Glencore : Preliminary Results 2020

Highlights

Glencore's Chief Executive Officer, 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 $11.6 billion. An outstanding Marketing performance lifted EBIT by 41% to $3.3 billion, while Industrial Adjusted EBITDA fell 13% to $7.8 billion, primarily reflecting weaker coal prices. A notable improvement was seen at our Katanga operation in the DRC, where its successful ramp-up lifted Africa copper EBITDA to $712 million from a loss of $349 million in 2019. Strong second half cash flows repositioned Net debt of $15.8 billion within our target range, allowing for the resumption of distributions. We are recommending to shareholders a distribution of $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 focussed on creating sustainable long-term value for all stakeholders while operating in a responsible manner across all aspects of our business'

US$ million	2020	2019	Change %
Key statement of income and cash flows highlights1:
Revenue	142,338	215,111	(34)
Adjusted EBITDA◊	11,560	11,601	-
Adjusted EBIT◊	4,416	4,151	6
Net loss attributable to equity holders	(1,903)	(404)	(371)
Loss per share (Basic) (US$)	(0.14)	(0.03)	(380)
Funds from operations (FFO)2◊	8,325	7,865	6
Cash generated by operating activities before working capital changes	8,568	10,346	(17)
Net purchase and sale of property, plant and equipment2◊	3,921	4,966	(21)

US$ million	31.12.2020	31.12.2019	Change %
Key financial position highlights:
Total assets	118,000	124,076	(5)
Net funding2,3◊	35,428	34,366	3
Net debt2,3◊	15,844	17,556	(10)
Ratios:
FFO to Net debt2◊	52.5%	44.8%	17
Net debt to Adjusted EBITDA◊	1.37	1.51	(9)

Healthy RESULTS

• $11.6bn Adjusted EBITDA, flat year over year (y/y), with stronger Marketing and Industrial metals offset by weaker coal prices
• Net income pre-significant items: $2.5bn, in line with 2019
• Significant items are mainly non-cash impairment charges amounting to $5.9bn (2019: $2.4bn), primarily in respect of Mopani, Colombian coal and the African oil portfolio. Resulting statutory loss of $1.9bn
• Net purchase and sale of PP&E: $3.9bn, down 21%
• Proposed $0.12/share ($1.6bn) 2021 distribution

Resilient industrial asset performance

• Industrial Assets Adjusted EBITDA $7.8bn, down 13%. Strong metals performance outweighed by weaker coal prices
• Metals $7.3bn (+31%), Energy $1.0bn (-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: Cu 94¢/lb (-15¢/lb y/y); Zn -7¢/lb (-35¢/lb y/y); Ni 376¢/lb (-22¢/lb y/y); coal $45.90/t ($11/t margin)

Outstanding marketing results

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

Strong balance sheet

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

Sector-leading climate strategy

• Medium-term Paris aligned total C02e 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 our AGM in April

Portfolio optimisation continuing

• Finalised agreement for sale of Mopani, with completion expected in Q2 2021
• Informed the Colombian government of our intention to relinquish Prodeco's mining licences
• Contributed our share of Alumbrera into the larger MARA joint venture

To view the full report please click https://www.glencore.com/dam:jcr/39edd425-7a17-4b9d-8f0b-051e11da1083/GLEN-2020-Preliminary-Results.pdf