Ladies and Gentlemen, 2004 was the best year of growth in the global economy for over 20 years. This recovery underpinned strong commodity prices with the material-intensive growth in China being a key determinant. Nonetheless, these strong US dollar prices were partially offset for Anglo American by the continued weakness of the dollar, especially relative to the South Africa rand, the Euro and the Australian dollar. Against this background, and at a point in the cycle when the greatest beneficiaries tend to be producers of bulk commodities, the board were pleased with the record, 59%, increase in Anglo American's headline earnings for 2004.
Taking into account the record results, and in line with the board's policy of progressively increasing dividends, the board is recommending an increase in the final dividend of 12 cents from 39 cents to 51 cents a share. If approved by shareholders, this will result in a 30% increase in the total dividend for 2004 to 70 cents a share, covered 2.7 times by earnings.
I should also say that whilst commodity prices and exchange rates will always have a crucial influence over our results, the undoubted benefits of the cycle were amplified by: the substantial changes engineered in our portfolio over the last five years; by the strong internal growth opportunities which the Group has generated; and by an ambitious programme of cost savings.
As the Chief Executive will outline, the results reflect our improved geographical diversity - with the Americas contributing over 40% of headline earnings - and the value-adding enhancements made to our asset base. Management have shown restraint in their acquisition strategy and they have realised strong value creation, for example, from the De Beers transaction; from the acquisition of the former Disputada copper assets in Chile and the purchase of stakes in Cerrejon Coal and Kumba Resources and from paper and packaging assets such as the Syktyvkar mill in Russia. I do not doubt the commitment of management to acquisitive opportunism – but equally in such a cyclical business we are wise to be cautious about not over-paying now and repenting at leisure.
Although we will be addressing elections to the board in detail a little later, I should like to pay tribute to three retiring Directors and to explain the thinking behind the nominations that have been put before you. First, I should like to thank Bill Nairn, who retired as Group Technical Director at the end of 2004. He played a key role in reshaping our technical disciplines and has given leadership to our unrelenting drive to improve our safety performance. Amongst our Non-Executive Directors, two have decided not to seek re-election – Sir David Scholey and Goran Lindahl – both of whom have brought their significant international business experience to our deliberations and made an important contribution to the work of the board. I thank them both for their insights.
Tony Lea, our Finance Director, will retire from the board at the end of 2005 after long and distinguished service with the Group. I will say more about him at next year's meeting and he will continue to be available as a consultant. He will hand over as Finance Director to Rene Medori in September. Subject to approval, Rene will join the board in June from his current role as Finance Director of BOC plc. Barry Davison will also retire from the board in December, but will continue for a further period as Chairman of Anglo Platinum and a director of a number of Group companies.
As part of our development of our senior executives we have also proposed that two new Executive Directors should join the board: Simon Thompson and David Hathorn. Simon Thompson has been the architect of the re-shaping of our Base Metals business unit – which became by far the biggest contributor to earnings in 2004 – and is now the Chairman of Base Metals, Industrial Minerals and of the Exploration Council. David Hathorn is the Chairman and Chief Executive of our Paper and Packaging businesses and has been the strategist behind its rapid expansion, especially in Europe. We are also proposing an additional independent Non-Executive for election to the board – Ralph Alexander. He is an American citizen who currently Heads BP Petrochemicals and brings with him extensive experience of international energy businesses.
Ladies and Gentlemen, during 2004 I visited Anglo American operations in countries as disparate as South Africa, Mozambique, Russia and China – and covering almost all of our business units. I was very impressed by the professionalism of the people whom I met, the consistent emphasis on safety, the zest for innovation and problem solving and their commitment to improving our impacts on local communities.
We increasingly expect our managers not only to uphold high standards of technical and commercial performance, but also to be adaptable and to embrace the new skills that are implied by our commitment to sustainable development. We have made significant strides in improving the management and development of our employees. We must ensure that we bring the same rigour and professionalism to managing our human resources as we do to managing our big capital assets. Hence there is an increasing emphasis, throughout the organisation, on entrenching a performance culture and a focus – at least annually – on personal development and talent management. You will also have noted, from our recently published 'Report to Society', our strong emphasis on improving communication with employees, on training and the big increase in the number of apprentices and bursars whom we are supporting. Taken together they amount to a substantial investment in our talent pipeline. In a year of exceptional performance I should also like to record the thanks of the Board to our employees at all levels for their work and commitment.
