# Glencore delivers an exceptional financial performance in H1

- Link: https://www.directorstalkinterviews.com/glencore-delivers-an-exceptional-financial-performance-in-h1/4121075903
- Published: 2022-08-04T07:46:12+01:00
- Author: Amilia Stone

**Glencore plc** ([LON:GLEN](https://www.directorstalkinterviews.com/ftse-company/glencore-plc/glen.l))
has announced its 2022 Half-Year Report.

**Highlights**

> **Glencore’s Chief Executive Officer, Gary Nagle, commented:**
> _“Notwithstanding what has clearly been a very complex environment for our markets,
> our operations, and the world in general, we are pleased to report an exceptional
> financial performance for Glencore over the period._
> _“Global macroeconomic and geopolitical events during the half created extraordinary
> energy market dislocation, volatility, risk, and supply disruption, resulting 
> in record pricing for many coal and gas benchmarks and physical premia, underpinning
> a $10.3 billion increase (119%) in Group Adjusted EBITDA to $18.9 billion. Marketing
> Adjusted EBIT more than doubled to $3.7 billion, with energy products the standout,
> while Industrial Adjusted EBITDA increased $8.4 billion to $15.0 billion period-
> on-period._
> _“Allied to the record EBITDA, our net working capital significantly increased
> during the period, with some $5 billion invested into Marketing, primarily Energy,
> in line with the materially higher oil, gas and coal prices, and their elevated
> volatilities. Despite this build,_ _significant_ _cash was generated, which reduced
> Net debt to $2.3 billion, allowing for today’s announcement of $4.5 billion of“
> top-up” shareholder returns, comprising a $1.45 billion special distribution (
> $0.11 per share) alongside a new $3.0 billion buyback program (c.$0.23 per share).
> Today’s additional returns lift total 2022 shareholder returns to c.$8.5 billion._
> _“Looking ahead, tightening financial conditions and a deteriorating macroeconomic
> environment present some uncertainty for commodity markets through the second 
> half of the year. However, with few short-term solutions to rebalance global energy
> markets, coal and LNG prices look set to remain elevated during this period, particularly
> given the current challenge of securing sufficient and reliable energy supply 
> for the Northern hemisphere winter ahead._
> _“For metals, the outlook is more complex, balancing supply risks, amid labour,
> water and energy shortages, supply chain disruptions, growing sovereign risk uncertainty
> and rising costs, against likely weakening end-use markets ex-China. There are
> some recent signs of China recovering from its Q2 trough, which could help to 
> offset potentially weaker conditions in other key consuming markets._
> _“The combined strength of our diversified business model across metals and energy
> industrial and marketing positions has proved itself adept in all market conditions,
> which should allow us to both successfully navigate the shorter-term challenges
> that may arise, as well as meet the resource needs of the future. I would like
> to thank all our employees for their efforts and tremendous contribution during
> these turbulent times and as always, we remain focused on creating sustainable
> long-term value for all our stakeholders.”_

| **US$ million** | **H1 2022** | **H1 2021** | **Change %** | **2021** | 
| Key statement of income and cash flows highlights^(1): |  |  |  |  | 
| Revenue |         134,435 |         93,805 |                  43 |         203,751 | 
| Adjusted EBITDA^(◊) |            18,918 |            8,654 |                 119 |           21,323 | 
| Adjusted EBIT^(◊) |             15,415 |            5,305 |                 191 |          14,495 | 
| Income for the period attributable to equity holders |            12,085 |             1,277 |               846 |            4,974 | 
| Earnings per share (Basic) (US$) |               0.92 |               0.10 |               820 |              0.38 | 
| Funds from operations (FFO)^(2◊) |            15,425 |             7,310 |                  111 |           17,057 | 
| Cash generated by operating activities before working capital changes, interest and tax |           18,290 |              7,181 |                155 |           16,725 |

| **US$ million** | **  30.06.2022** | **31.12.2021** | **Change %** | 
| Key financial position highlights: |  |  |  | 
| Total assets |         139,955 |         127,510 |                  10 | 
| Total equity |          44,451 |           36,917 |                 20 | 
| Net funding^(2,3◊) |          27,987 |          30,837 |                 (9) | 
| Net debt^(2,3◊) |            2,308 |            6,042 |               (62) | 
| Ratios: |  |  |  | 
| FFO to Net debt^(2,3,4◊) | 1090.6% | 282.3% |               286 | 
| Net debt to Adjusted EBITDA^(3,4◊) |              0.07 |              0.28 |               (75) |

