Glencore Plc Another strong financial performance

Glencore plc

Glencore Plc (LON:GLEN), announced half year report for 2018.

Highlights

Glencore’s Chief Executive Officer, Ivan Glasenberg, commented: “The strength of our diversified business model and commodity mix is once again demonstrated with a 13% increase in net income and a 23% increase in Adjusted EBITDA to $8.3 billion.

“Against a volatile but favourable trading and commodity price environment, Marketing performed towards the upper end of its guidance range with a 12% increase in Adjusted EBIT to $1.5 billion. Our Industrial business recorded Adjusted EBITDA of $6.7 billion, up 26%, reflecting the highly competitive cost positions of our asset base.

“Cash generation remains strong, with FFO up 8% to $5.6 billion and our balance sheet healthy, with Net debt of $9 billion. In addition to the $2.85 billion of shareholder distributions announced earlier this year, we recently announced a $1 billion buy-back programme.

“While broader market conditions are likely to remain volatile, confidence in our business prospects and current share trading levels point to near-term focus on deleveraging and shareholder returns / buybacks funded through cash generation. We remain focused on creating value for shareholders through the disciplined allocation of long-term capital.”

US$ million

H1 2018

H1 2017

Change %

2017

Key statement of income and cash flows highlights1:

Net income attributable to equity holders

2,776

2,450

13

5,777

Adjusted EBITDA

8,270

6,741

23

14,762

Adjusted EBIT

5,119

3,801

35

8,552

Earnings per share (Basic) (US$)

0.19

0.17

12

0.41

Funds from operations (FFO)2◊

5,625

5,201

8

11,556

Net cash generated by operating activities before working capital changes

6,805

5,599

22

11,866

Capital expenditure

2,165

1,679

29

4,234

US$ million

30.06.2018

31.12.2017

Change %

Key financial position highlights:

Total assets

134,464

135,593

(1)

Net funding2◊

31,894

32,898

(3)

Net debt2◊

8,997

10,673

(16)

Ratios:

FFO to Net debt2,3◊

133.2%

108.3%

Net debt to Adjusted EBITDA3◊

0.55x

0.72x

Another strong financial performance
– Adjusted EBITDA of $8.3 billion, up 23%; Adjusted EBIT of $5.1 billion, up 35%

– Net income attributable to equity holders of $2.8 billion, up 13%; net income, pre-significant items up 40% to $3.3 billion

– Funds from operations of $5.6 billion, up 8%

– Continued balance sheet strength and flexibility: Net debt of $9.0 billion, down 16%

– EPS of $0.19 per share, up 12%

– 2nd instalment of the 2018 distribution of $1.4 billion ($0.10 per share) payable in September

Strong Marketing performance
– Marketing Adjusted EBIT of $1.5 billion, up 12%

– Strong performances from Metals and minerals and Energy products segments, up 17% and 23% respectively

– Lower crop yields in key geographies reflected in weaker Agricultural products performance; stronger H2 expected

Industrial assets performance underpinned by higher prices and continued cost/asset optimisation
– Industrial Adjusted EBITDA up 26% to $6.7 billion

– Solid first-half mine cost/margin performances across the business (Cu: 88c/lb, Zn: -11c/lb (20c/lb ex Au), Ni: 177c/lb, Coal: $35/t margin at $50/t unit cash cost)

– Copper and zinc mine costs higher than initial FY guidance primarily due to project ramp-up, lower by-product pricing, some modest energy cost inflation and H2 weighted production

Growth through selective M&A
– Hunter Valley Operations large-scale premium thermal coal mine JV established in May (49% attributable to Glencore)

– Hail Creek primarily coking coal acquisition from Rio Tinto completed on 1 August

– Downstream oil investments in South Africa, Botswana and Brazil expected to complete in H2

Increasing returns to shareholders, funded by cash generation
– 2018E distributions / buybacks now total $4.2 billion, comprising $2.85 billion distribution of 2017 cash flows, $0.3 billion H1 share trust purchases and $1.0 billion H2 buy-back programme

– Confidence in own business prospects and current share trading levels point to near-term focus on deleveraging and shareholder returns/buybacks

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