REG - Glencore PLC - 2024 Half-Year Report

GlencoreAnnouncement

07/08/2024 07:15

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RNS Number : 4320Z  Glencore PLC  07 August 2024

NEWS RELEASE

Baar, 7 August 2024

 

2024 Half-Year Report

Highlights

 

Glencore's Chief Executive Officer, Gary Nagle, commented:

"We are pleased to report strong strategic achievements for the Group over the
year to date. Our Industrial portfolio has been further streamlined with the
sale of our Volcan stake and strengthened with the addition of a 77% interest
in Elk Valley Resources (EVR). Our updated Climate Action Transition Plan
(CATP) received more than 90% shareholder support at our 2024 AGM, the Swiss
and Dutch government investigations have been resolved and our 2024 production
guidance has been maintained and enhanced, with a skew to the second half of
2024.

"Critically, we have also clarified the immediate future of our coal and
carbon steel materials business. Following completion of the acquisition of
EVR in early July, we undertook an extensive consultation with shareholders
and based on the outcome of that process and the Group's own analysis,
Glencore's Board, considering both risk and opportunity scenarios, endorsed
the retention, rather than demerger, of the coal and carbon steel materials
business, as currently providing the optimal pathway for demonstrable and
realisable value creation for Glencore shareholders.

"Some shareholders stated that this was a decision for the Board alone to
make, but of the others, the overwhelming majority had a clear preference for
retention. This was primarily on the basis that retention should enhance
Glencore's cash-generating capacity to fund opportunities in our transition
metals portfolio, such as our copper growth project pipeline, as well as
accelerate and optimise the return of excess cash flows to shareholders.

"Against the backdrop of lower average prices for many of our key commodities
during the period, particularly thermal coal, our overall Group Adjusted
EBITDA of $6.3 billion was 33% below the comparable prior year period, however
Funds from Operations were up 9%, due to the timing of income tax payments .
We reported a Net loss attributable to equity holders of $233 million, after
recognising $1.7 billion of significant items, including c.$1.0 billion of
impairment charges.

"Reflecting healthy cash generation and after funding $2.9 billion of net
capital expenditure and $1.0 billion of shareholder returns, Net debt,
including Marketing-related lease liabilities, finished the first half at $3.6
billion, down $1.3 billion compared to $4.9 billion at the end of 2023.

"From Net debt of $3.6 billion, accounting for Marketing-related lease
liabilities of $1.0 billion, H2 cash outflows of $6.9 billion for the EVR
acquisition and the $0.8 billion for the 2(nd) tranche of the shareholder
distribution due, all else being equal deleveraging of just $0.3 billion would
be required to reach the reset c.$10 billion net debt cap under our framework
for excess return top-up payments, compared to at least $5.3 billion of
deleveraging that would have been required under the original demerger
scenario.

"This relatively modest gap of $0.3 billion, together with the $1 billion
Viterra cash disposal proceeds expected to be received over the next several
months and noting the healthy current spot illustrative annualised free cash
flow generation of c.$6.1 billion, augers well for potential top-up
shareholder returns, above our base cash distribution, in February 2025.

"The strength of our diversified business model across marketing and
industrial has proven itself adept in a range of market conditions, giving us
a solid foundation to successfully navigate the near-term macroeconomic
uncertainty. We continue to remain focused on operating safely, responsibly
and ethically and creating sustainable long-term value for all our
stakeholders."

 

 US$ million                                                      H1 2024             H1 2023              Change %                2023
 Key statement of income and cash flows highlights(1):
 Revenue                                                               117,091             107,415                    9                 217,829
 Adjusted EBITDA(◊)                                                      6,335               9,397                  (33)                 17,102
 Adjusted EBIT(◊)                                                        2,850               6,305                  (55)                 10,392
 Net (loss)/income for the period attributable to equity holders          (233)              4,568                 n.m.                   4,280
 (Loss)/earnings per share (Basic) (US$)                                 (0.02)               0.36                 n.m.                    0.34
 Funds from operations (FFO)(2◊)                                         4,037               3,712                    9                   9,452

 

 US$ million                         30.06.2024           31.12.2023           Change %
 Key financial position highlights:
 Total assets                             120,690              123,869                   (3)
 Total equity                              35,763               38,237                   (6)
 Net funding(2,3◊)                         29,360               31,062                   (5)
 Net debt(2,3◊)                             3,648                4,917                  (26)
 Ratios:
 Net debt to Adjusted EBITDA(4◊)             0.26                 0.29                  (10)

1 Refer to basis of presentation on page 6.

2 Refer to page 10.

3 Includes $952 million (2023: $705 million) of Marketing-related lease
liabilities.

4 H1 2024 ratio based on last 12 months' Adjusted EBITDA, refer to APMs
section for reconciliation.

◊ 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 70 for
definitions and reconciliations and to note 3 of the condensed consolidated
interim financial statements for reconciliation of Adjusted EBIT/EBITDA.

