https://www.engineeringnews.co.za

Marketing hoists Glencore over low commodity price hurdle

Ivan Glasenberg

Ivan Glasenberg

3rd March 2015

By: Martin Creamer

Creamer Media Editor

  

Font size: - +

JOHANNESBURG (miningweekly.com) – Diversified major Glencore has managed to scale the low commodity price hurdle with significant help from its marketing arm.

The London-, Hong Kong- and Johannesburg-listed company, which produces and markets 93 commodities, went against the grain with its surging agricultural business yielding timeously, and funds from operations of $10.2-billion in line with 2013 reflecting a resilient operating performance.

The company, headed by CEO Ivan Glasenberg, reported modestly down yearly earnings for the 12 months to December 31, when it took a lot less of a beating than many of its peers with earnings before interest, taxes depreciation and amortisation (Ebitda) of $12.8-billion only 2% down on 2013.

Ebitda from its marketing arm was up 15% to $3-billion and Ebit up 18% to $2.8-billion, on the back of Viterra’s agricultural input and grain featuring particularly strongly.

The 7% lower industrial Ebitda at $9.8-billion on generally lower commodity prices was largely offset by the positive impacts of production growth, real unit cost savings and weaker producer currencies.

The results of the company largely matched or beat the consensus of 17 global analysts, with net debt of $30.5-billion down $5.3bn, exceeding analyst expectations and reflecting cash flow growth, proceeds from sale of the Las Bambas copper operation, a 25% reduction in net capital expenditure and lively working capital management.

The net debt to Ebitda ratio ended up well within target at 2.39 times and the final dividend of $0.12 a share took the full-year dividend to a 9%-higher $0.18 a share – also ahead of expectations.

“We note the strength of the trading business in helping to offset weakness in industrial activities,” said Investec Securities in a note, which added that the increased dividend indicated management's confidence despite the tough environment.

Investec foresaw a recovery in key Glencore commodities such as copper and zinc and the benefit to the company of having negligible iron-ore exposure.

Production growth was made up by a 4% higher output of copper to 1.5-million tonnes, principally on the 31% ramp-up of Mutanda, to 197 000 t, with the operation running at close to capacity throughout the year.

Expansion at Mount Isa, McArthur River and Perkoa kept overall zinc production in line with 2013 at 1.4-million tonnes by making up output lost in 2013’s planned Perseverance and Brunswick mine closures.

Coal production rose 6% to 146.3-million tonnes on productivity improvements and delivery of various advanced stage Australian thermal coal projects.

The three-week Australian coal shutdown was carried out over December and January in response to the subdued market environment.

Glencore’s oil entitlement was 7.4-million barrels, 47% higher than 2013 on a full-year of production at the Alen and Badila fields plus the enlarged ownership of the Chad assets as a result of the Caracal acquisition.

Mangara, which began producing oil at year-end, is expected to ramp up during 2015.

The virtually complete $1-billion share buyback programme has so far returned $930-million to shareholders.

Total industrial capital expenditure is now expected to be in the $6.5-billion to $6.8-billion range, below the originally guided to $7.9-billion.

"Our ultimate goal remains to grow our free cash flow and return excess capital in the most sustainable and efficient manner,” Glasenberg said.

As the most diversified raw material producer and marketer, Glencore is seen as being well positioned to react to changes in commodity fundamentals.

The company reported 16 fatalities at its operations, 13 of them at a small number of assets employing 60 000 people, located in countries including the Democratic Republic of Congo, Zambia, Bolivia and Kazakhstan.

The remaining 3 incidents occurred at developed operations, employing 140 000 people, which Glasenberg contended represented a world-class safety performance.

The ongoing commitment was thus to embed the world-class performance in the high-fatality operations through its SafeWork programme, which has brought the long-term injury frequency rate down from 1.93 to 1.58 and opened the way for the company to be granted membership of the International Council on Mining and Metals.

Edited by Creamer Media Reporter

Comments

Showroom

John Deere (Pty) Ltd
John Deere (Pty) Ltd

In 1958 John Deere Construction made its first introduction to the industry with their model 64 bulldozer.

VISIT SHOWROOM 
Showroom image
Alcohol Breathalysers

Supplier & Distributor of the Widest Range of Accurate & Easy-to-Use Alcohol Breathalysers

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.164 0.219s - 156pq - 2rq
Subscribe Now