Metal News

Glencore Semi-Annual Report 2019

Glencore Semi-Annual Report 2019

 

Highlights

Glencore CEO Ivan Glasenberg said: "Our performance in the first half of the year reflected a challenging economic environment for our mix of raw materials and operational and cost reductions in our startup / development assets. Adjusted EBITDA decreased by 32% to 5,6 billion USD.

"The rest of our business, however, remained strong and developed well. Excluding our African copper assets and Koniambo, our metals and coal industries delivered a robust adjusted EBITDA margin of 39%. In particular, our copper business excluding African copper posted an EBITDA margin of 52% and full cash unit costs of 72 cp / lb, while our coal business once again returned margins of over 30 USD / t with a thermal value of 46 USD / t. Similarly, our marketing business is moving towards the middle of our entire year. Adjusted EBIT projections range between 2,2 and 3,2 billion US dollars, adjusted for approximately 350 million dollars of non-cash cobalt losses reported in the first half of the year.

"However, our copper business in Africa did not deliver the expected operating performance. We have met the Katanga and Mopani challenges with several management changes and a detailed operational review aimed at achieving several improvements to achieve consistent, cost-effective production with design capabilities. Our teams have found a credible roadmap to exploit the significant cash flow generation potential of these assets for targeted production. At Mutanda, we plan to transition operations to temporary maintenance and servicing by the end of the year to reflect the Company's reduced economic viability in the current market environment, mainly due to low cobalt prices. We continue to work on studies on the sulfide project, which has the potential to extend operation over many years, and we expect to be able to provide an update at our Investor Day in December.

 

Glencore Semi-Annual Report 2019

Glencore headquarters in Baar - Switzerland

"Looking to the future, we are confident that commodity fundamentals will be in our favor, and that our diverse commodity portfolio will continue to play a key role in global growth and transition to a low-carbon economy. Our asset teams are focused on unlocking the full potential of our business. Together with our promising range of raw materials, they should see us well positioned for the future. Through continued constructive cooperation, we continue to focus on creating sustainable long-term value for all shareholders. "

US $ million H1 2019 H1 2018 Change% 2018
Key statement of income and cash flow highlights2:
Net income attributable to equity holders                     226                  2,776                       (92)                  3,408
Adjusted EBITDA◊                   5,582                   8,180 1                       (32)                 15,767
Adjusted EBIT◊                  2,229                    5,091 1                       (56)                   9,143
Earnings per share (Basic) (US $)                    0.02                     0.19                       (89)                    0.24
Funds from operations (FFO)3◊                    3,516                   5,566 1                       (37)                   11,595
Cash generated by operating activities before working capital changes                  5,409                  6,805                        (21)                  13,210
Net purchase and sale of property, plant and equipment3                    2,193                   2,055 1                          7                  4,899

 

US $ million 30.06.2019 31.12.2018 Change%
Key financial position highlights:
Total assets                127,183               128,672                          (1)
Net funding3◊                 33,238                 32,138                          3
Net debt3◊                 16,308                  14,710                          11
ratios:
FFO to Net debt3,4◊                  58.5%                 78.8%                       (26)
Net debt to adjusted EBITDA4◊                     1.24                     0.93                        33
1 Restated to present Glencore Agri on a basis consistent with its underlying IFRS treatment (equity accounting), previously proportionately accounted, refer to APMs section for reconciliations and note 2 of the 2018 annual report.
2 Refer to basis of presentation on page 5.
3 Refer to page 9.
4 H1 2019 and H1 2018 ratio 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 66 for definition and reconciliations, to note 3 of the financial statements for reconciliation of Adjusted EBIT / EBITDA and to page 18 for reconciliations of Mining Margins.
Healthy cash generation despite significantly lower raw material prices
  • Adjusted EBITDA for the first half of the year 2019 down 32% to 5,6 billion USD (5,9 billion USD before non-cash cobalt loss of 350 million USD)
  • Net income attributable to shareholders decreased to 0,2 billion USD, mainly due to lower average commodity prices and impairment charges in our oil and copper portfolios in Chad and Africa
  • Cash flow from operating activities before changes in working capital decreased by 21% to 5,4 billion USD
  • Net purchase and sale of property, plant and equipment increased by 7% to 2,2 billion USD
  • Our startup / development assets, consisting of Copper Africa and Koniambo, detracted from earnings in the first half of 2019 with a negative adjusted EBITDA of 0,4 billion USD. These assets offer a significant upward trend with consistent production.

 

Industry leading cost items

  • Cash-cost performance of the operating unit in the first half of the year for our major commodities: copper (excluding African copper) 72 cp, zinc 3 cp (excluding gold 40 cp), nickel (excluding Koniambo) 329 cp and thermal coal 46 USD / t a margin of 32 USD / t

 

Marketing a diversified earnings driver

  • Marketing Adjusted EBIT of 1,0 Billion, minus 35%, but only 13%, net of a cobalt loss due to an "involuntary" cobalt long position against a particularly strong base period

 

Forecast factors for the full year ...

  • On an annualized basis, adjusted EBIT before cobalt marketing at 1,3 billion dollars was in the middle of our long-term target corridor from 2,2 to 3,2 billion dollars
  • Expected industrial production of H2 for copper, zinc, nickel, coal and oil
  • African Copper and Koniambo are taking significant initiatives to improve their operations and costs

 

... and a solid balance sheet in the medium term

  • Debt facilities renewed in March / April. The maturities of the bonds are still limited to ~ 3 billion USD per year
  • Although net debt of 16,3 billion USD is at the upper end of our target range due to a new lease accounting standard, 2019 recognized new lease liabilities of 1,1 billion previously treated as operating leases Conservative 1,24x Net Debt / Adjusted EBITDA -Relationship. We intend to manage the balance sheet over the next 6 to 12 months in view of our target of approximately 1x in the current uncertain environment of the business cycleTo view the full report, please click
    https://www.glencore.com/dam/jcr:de09eded-6a3b-42f7-9b82-f40d1a257dcd/GLEN-2019-Half-Year-Report.pdfFor more information please contact:Investors
    Martin Fewings
    t: + 421 917 252 978
    m: + 41 79 737 5642
    [email protected]Media
    Charles Watenphul
    t: + 421 917 252 978
    m: + 41 79 904 3320
    [email protected]

    Glencore LEI: 2138002658CPO9NBH955

Text and pictures: Glencore

Translation: Institute of rare earth metals

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