 

2024 HALF-YEAR FINANCIAL SCORECARD

•   $6.3 billion Adjusted EBITDA, down 33%, primarily reflecting the
normalisation of energy markets from the severe disruptions and volatilities
seen over 2022/23

•   Marketing Adjusted EBIT of $1.5 billion, down 16% period-on-period,
tracking on an annualised basis at $3.0 billion. The lower energy
contribution, reflecting prior period elevated volatilities, was partially
offset by a strong metals performance in H1 2024

•   Industrial Assets Adjusted EBITDA of $4.5 billion, down 39%, primarily
driven by a $2.7 billion lower contribution from our coal operations, owing to
the substantial average period-over-period declines in key thermal coal
pricing benchmarks

•   2024 full year (ex-EVR) production guidance has been maintained, with
production expected to be second-half weighted. EVR steelmaking coal volumes
now incorporated into H2 guidance

•   Net cash purchase and sale of PP&E: $2.9 billion, up 15%

•   Net income attributable to equity holders pre significant items: $1.5
billion; Net loss attributable to equity holders: $233 million

•   Adjusted EBITDA mining margins were 28% in our metals operations and
31% in our energy operations

BALANCE SHEET

•   Healthy H1 cash generation: after funding $2.9 billion of net capital
expenditure and $1.0 billion of shareholder returns, Net debt finished the
first half at $3.6 billion compared to $4.9 billion at the end of 2023

•   Net funding, including lease liabilities, decreased to $29.4 billion,
aided by a $0.4 billion reduction in readily marketable inventories

•   Available committed liquidity of $16.6 billion; bond maturities
maintained around a cap of $3 billion in any given year

•   Net debt/Adjusted EBITDA of 0.26x (c.0.75x proforma for EVR) provides
significant financial headroom and strength

•   In June 2023, Glencore agreed to dispose of its interest in Viterra in
a cash and shares transaction with Bunge. For its c.50% stake, Glencore will
receive $1.0 billion in cash and c.$3.1 billion in Bunge stock (reflecting
Bunge's stock price at the date of announcement and also currently as of 5
August 2024). The merger, which remains subject to regulatory approvals, is
expected to close within the next several months

•   Spot illustrative annualised free cash flow generation, including EVR,
of c.$6.1 billion from Adjusted EBITDA of c.$17.3 billion

To view the full report please click
www.glencore.com/.rest/api/v1/documents/static/31bcbe31-4250-42cd-b6d8-1a7cb48efbd2/GLEN-2024-Half-Year-Report.pdf
(http://www.glencore.com/.rest/api/v1/documents/static/31bcbe31-4250-42cd-b6d8-1a7cb48efbd2/GLEN-2024-Half-Year-Report.pdf)

For further information please contact:

 Investors
 Martin Fewings        t: +41 41 709 2880      m: +41 79 737 5642      martin.fewings@glencore.com (mailto:martin.fewings@glencore.com)
 Media
 Charles Watenphul     t: +41 41 709 2462      m: +41 79 904 3320      charles.watenphul@glencore.com

www.glencore.com (http://www.glencore.com)

Glencore LEI: 2138002658CPO9NBH955

Please refer to the end of this document for disclaimers including on
forward-looking statements.

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 commodities that
advance everyday life. Through a network of assets, customers and suppliers
that spans the globe, we produce, process, recycle, source, market and
distribute the commodities that support decarbonisation while meeting the
energy needs of today.

With over 150,000 employees and contractors and a strong footprint in over 35
countries in both established and emerging regions for natural resources, our
marketing and industrial activities are supported by a global network of more
than 50 offices.

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 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.

