anglo American plc, with its subsidiaries, joint ventures and associates, is a international foremost in the excavation and natural resource parts. It has significant and concentrated concerns in gold, platinum, diamonds, coal, groundwork and ferrous metals, developed minerals and plantation products, as well as economic and technical strengths. The Group is geographically diverse, with operations in Africa, Europe, North and South America and Australasia. We do not cover in this report independently managed companies including our subsidiary, AngloGold, and our associate, De Beers, both of which publish their own Safety, Health and Environment (SHE) reports. Financial highlights. Total Group turnover decreased by 6% to $19,282 million. Headline profit declined by 12% to $1,770 million. Capital expenditure amounted to $1,787 million. $637 million was paid in taxes. $101 million was expended on exploration. These financial data are derived from the audited Anglo American plc Annual Report and Accounts for the year ended 31 December 2001, and are aggregated from Anglo American plc subsidiaries (together with joint ventures and other interests) using the accounting and consolidation principles of Anglo American plc.

Discussion

It is quite evident that the company is tough to beat if one is looking for stable earnings growth, excellent fundamentals and compelling valuations. The net profit margin has increased slightly because the company offered majority of its products at a cheaper rate to promote its operations. With operations revenue increasing because of this marketing strategy, the ratio is bound to be lower. However, the gross profit has also shown an increase due to the increased operations which is understandable as they have a direct relationship. The increase in revenue is more than the increase in gross profit thus shifting the balance towards the denominator.

When analyzed also with net profit, net profit has also shown a decline. Net profit has marginally decreased over the year. This marginal difference could be attributed to an increase in administrative expenses, increased taxes due to new taxation policy guidelines and finance costs (Interest paid). Similar to gross profit, the increase in revenue surpasses the increase in net profits and hence the ratio has shown a decline. However, it can be presumed that the new operations strategy would help in not only increase the operations in the future but also improve profits by a good margin.

The company has improved its efficiency in utilizing the shareholder funds when compared to previous years. This increase is warranted and expected because of the increase in profits arising due to increased operations, thanks to the new pricing strategy. Increased profit implies increased dividends payout and excellent returns for shareholders. This also makes it an excellent buy option in the capital markets. The return on capital has shown a slight decrease when compared to the previous year. This implies the company's earnings before interest and tax have decreased over the previous year. Since capital employed has decreased in previous years, operations have reduced over the year due to high level of investment, and this has ...