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Glencore announces preliminary 2020 results

Published by
Global Mining Review,


Glencore has announced its preliminary results for 2020.

Glencore’s CEO, Ivan Glasenberg, commented: “The COVID-19 pandemic is an extraordinary challenge that continues to impact many aspects of day-to-day life. Against this backdrop, the strength of our 2020 underlying performance is a credit to our highly skilled and dedicated employees, and also reflects our unique business model and ability to quickly adapt to changing market conditions and customer needs.

“Navigating from recessionary conditions in the first half to a strong price recovery for most commodities in the second, Adjusted EBITDA finished the year flat at US$11.6 billion. An outstanding marketing performance lifted EBIT by 41% to US$3.3 billion, while industrial adjusted EBITDA fell 13% to US$7.8 billion, primarily reflecting weaker coal prices. A notable improvement was seen at our Katanga operation in the Democratic Republic of Congo (DRC), where its successful ramp-up lifted Africa copper EBITDA to US$712 million from a loss of US$349 million in 2019. Strong second half cash flows repositioned net debt of US$15.8 billion within our target range, allowing for the resumption of distributions. We are recommending to shareholders a distribution of US$0.12 per share.

“As the world focuses on the pathway to recovery from COVID-19, it is clear that meeting the goals of the Paris Agreement has taken on even greater urgency. While innovation and technological advances have transformed how we live and work, the commodities needed to enable this have not. Our commodities are essential in developing all facets of infrastructure needed to deliver the goals of energy and mobility transition.

“We are focused on playing our part in supporting the Paris goals and have set out a clear strategy to address our total emissions footprint – being Scope 1, 2 and 3 emissions.

“Glencore has been transforming the global commodities industry for nearly half a century, growing from a trader of ferrous and non-ferrous metals, minerals and crude oil, into one of the world’s largest natural resource companies. Today, the business and its portfolio of commodities is uniquely positioned for the needs of the future. It is ready to support the transition to a low-carbon economy and realise its ambition of net-zero by 2050. We remain focused on creating sustainable long-term value for all stakeholders while operating in a responsible manner across all aspects of our business”

Results

  • US$11.6 billion adjusted EBITDA, flat y/y, with stronger marketing and industrial metals offset by weaker coal prices.
  • Net income pre-significant items: $US2.5 billion, in line with 2019.
  • Significant items are mainly non-cash impairment charges amounting to US$5.9 billion (2019: US$2.4 billion), primarily in respect of Mopani, Colombian coal and the African oil portfolio. Resulting statutory loss of US$1.9 billion.
  • Net purchase and sale of PP&E: US$3.9 billion, down 21%.
  • Proposed US$0.12/share (US$1.6 billion) 2021 distribution.

Resilient industrial asset performance

  • Industrial assets adjusted EBITDA US$7.8 billion, down 13%. Strong metals performance outweighed by weaker coal prices.
  • Metals US$7.3 billion (+31%), energy US$1 billion (-73%); balance is corporate and other.
  • Early COVID-19 impacts followed by multi-year highs for base metals. Energy complex also recovered into year-end.
  • Cost/margin performance: Copper (Cu) US$0.94/lb (-US$0.15/lb y/y); Zinc (Zn) -US$0.7/lb (-US$0.35/lb y/y); Nickel (Ni) US$3.76/lb (-US$0.22/lb y/y); coal US$45.90/t (US$11/t margin).

Marketing results

  • Marketing adjusted EBIT US$3.3 billion, c. +US$1 billion y/y (+41%).
  • Energy US$1.8 billion (+33%) driven by exceptional price movements/dislocations and logistics/storage demand.
  • Metals US$1.7 billion (+53%) reflects supportive market conditions and absence of cobalt market challenges experienced in 2019.
  • Viterra agricultural business contributed US$211 millio (2019: US$58 million) share of net earnings.
  • Unchanged longer-term guidance range of US$2.2 – US$3.2 billion adjusted EBIT.

Strong balance sheet

  • Net debt US$15.8 billion, successfully repositioned in the company’s US$10 – US$16 billion target range; targeting below the middle of the range by end 2021.
  • Net debt/adjusted EBITDA down to 1.37x.
  • RMI US$19.6 billion, near the top end of the company’s US$15 – US$20 billion target range, reflecting higher metal prices and carry-trade opportunities.
  • Available committed liquidity of US$10.3 billion; bond maturities capped at c.US$3 billion in any given year.
  • Spot illustrative free cash flow generation of c.US$7.2 billion from adjusted EBITDA of US$16 billion, using end of January 2021 prices.

Climate strategy

  • Medium-term Paris aligned total carbon dioxide equivalent emissions reduction targets and 2050 net zero ambition for Scope 1+2+3.
  • Responsible stewardship of declining coal business over time as industry decarbonises.
  • Climate strategy to be put to shareholders for an advisory vote at the AGM in April.

Portfolio optimisation continuing

  • Finalised agreement for sale of Mopani, with completion expected in 2Q21.
  • Informed the Colombian government of its intention to relinquish Prodeco’s mining licences.
  • Contributed its share of Alumbrera into the larger MARA joint venture.

Read the article online at: https://www.globalminingreview.com/environment-sustainability/17022021/glencore-announces-preliminary-2020-results/

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