We will support the global effort to achieve the goals of the Paris Agreement
through our efforts to decarbonise our own operational footprint. We believe
that we should take a holistic approach and have considered our commitment
through the lens of our global industrial emissions. Against a restated 2019
baseline, we are targeting to reduce our Scope 1, 2 and 3 industrial emissions
by 15% by the end of 2026, 25% by the end of 2030, 50% by the end of 2035 and
we have an ambition to achieve net zero industrial emissions by the end of
2050, subject to a supportive policy environment. For more information see our
2024-2026 Climate Action Transition Plan and the About our emissions
calculation and reporting section in our 2023 Annual Report, available on our
website at glencore.com/publications.

Important notice

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. This document does not purport to contain all of the
information you may wish to consider.

Cautionary statement regarding forward-looking information

Certain descriptions in this document are oriented towards future events and
therefore contains statements that are, or may be deemed to be,
"forward-looking statements" which are prospective in nature. Such statements
may include, without limitation,  statements in respect of trends in
commodity prices and currency exchange rates; demand for commodities; reserves
and resources and production forecasts; expectations, plans, strategies and
objectives of management; expectations regarding financial performance,
results of operations and cash flows, climate scenarios; sustainability
(including, without limitation, environmental, social and governance)
performance-related goals, ambitions, targets, intentions and aspirations;
approval of certain projects and consummation and impacts of certain
transactions (including, without limitation, acquisitions and disposals);
closures or divestments of certain assets, operations or facilities
(including, without limitation, associated costs); capital costs and
scheduling; operating costs and supply of materials and skilled employees;
financings; anticipated productive lives of projects, mines and facilities;
provisions and contingent liabilities; and tax, legal and regulatory
developments.

These forward-looking statements may be identified by the use of
forward-looking terminology, or the negative thereof including, without
limitation, "outlook", "guidance", "trend", "plans", "expects", "continues",
"assumes", "is subject to", "budget", "scheduled", "estimates", "aims",
"forecasts", "risks", "intends", "positioned", "predicts", "projects",
"anticipates", "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. The information in this document provides an insight into how
we currently intend to direct the management of our businesses and assets and
to deploy our capital to help us implement our strategy. The matters disclosed
in this document are a 'point in time' disclosure only. 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 conditions and discussions of strategy, and reflect
judgments, assumptions, estimates and other information available as at the
date of this document or the date of the corresponding planning or scenario
analysis process.

By their nature, forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to differ materially from any future event, results, performance,
achievements or other outcomes expressed or implied by such forward-looking
statements. Important factors that could impact these uncertainties include
(without limitation) those disclosed in the risk management section of our
latest Annual Report and/or Half-Year Report (which can each be found on our
website). These risks and uncertainties may materially affect the timing and
feasibility of particular developments. Other factors which impact risks and
uncertainties include, without limitation: the ability to produce and
transport products profitably; demand for our products and commodity prices;
development, efficacy and adoption of new or competing technologies; changing
or divergent preferences and expectations of our stakeholders; events giving
rise to adverse reputational impacts; changes to the assumptions regarding the
recoverable value of our tangible and intangible assets; inadequate estimates
of resources and reserves; changes in environmental scenarios and related
regulations, including, without limitation, transition risks and the evolution
and development of the global transition to a low carbon economy; recovery
rates and other operational capabilities; timing, quantum and nature of
certain acquisitions and divestments; delays, overruns or other unexpected
developments in connection with significant projects; the ability to
successfully manage the planning and execution of closure, reclamation and
rehabilitation of industrial sites; health, safety, environmental or social
performance incidents; labor shortages or workforce disruptions; natural
catastrophes or adverse geological conditions, including, without limitation,
the physical risks associated with climate change; effects of global pandemics
and outbreaks of infectious disease; the outcome of litigation or enforcement
or regulatory proceedings; the effect of foreign currency exchange rates on
market prices and operating costs; actions by governmental authorities, such
as changes in taxation or regulation or changes in the decarbonisation
policies and plans of other countries; breaches of Glencore's policy
framework, applicable laws or regulations; the availability of sufficient
credit and management of liquidity and counterparty risks; changes in economic
and financial market conditions generally or in various countries or regions;
political or geopolitical uncertainty; and wars, political or civil unrest,
acts of terrorism, cyber attacks or sabotage.

