GLENCORE PLC - GLN - Preliminary Results 2018

Release Date: 20/02/2019 09:00
Code(s): GLN
 
Wrap Text
GLN - Preliminary Results 2018

Glencore plc
(Incorporated in Jersey under the Companies (Jersey) Law 1991)
(Registration number 107710)
JSE Share Code: GLN
LSE Share Code: GLEN
HKSE Share Code: 805HK
ISIN: JE00B4T3BW64

NEWS RELEASE
Baar, 20 February 2019

Preliminary Results 2018

To view the full report on the Glencore website please click here:
www.glencore.com/dam/jcr:cc9f472a-2486-4e72-8a21-5197ef393fab/GLEN-2018-Preliminary-Results.pdf

To view the full report on the Johannesburg Stock Exchange portal please click here:
https://senspdf.jse.co.za/documents/2018/JSE/ISSE/BIBLT/GLEN-2018-Preliminary-Results.pdf

Highlights

Glencore’s Chief Executive Officer, Ivan Glasenberg, commented: “We are pleased to report that we have delivered
both record Adjusted EBITDA and significant cash returns to shareholders in 2018.
“Reflecting the strength of our uniquely diversified business model and commitment of our people, we achieved
these results in a challenging operating environment. Our asset portfolio continued to deliver overall competitive
all-in unit costs, which allowed the Company to capitalise on healthy average commodity prices and generate
attractive margins. Adjusted EBITDA increased 8% to $15.8 billion and net income before significant items rose
5% to $5.8 billion.

“Our strong cash generation underpinned $5.2 billion of announced shareholder returns and buybacks in 2018.
Reflecting the strength of these cash flows, we are again recommending to shareholders a 2019 base distribution
of $0.20 per share (~$2.8 billion), payable in two equal instalments in 2019. We also announce today a new $2
billion buyback program, which will run until the end of 2019. We will proactively look to top this up (in
August, or otherwise) as market conditions support, including automatically from a targeted $1 billion of non-
core asset disposals in 2019.

“Our commodity portfolio and its key role in enabling the energy and mobility transition for a low-carbon economy
enables us to look ahead with confidence and to remain focused on creating sustainable long-term value for all
our shareholders.”

US$ million                                                                                                2018             2017         Change %
Key statement of income and cash flows highlights(2):
Net income attributable to equity holders                                                                3,408            5,777                (41)
Adjusted EBITDA(#)                                                                                      15,767         14,545(1)                 8
Adjusted EBIT(#)                                                                                         9,143          8,459(1)                 8
Earnings per share (Basic) (US$)                                                                          0.24             0.41                (41)
Funds from operations (FFO)(2,3#)                                                                       11,595         11,350(1)                 2
Cash generated by operating activities before working capital changes                                   13,210           11,866                 11
Purchase and sale of property, plant and equipment – net(3#)                                             4,899          3,789(1)                29


US$ million                                                                                         31.12.2018       31.12.2017          Change %
Key financial position highlights:
Total assets                                                                                           128,672          135,593                 (5)
Net funding(3#)                                                                                         32,138         31,053(1)                 3
Net debt(3#)                                                                                            14,710         10,216(1)                44
Ratios:
FFO to Net debt(3#)                                                                                      78.8%         111.1%(1)               (29)
Net debt to Adjusted EBITDA(#)                                                                           0.93x          0.70x(1)                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.
2 Refer to   basis of presentation on page 7.
3 Refer to   page 11.

# 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 106 for definition and reconciliations and note 2 of the financial statements for
  reconciliation of Adjusted EBIT/EBITDA and capital expenditure.

Another record Adjusted EBITDA performance
• Adjusted EBITDA of $15.8 billion, up 8%; Adjusted EBIT of $9.1 billion, also up 8%
• Net income attributable to equity holders down 41% to $3.4 billion, mainly due to non-cash impairments at
  Mutanda and Mopani, totalling $1.4 billion, compared to $1.3 billion of accounting gains on sales of
  investments in the base period
• Resulting EPS down 17¢ to 24¢/share

Marketing Adjusted EBIT down $0.5 billion, still well within our long-term guidance range
• Some industrial metal inventories (e.g. copper) reaching near-historical lows on exchange, indicating
  balanced to undersupplied markets
• Generally positive market conditions, hampered by alumina “basis risk” impact and a challenging cobalt market
  in H2
• Marketing EBIT guidance for 2019 towards the middle of our $2.2-3.2 billion long-term range

Industrial Adjusted EBITDA up $1.7 billion (15%) supported by ramp-ups, acquisitions and prices
• Restarts of Katanga’s processing operations and zinc mining at Lady Loretta (Mount Isa)
• HVO and Hail Creek contributed positively post-acquisition
• H1 commodity prices generally strong; H2 lower but still well above H1 2016 lows. Coal prices were strong
  throughout
• Looking forward, Mutanda’s updated mine plan reduces annual copper production to 100,000 tonnes per year from
  oxide and transitional ores (vs 200,000 tonnes historically), pending a future investment decision on whether
  and how to process the now increased sulphide reserves/resources.
• 2019 production guidance in all commodities expected higher than 2018

