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16 Feb 2021 | 08:05

Glencore restarts dividend as it achieves debt target

(Sharecast News) - Glencore reported a 34% decline in revenue on Tuesday, to $142.34bn, although a successful narrowing of its net debt meant it could now restart dividend payments.

The FTSE 100 mining giant said its adjusted EBITDA was broadly flat in 2020 at $11.56bn, compared to $11.6bn in the prior year, while its adjusted EBIT improved 6% to $4.42bn.

Its net loss widened by 371% to $1.9bn, as basic losses per share were 380% larger at 14 US cents.

Funds from operations were 6% firmer at $8.33bn, as cash generated by operating activities were 17% lower at $8.57bn.

Glencore reported net purchases and sale of property, plant and equipment of $3.92bn, making for a fall of 21% year-on-year.

Looking at its financial position, the company's total assets were down 5% year-on-year at $118bn, as net funding was 3% higher at $35.43bn and net debt narrowed by 10% to $15.84bn.

Funds from operations-to-net debt rose 17% to 52.5%, as the company's net debt-to-adjusted EBITDA ratio was 9% lower at 1.37x.

Glencore said its industrial assets performance was "resilient", with adjusted EBITDA there down 1% at $7.8bn, as a strong metals performance was outweighed by weaker coal prices.

Metals were up 31% at $7.3bn, while energy fell 73% to $1.0bn, with the balance of the difference being in corporate and other costs.

Early Covid-19 impacts were followed by multi-year highs for base metals, the company noted, as its energy complex also recovered into the year-end.

Glencore's cost-to-margin performance saw copper drop 15 cents to 94 cents per pound, zinc to fall 35 cents to -7 cents per pound, nickel to drop 22 cents to 376 cents per pound, and coal to come in at $45.90 per tonne for an $11 per tonne margin.

On the marketing front, Glencore said its marketing adjusted EBIT was up 41% year-on-year at $3.3bn.

Energy was ahead 33% at $1.8bn, which was driven by "exceptional" price movements and dislocations, and demand for logistics and storage.

Metals marketing was 53% higher at $1.7bn, which the company said reflected supportive market conditions and the absence of cobalt market challenges experienced in 2019.

The Viterra agricultural business contributed a $211m share of net earnings, up from $58m year-on-year, as the firm left its longer-term guidance range unchanged at between $2.2bn and $3.2bn adjusted EBIT.

Looking at its balance sheet, the board noted that its net debt of $15.8bn was within its $10bn to $16bn target range, and it was now targeting below the middle of that range by the end of 2021.

Available committed liquidity was $10.3bn, with bond maturities capped at around $3bn in any given year.

"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," said chief executive officer Ivan Glasenberg.

"An outstanding marketing performance lifted EBIT by 41%, while industrial adjusted EBITDA fell 13%, primarily reflecting weaker coal prices.

"A notable improvement was seen at our Katanga operation in the Democratic Republic of the Congo, where its successful ramp-up lifted Africa copper EBITDA to $712m from a loss of $349m in 2019."

Glasenberg said strong second half cash flows repositioned the company's net debt within its target range, allowing for the resumption of distributions.

"We are recommending to shareholders a distribution of 12 cents per share."

At 0848 GMT, shares in Glencore were up 2.32% at 288.85p.
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