Readers, including, without limitation, investors and prospective investors,
should review and consider these risks and uncertainties (as well as the other
risks identified in this document) when considering the information contained
in this document. Readers should also note that the high degree of uncertainty
around the nature, timing and magnitude of climate-related risks, and the
uncertainty as to how the energy transition will evolve, makes it particularly
difficult to determine all potential risks and opportunities and disclose
these and any potential impacts with precision. Neither Glencore nor any of
its affiliates, associates, employees, directors, officers or advisers,
provides any representation, warranty, assurance or guarantee as to the
accuracy, completeness or correctness, likelihood of achievement or
reasonableness of any forward-looking information contained in this document
or that the events, results, performance, achievements or other outcomes
expressed or implied in any forward-looking statements in this document will
actually occur. Glencore cautions readers against reliance on any
forward-looking statements contained in this document, particularly in light
of the long-term time horizon which this document discusses in certain
instances and the inherent uncertainty in possible policy, market and
technological developments in the future.

No statement in this document is intended as any kind of forecast (including,
without limitation, a profit forecast or a profit estimate), guarantee or
prediction of future events or performance and past performance cannot be
relied on as a guide to future performance.

Except as required by applicable rules and 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.

Cautionary statement regarding climate strategy

Glencore operates in a dynamic and uncertain market and external environment.
Plans and strategies can and must adapt in response to dynamic market
conditions, changing preferences of our stakeholders, joint venture decisions,
changing weather and climate patterns, new opportunities that might arise or
other changing circumstances. Investors should assume that our climate
strategy will evolve and be updated as time passes. Additionally, a number of
aspects of our strategy involve developments or workstreams that are complex
and may be delayed, more costly than anticipated or unsuccessful for many
reasons, including, without limitation, reasons that are outside of Glencore's
control. Our strategy will also necessarily be impacted by changes in our
business.

There are inherent limitations to scenario analysis and it is difficult to
predict which, if any, of the scenarios might eventuate. Scenario analysis
relies on assumptions that may or may not be, or prove to be, correct and that
may or may not eventuate and scenarios may also be impacted by additional
factors to the assumptions disclosed. Given these limitations we treat these
scenarios as one of several inputs that we consider in our climate strategy.

Due to the inherent uncertainty and limitations in measuring greenhouse gas
(GHG) emissions and operational energy consumption under the calculation
methodologies used in the preparation of such data, all CO(2)e emissions and
operational energy consumption data or volume references (including, without
limitation, ratios and/or percentages) in this document are estimates. GHG
emissions calculation and reporting methodologies may change or be
progressively refined over time resulting in the need to restate previously
reported data. There may also be differences in the manner that third parties
calculate or report such data compared to Glencore, which means that
third-party data may not be comparable to Glencore's data. For information on
how we calculate our emissions, see our latest Basis of Reporting, Climate
Report and Extended ESG Data, which is available on our website.

Sources

Certain statistical and other information included in this document is sourced
from publicly available third-party sources. This information has not been
independently verified and presents the view of those third parties, and may
not necessarily correspond to the views held by Glencore and Glencore
expressly disclaims any responsibility for, or liability in respect of, and
makes no representation or guarantee in relation to, such information
(including, without limitation, as to its accuracy, completeness or whether it
is current). Glencore cautions readers against reliance on any of the
industry, market or other third-party data or information contained in this
document.

Information preparation

In preparing this document, Glencore has made certain estimates and
assumptions that may affect the information presented. Certain information is
derived from management accounts, is unaudited and based on information
Glencore has available to it at the time. Figures throughout this document are
subject to rounding adjustments. The information presented is subject to
change at any time without notice and we do not intend to update this
information except as required.

This document contains alternative performance measures which reflect how
Glencore's management assesses the performance of the Group, including results
that exclude certain items included in our reported results. These alternative
performance measures should be considered in addition to, and not as a
substitute for, or as superior to, measures of financial performance or
position reported in accordance with IFRS. Such measures may not be uniformly
defined by all companies, including those in Glencore's industry. Accordingly,
the alternative performance measures presented may not be comparable with
similarly titled measures disclosed by other companies. Further information
can be found in our reporting suite available at glencore.com/publications.

Subject to any terms implied by law which cannot be excluded, Glencore accepts
no responsibility for any loss, damage, cost or expense (whether direct or
indirect) incurred by any person as a result of any error, omission or
misrepresentation in information in this document.

Other information

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.

 

 

 

 

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