Governance issues being addressed
• Resolutions achieved at Katanga relating to recapitalisation of its main operating subsidiary and with the
  Ontario Securities Commission regarding accounting, governance and disclosure matters. A refreshed management
  team has been appointed
• Board committees have been created to oversee (1) the Group’s response to the U.S. Department of Justice’s
  investigation (2) the Group’s key ethics, compliance, culture and governance matters. We have appointed a
  Head of Industrial Assets (newly created position) to drive operational and sustainability improvements
  across the Group

Global transition to a low carbon economy
• Following engagement with the investor signatories of the Climate Action 100+ initiative, we are furthering
  our commitment to the transition to a low carbon economy
• As one of the world’s largest diversified mining companies, we have a key role in enabling transition to a
  low carbon economy
• We aim to prioritise capital investment to grow production of commodities essential to the energy and
  mobility transition and to limit our coal production capacity broadly to current levels
• Our commitments include: Paris-consistent capital discipline, developing new longer-term Scope 1 and 2
  reduction targets, regular review of progress, alignment with TCFD recommendations and corporate climate
  change lobbying review

Targeted M&A moving to integration phase
• Hunter Valley Operations premium thermal coal mine (49% interest) and Hail Creek coking/thermal coal mine
  (82% interest) acquired and material integration benefits starting to flow
• Acquired fuel distribution network in Brazil
• Acquisition of Astron Energy (formerly Chevron’s Cape Town refinery and distribution assets in South Africa
  and Botswana), pending SA competition clearance. At 31 December, this is reflected as a loan to our
  prospective business partner

2018 announced returns to shareholders totalling $5.2 billion (approximately 36¢/share); further distributions
and buybacks in 2019
• Distribution of 20¢/share was enhanced by share trust purchases of $0.32 billion and a $2 billion buyback
  programme, now almost fully executed
• Dislocation between our current share price levels and the prospects, strength and embedded optionality in
  our business leads us to conclude that it is difficult to find a better investment than buying back our own
  shares
• We have therefore recommended a 20¢/share distribution for 2019 (basis 2018 cash flows), in line with the
  prior year, supplemented by a new $2 billion buyback programme, effective immediately and running until the
  end of 2019. We will proactively look to top this up (in August, or otherwise) as market conditions support,
  including automatically from a targeted $1 billion of non-core asset disposals in 2019, from a range of
  candidate assets
 • Equity cash flows prioritised for: (1) buybacks funded by cash generation; (2) RMI managed consistently below
  $20 billion; and (3) net debt maintained in a $10-16 billion range, while limiting Net debt:Adjusted EBITDA
  to around one times, in the current uncertain economic cycle backdrop

For further information please contact:
 Investors
 Martin Fewings              t: +41 41 709 2880     m: +41 79 737 5642       martin.fewings@glencore.com
 Ash Lazenby                 t: +41 41 709 2714     m: +41 79 543 3804       ash.lazenby@glencore.com

 Media
 Charles Watenphul           t: +41 41 709 2462     m: +41 79 904 3320       charles.watenphul@glencore.com

www.glencore.com
Glencore LEI: 2138002658CPO9NBH955

Notes for Editors

Glencore is one of the world’s largest global diversified natural resource companies and a major producer and
marketer of more than 90 commodities. The Group's operations comprise around 150 mining and metallurgical sites,
oil production assets and agricultural facilities.

With a strong footprint in both established and emerging regions for natural resources, Glencore's industrial
and marketing activities are supported by a global network of more than 90 offices located in over 50 countries.
Glencore's customers are industrial consumers, such as those in the automotive, steel, power generation, oil and
food processing sectors. We also provide financing, logistics and other services to producers and consumers of
commodities. Glencore's companies employ around 158,000 people, including contractors.

Glencore is proud to be a member of the Voluntary Principles on Security and Human Rights and the International
Council on Mining and Metals. We are an active participant in the Extractive Industries Transparency Initiative.

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Disclaimer

The companies in which Glencore plc directly and indirectly has an interest are separate and distinct
legal entities. In this document, “Glencore”, “Glencore group” and “Group” are used for convenience only
where references are made to Glencore plc and its subsidiaries in general. These collective expressions
are used for ease of reference only and do not imply any other relationship between the companies.
Likewise, the words “we”, “us” and “our” are also used to refer collectively to members of the Group or
to those who work for them. These expressions are also used where no useful purpose is served by
identifying the particular company or companies.

Sponsor
Absa Bank Limited (acting through its Corporate and Investment Banking Division)

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