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GLENCORE PLC - GLN - Preliminary Results

Release Date: 18/02/2020 09:00
Code(s): GLN     PDF:  
Wrap Text
GLN - Preliminary Results

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

Baar, 18 February 2020

Preliminary Results 2019


Glencore’s Chief Executive Officer, Ivan Glasenberg, commented: “Our performance in 2019 reflected the
prolonged and uncertain trade deal negotiations, generally weaker prices for our key commodities and some
operational challenges experienced at our ramp-up/development assets. Adjusted EBITDA declined 26% to
$11.6 billion.

“Our Marketing business finished 2019 on a strong note, generating Adjusted EBIT of $2.4 billion, in line with
2018, with an excellent performance from oil and a stronger second half metals’ contribution, helping to offset
the cobalt headwinds experienced in the first half.

“In relation to our ramp-up/development assets, performance is steadily improving, in particular at our flagship
Katanga operation, which met its second half production targets for both copper and cobalt.

“We are again recommending to shareholders a 2020 base distribution of $0.20 per share, payable in two equal
instalments, which is comfortably covered (c.1.5x) by current annualised business free cashflow generation,
even applying the presently weakened coronavirus discounted commodity prices.

“We are also pleased to report progress against our commitments to the transition to a low-carbon economy.
We are on track to achieve a near doubling of our first GHG target with a reduction in Scope 1 and 2 emissions
intensity of c.10% since 2016. Also, in line with our commitment to a Paris consistent strategy, we project a
c.30% reduction in absolute Scope 3 emissions by 2035, including natural depletion of our coal and oil resource
base over time.

“Looking ahead, in the short-term, we are closely watching coronavirus developments and potential scenario
impacts on global growth and markets. As shown over many cycles, our business has various defensive
cashflow characteristics, stemming primarily from marketing activities, but also material exposure to precious
metals and infrastructure and expected countercyclical working capital inflows. Our priorities for 2020 remain
being focused on delivering sustainable long-term returns for all stakeholders, including via delivering a step-
change in safety performance, realising the potential of our ramp-up assets, seizing further operational
efficiencies, strengthening our balance sheet and managing the transition to Glencore’s next generation of

US$ million                                                                     2019            2018            Change %
Key statement of income and cash flows highlights1:
Adjusted EBITDA#                                                                11,601          15,767          (26)
Adjusted EBIT#                                                                  4,151           9,143           (55)
Net (loss)/income attributable to equity holders                                (404)           3,408           (112)
(Loss)/earnings per share (Basic) (US$)                                         (0.03)          0.24            (112)
Funds from operations (FFO)(2)#                                                 7,865           11,595          (32)
Cash generated by operating activities before working capital changes           10,346          13,210          (22)
Net purchase and sale of property, plant and equipment(2)#                      4,966           4,899           1

US$ million                                                                     31.12.2019     31.12.2018       Change %
Key financial position highlights:
Total assets                                                                    124,076        128,672          (4)
Net funding(2,3)#                                                               34,366         32,138           7
Net debt(2,3)#                                                                  17,556         14,710           19
FFO to Net debt(2)#                                                             44.8%          78.8%            (43)
Net debt to Adjusted EBITDA#                                                    1.51           0.93             62

1 Refer to basis of presentation on page 5.
2 Refer to page 10, also noting that 2019 FFO materially impacted by the lag of income taxes paid in 2019, in respect of 2018
  profitability (reduction in balance sheet income tax payable of $755 million), as well as $238 million of taxes paid in 2019,
  expected to be offset against future taxes due or refunded.
3 Adoption of the new lease accounting standard, effective 1 January 2019, resulted in $865 million (non-cash) of new lease
  liabilities being recognised (see note 1), while $582 million of additional new leases (non-cash) were booked as capital
  expenditures and debt in 2019, that previously would have been classified as operating leases.
# 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 112 for definition and
  reconciliations, to note 2 of the financial statements for reconciliation of Adjusted EBIT/EBITDA and to page 17 for
  reconciliations of Mining Margins.