A key attribute that we look for from our managers is leadership. I saw this in many places but most notably at our Goedehoop colliery in South Africa. This is a strong performer in relation to production and profitability but it is also a leader in the battle against HIV/AIDS and – in particular – to get employees to confront their HIV status through Voluntary Counselling and Testing – or VCT. By the end of 2004, the level of participation in VCT at Goedehoop stood at over 90% and of those on anti-retroviral therapies all were able to do normal work and to continue supporting their families. Moreover, I understand that at the beginning of the year they turned the testing counter back to zero and already, in the first quarter, one third of employees have come forward to repeat their test. I also understand that such is the focus on the HIV issue, the level of infection at Goedehoop seems to be being contained. We need to spread this level of performance to our other operations in Southern Africa. Anglo American's leadership role on HIV is not only part of our commitment to making a difference to the societies in which we work but also a prudent investment in the preservation of the human capital within our business.
The natural resources and mining businesses have a significant operational environmental and social 'footprint'. This carries with it a responsibility to minimise our negative impacts on the societies around us and to accentuate our positive impacts. At last year's meeting I spoke about the Extractive Industries Review and the role of mining as a trigger for wider development. The World Bank has shown considerable skill in using the outcomes of the Review as a starting point basis for the revision of its Performance Standards, whilst rejecting some of the more extreme options contained in the Salim Report. But during the rest of this year, with the focus of the G8 Summit being on poverty alleviation in Africa and the UN Review Conference of the Millennium Development Goals taking place in September, there will be continuing scrutiny of business' role in development. There are undoubtedly dangers of some groups seeking to push onto the shoulders of companies, responsibilities that are more properly matters for governments. But we also have a clear interest in the healthy development of the countries and communities where we do business and in showing that the responsible exploitation of natural resources is an opportunity rather than a curse.
Thus at an international level we have been strong supporters of the Extractive Industries Transparency Initiative – to help ensure that the tax revenues that we generate find their way to legitimate purposes. At a national level within South Africa we are playing an active and committed role in the transformation process required to address the continuing legacies of the apartheid era. This involves not only opening up equity participation for black economic empowerment companies but also seeking to spread opportunities through our purchasing strategies, local business development and social investment. This work is being ably led by Lazarus Zim, the newly-appointed Chief Executive of Anglo American South Africa.
Moreover, at a community level, our innovative Socio-Economic Assessment Toolbox – or SEAT - process is making a big difference in ensuring that our operations have a rounded understanding of the concerns and priorities of the communities around them. SEAT assessments are in the field at about 35 locations around the globe in nine countries. Earlier this month, together with Karel van Miert and David Challen, I visited our paper and packaging plant at Syktyvkar in Russia to be briefed on their application of the methodology. What has resulted is a better understanding of risk and an action plan in areas like health monitoring, local business development and greater transparency in tendering processes. I should emphasise that this is not window dressing – understanding the social and political dynamics of the societies where we operate is fundamental to maintaining our licences to operate and our future access to resources.
I should like at this point to thank on your behalf those who chair committees of the board, David Challen – audit committee, Rob Margetts – remuneration, Fred Phaswana – nomination and Chris Fay – Safety and Sustainable Development. Their work and comprehensive reports to the full board are a significant contribution to the effectiveness of your board. But all the non-executive directors are involved during the year in working visits to sites. Apart from the Russian visit just mentioned, the Safety and SD committee and other members of the board visited Mondi operations at Richards Bay and Kumba operations at the Sishen mine in conjunction with our annual board strategy meeting in South Africa, as well as a Safety and SD committee visit to operations in Chile and Brazil. Göran Lindahl also visited our operations in Zimbabwe. These visits, normally combined with other travel, are an excellent way of directors becoming acquainted not only with our operations, but with the people who run them. We also find that the visits contribute greatly to corporate cohesion and morale in the sites.
I will now ask the Chief Executive to report on the performance of Anglo American's businesses during 2004 and on the prospects for the current year.