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Anglogold Ashanti Ltd (NYSE:AU)
Operating Income
$431 Mil (TTM As of Mar. 2015)

Anglogold Ashanti Ltd's operating income for the three months ended in Mar. 2015 was $142 Mil. Its operating income for the trailing twelve months (TTM) ended in Mar. 2015 was $431 Mil.

Warning Sign:

Anglogold Ashanti Ltd had operating loss over the past 3 years.

Operating margin is calculated as operating income divided by its revenue. Anglogold Ashanti Ltd's operating income for the three months ended in Mar. 2015 was $142 Mil. Anglogold Ashanti Ltd's revenue for the three months ended in Mar. 2015 was $1,079 Mil. Therefore, Anglogold Ashanti Ltd's operating margin for the quarter that ended in Mar. 2015 was 13.16%.

Anglogold Ashanti Ltd's 3-Year average Growth Rate for operating margin was 0.00% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition. Anglogold Ashanti Ltd's annualized return on capital for the quarter that ended in Mar. 2015 was 0.73%. Anglogold Ashanti Ltd's annualized return on capital (Joel Greenblatt’s) for the quarter that ended in Mar. 2015 was 9.22%.


Definition

Operating income, is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

Anglogold Ashanti Ltd's Operating Income for the fiscal year that ended in Dec. 2014 is calculated as

Anglogold Ashanti Ltd's Operating Income for the quarter that ended in Mar. 2015 is calculated as

Operating Income(Q: Mar. 2015 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=1079-870-20
-Research & Development-Depreciation, Depletion & Amortization-Others (1)
-0-174--127
=142

Operating Income(Q: Mar. 2015 )
=EBITDA-Depreciation, Depletion & Amortization-Others (2)
=298-174--18
=142

Anglogold Ashanti Ltd Operating Income for the trailing twelve months (TTM) ended in Mar. 2015 was 175 (Jun. 2014 ) + 149 (Sep. 2014 ) + -35 (Dec. 2014 ) + 142 (Mar. 2015 ) = $431 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition.

Anglogold Ashanti Ltd's annualized Return on Capital (ROC) for the quarter that ended in Mar. 2015 is calculated as:

Return on Capital (ROC)(Q: Mar. 2015 )
=NOPAT/Average Invested Capital
=Oper. Inc.*(1-Tax Rate)/( (Invested Capital (Q: Dec. 2014 ) + Invested Capital (Q: Mar. 2015 ))/2)
=568 * ( 1 - 92.19% )/( (6098 + 6071)/2)
=44.3608/6084.5
=0.73 %

where

Invested Capital(Q: Dec. 2014 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=3498 + 223 + 2845 - 468
=6098

Invested Capital(Q: Mar. 2015 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=3471 + 199 + 2765 - 364
=6071

Note: The Operating Income data used here is four times the quarterly (Mar. 2015) operating income data.

2. Joel Greenblatt’s definition of Return on Capital:

Anglogold Ashanti Ltd's annualized Return on Capital (Joel Greenblatt’s) for the quarter that ended in Mar. 2015 is calculated as:

ROC (Joel Greenblatt’s)(Q: Mar. 2015 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=EBIT/Average of (Net PPE+Net Working Capital)
     Q: Dec. 2014  Q: Mar. 2015
=EBIT/( ( (Net PPE + Net Working Capital) + (Net PPE + Net Working Capital) )/2 )
=496/( ( (4863 + max(420, 0)) + (4603 + max(875, 0)) )/2 )
=496/( ( 5283 + 5478 )/2 )
=496/5380.5
=9.22 %

where Working Capital is:

Working Capital(Q: Dec. 2014 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(239 + 888 + 54) - (761 + 0 + 0)
=420

Working Capital(Q: Mar. 2015 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(263 + 795 + 498) - (588 + 0 + 93)
=875

When net working capital is negative, 0 is used.

Note: The Earnings Before Interest and Taxes (EBIT) data used here is four times the quarterly (Mar. 2015) EBIT data.

3. Operating Income is also linked to Operating Margin:

Anglogold Ashanti Ltd's Operating Margin for the quarter that ended in Mar. 2015 is calculated as:

Operating Margin=Operating Income (Q: Mar. 2015 )/Total Revenue (Q: Mar. 2015 )
=142/1079
=13.16 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Be Aware

Compared with a company’s EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company’s revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)’s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia’s Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus’s Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.


Related Terms

Revenue, Cost of Goods Sold, Selling, General, & Admin. Expense, Research & Development, Gross Profit, EBITDA, Depreciation, Depletion and Amortization, Return on Capital, Return on Capital (Joel Greenblatt’s), Earnings Yield, Operating Margin, EBIT


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Anglogold Ashanti Ltd Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Operating Income -96210206-577181,3152,0601,194-2,440519

Anglogold Ashanti Ltd Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
Operating Income -88323773-1,943-807229175149-35142
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