Highlights (continued)

Healthy cash generation despite significantly lower commodity prices

   –   2019 Adjusted EBITDA of $11.6 billion, down 26%
   –   Net loss attributable to equity holders of $0.4 billion, after $2.8 billion of impairment charges
   –   Cash generated by operating activities before working capital changes of $10.3 billion, down 22%
   –   Net capex cash flow of $5 billion

Solid margin and cost performance for our key commodities

   –   Impact of lower prices on EBITDA margins somewhat moderated by solid cost control performance in
       our key commodities: EBITDA mining margin? (excluding ramp-up/development assets) of 37% (40% in
       2018). Coal EBITDA mining margin of 36% (46% in 2018)
   –   Full year unit cost performance in our key commodities: copper (ex African copper) 81c/lb, zinc 13c/lb
       (47c/lb ex-gold), nickel (ex Koniambo) 277c/lb and thermal coal $45/t ($26/t margin)

Marketing underpinned by oil’s performance

   –   Marketing Adjusted EBIT of $2.4 billion, down 2% year-on-year. Strong second half metals’
       performance and robust oil results largely offset the cobalt headwinds experienced in the first half

Balance sheet / cash flow coverage in good shape

   –   Available committed liquidity of $10.1 billion; bond maturities capped around $3 billion in any given year
   –   Net debt of $17.6 billion, after $1.25 billion of IFRS 16 related lease liabilities
   –   2020 focus on reducing Net debt/Adjusted EBITDA ratio closer to 1x and Net debt towards the c.$14-15
       billion range, excluding Marketing related lease liabilities ($0.6 billion as at 31 December 2019). Some
       return of cash margin calls in respect of Marketing’s hedging activities and monetisation of select non-
       core long-term assets could aid in this process.
   –   Recommended 2020 base distribution of $0.20 per share ($2.6 billion), payable in two equal
                                                                                                            Page 3
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To view the full report on the Johannesburg Stock Exchange portal please click here:

For further information please contact:

 Martin Fewings                 t: +41 41 709 2880         m: +41 79 737 5642
 Maartje Collignon              t: +41 41 709 3269         m: +41 79 197 4202
 Charles Watenphul              t: +41 41 709 2462         m: +41 79 904 3320
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 60 responsibly-sourced commodities that advance everyday life. The Group's
operations comprise around 150 mining and metallurgical sites and oil production assets.

With a strong footprint in over 35 countries in both established and emerging regions for natural resources,
Glencore's industrial activities are supported by its global marketing network.

Glencore's customers are industrial consumers, such as those in the automotive, steel, power generation,
battery manufacturing and oil sectors. We also provide financing, logistics and other services to producers
and consumers of commodities. Glencore's companies employ around 160,000 people, including

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.

Important notice concerning this document including forward looking statements

This document contains statements that are, or may be deemed to be, “forward looking statements” which are
prospective in nature. These forward looking statements may be identified by the use of forward looking
terminology, or the negative thereof such as “outlook”, "plans", "expects" or "does not expect", "is expected",
"continues", "assumes", "is subject to", "budget", "scheduled", "estimates", "aims", "forecasts", "risks", "intends",
"positioned", "predicts", "anticipates" or "does not anticipate", or "believes", or variations of such words or
comparable terminology and phrases or statements that certain actions, events or results "may", "could",
"should", “shall”, "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements are not
based on historical facts, but rather on current predictions, expectations, beliefs, opinions, plans, objectives,
goals, intentions and projections about future events, results of operations, prospects, financial condition and
discussions of strategy.

By their nature, forward-looking statements involve known and unknown risks and uncertainties, many of
which are beyond Glencore’s control. Forward looking statements are not guarantees of future performance
and may and often do differ materially from actual results. Important factors that could cause these
uncertainties include, but are not limited to, those disclosed in the last published annual report and half-
year report, both of which are freely available on Glencore’s website.
For example, our future revenues from our assets, projects or mines will be based, in part, on the market
price of the commodity products produced, which may vary significantly from current levels. These may
materially affect the timing and feasibility of particular developments. Other factors include (without
limitation) the ability to produce and transport products profitably, demand for our products, changes to the
assumptions regarding the recoverable value of our tangible and intangible assets, the effect of foreign
currency exchange rates on market prices and operating costs, and actions by governmental authorities,
such as changes in taxation or regulation, and political uncertainty.

Neither Glencore nor any of its associates or directors, officers or advisers, provides any representation,
assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking
statements in this document will actually occur. You are cautioned not to place undue reliance on these forward-
looking statements which only speak as of the date of this document.

Except as required by applicable regulations or by law, Glencore is not under any obligation and Glencore and
its affiliates expressly disclaim any intention, obligation or undertaking, to update or revise any forward looking
statements, whether as a result of new information, future events or otherwise. This document shall not, under
any circumstances, create any implication that there has been no change in the business or affairs of Glencore
since the date of this document or that the information contained herein is correct as at any time subsequent to
its date.

No statement in this document is intended as a profit forecast or a profit estimate and past performance cannot
be relied on as a guide to future performance. This document does not constitute or form part of any offer or
invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities.

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.

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

Date: 18-02-2020 09:00:00
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