De Beers Société Anonyme today reported underlying earnings for the year ended 31 December 2006 of $425 million
09 February, 2007
Anglo American plc arrives at its underlying earnings in respect of De Beers by accounting for the interests arising from the ordinary shares and the 10% preference shares it holds in DB Investments.
Anglo American plc (AA plc) will therefore report underlying earnings of US$227 million for the year ended 31 December 2006 from its investment in DB Investments (DBI), as reconciled in the table below:
| US$ million | 2006 |
|---|---|
| DBI underlying earnings(1) (100%) | 425 |
| Adjustments(2) | 18 |
| DBI underlying earnings – AA plc basis (100%) | 443 |
| AA plc's 45% ordinary share interest | 199 |
| Income from preference shares | 28 |
| AA plc underlying earnings | 227 |
(1)DBI underlying earnings is stated before costs of $57m in relation to the amended class action settlement agreement, and profits of $229m and $105m relating to the Ponahalo BEE transaction and sale of interest in Fort a la Corne, respectively.
(2)Adjustments include the reclassification of the actuarial gains and losses booked to the income statement by De Beers Société Anonyme (Dbsa) under the corridor mechanism of IAS19.
On 30 June 2006, Dbsa redeemed a further 25% of the preference shares originally in issue, taking the total redemption to 75% of the issue, and on that date AA plc received S$175 million, representing 25% of its original US$701 million preference share interest. AA plc now holds US$175 million of preference shares in Dbsa.
In the year ended 31 December 2006, AA plc received a total of US$315 million in distributions from DBI, consisting of a US$68 million interim dividend on ordinary shares relating to FY 2006, US$17 million dividends representing the second payment on preference shares for 2005, interim dividends totalling US$18 million on preference shares for 2006, and a share premium repayment of US$212 million relating to the proceeds from the BEE transaction. This transaction, which concluded on 18 April 2006, resulted in 26% of De Beers Consolidated Mines Limited being sold to Ponahalo Consortium for R3.7 billion.
Underlying Earnings
Underlying Earnings is net profit attributable to equity shareholders, adjusted for the effect of special items and remeasurements, and any related tax and minority interests. Special items are those items of financial performance which are material by nature or amount and should therefore be separately presented. These principally relate to impairment and significant closure costs, exceptional legal provisions and profit or loss on disposals. Remeasurements include (i) adjustments to ensure that the unrealised gains or losses on non-hedge derivative instruments are recorded in underlying earnings in the same period as the underlying transaction against which these instruments provide an economic, but not formally designated, hedge and (ii) foreign currency gains and losses arising on the retranslation of dollar denominated De Beers preference shares held by a rand functional currency subsidiary of the Group.
The above figures are unaudited.