_1 Refer to basis of presentation on page 6._

_2 Refer to page 10._

_3 Includes $585 million (2021: $857 million) of Marketing related lease liabilities._

_4 H1 2022 ratios based on last 12 months’ FFO and Adjusted EBITDA, refer to APMs
section for reconciliation._

_◊ Adjusted measures referred to as Alternative performance measures (APMs) which
are not defined or specified under the requirements of International Financial Reporting
Standards; refer to APMs section on page 67 for definitions and reconciliations 
and to note 3 of the financial statements for reconciliation of Adjusted EBIT/EBITDA._

**ENERGY MARKET VOLATILITY AND HIGH PRICES DRIVE RECORD FIRST HALF EARNINGS**

–       Elevated energy market dislocation, volatility, risk and supply disruption,
led to record prices for many coal and gas benchmarks and physical premia, underpinning
a $10.3 billion increase in Group Adjusted EBITDA to $18.9 billion

–       Industrial Adjusted EBITDA increased $8.4 billion to $15.0 billion period-
on-period, benefitting primarily from record coal prices, augmented by the incremental
66.7% contribution from Cerrejón, acquired in January 2022

–       Marketing Adjusted EBIT more than doubled to $3.7 billion, with energy products
performing exceptionally well amid the complex, volatile and elevated market risk
backdrop, characterised by extreme dislocations and price movements

–       We currently expect more normal Marketing conditions to prevail in the second
half of the year

**INDUSTRIAL UNIT COSTS HIGHER, PRIMARILY DUE TO THE BROAD INFLATIONARY ENVIRONMENT
AND LOWER BY-PRODUCT CREDITS**

–       H1 unit costs were: Copper 54¢/lb, zinc 9¢/lb (48¢/lb ex-gold), nickel (
ex Koniambo) 370¢/lb and thermal coal $75.4/t

–       Full year estimated unit costs: Copper 93¢/lb, zinc 29¢/lb (63¢/lb ex-gold),
nickel (ex Koniambo) 359¢/lb and thermal coal $79.4/t (all including updated by-
product credits, as appropriate)

–       H1 Industrial capex was $2.0 billion (H1 2021: $1.8 billion); full year 
guidance unchanged at $5.4 billion

**INCOME FOR THE PERIOD ATTRIBUTABLE TO EQUITY HOLDERS OF $12.1 BILLION**

–       Including a $1.5 billion gain on acquiring the remaining 66.67% interest
in Cerrejón and disposal of Ernest Henry

**STRONG BALANCE SHEET**

–       Allied to the record EBITDA, our net working capital significantly increased
during the period, with some $5 billion invested into Marketing, primarily Energy,
in line with the materially higher oil, gas and coal prices, and their elevated 
volatilities

–       Despite the working capital build, significant cash was generated during
the half, which reduced Net funding and Net debt to $28.0 billion and $2.3 billion
respectively from prior period levels of $30.8 billion and $6.0 billion.

–       Period-end Net debt of $2.3 billion allows for “top-up” returns under our
shareholder returns framework, where Net debt is managed around a $10 billion cap,
with sustainable deleveraging below the cap periodically returned to shareholders

–       Announced today “top-up” shareholder returns of $4.5 billion, comprising
a $1.45 billion special distribution ($0.11/share) and a $3.0 billion share buyback(
c.$0.23 per share)

–       Total shareholder returns for 2022 of c.$8.5 billion, including the $3.4
billion base distribution and $0.6 billion buyback announced in February 2022

–       Spot illustrative free cash flow generation of c.$18 billion from Adjusted
EBITDA of c.$32.3 billion.

_Glencore is one of the world’s largest global diversified natural resource companies
and a major producer and marketer of more than 60 responsibly-sourced commodities
that advance everyday life. Through a network of assets, customers and suppliers
that spans the globe, we produce, process, recycle, source, market and distribute
the commodities that enable decarbonisation while meeting the energy needs of today._

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