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Glencore preliminary annual results 2014

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World Coal,


Energy products total Adjusted EBITDA was US$3406 million, down 16% from US$4044 million in 2013. The reduction is mainly driven by the impact of the lower realised prices on coal’s industrial activities and the sharp decline in oil prices in Q4 2014, partially mitigated by higher production, real unit cost savings and currency related costs benefits as the US dollar strengthened against our key producer country currencies. Adjusted EBIT was US$1010 million, down 46% from 2013, the higher reduction, compared to EBITDA, reflecting the increase in the depreciation charge (non-cash) across both coal and oil industrial activities as production increased.


Adjusted EBIT was US$524 million, down 17% from US$629 million in 2013. The reduction reflects the oversupplied coal and ‘flat’ oil markets that prevailed during H1 2014, however market conditions, notably in oil, were more supportive towards the end of the year, on account of increased volatility and curve structure.

Demand levels in 2014 remained strong in key importing countries, particularly Turkey, India and Korea, and Glencore expect that to remain so during 2015 and beyond. The market continues to be highly segmented in terms of quality, with greater demand for bituminous over sub-bituminous coal. Given Glencore’s supply base, the company is well positioned to benefit from the resulting market arbitrages that will invariably occur. In terms of seaborne fundamentals, demand for coal in Europe has been impacted by the low gas price which has resulted in more competition, partially offset by a significant reduction in US coal exports. China import demand has also contracted somewhat, which we believe results from a current preference for higher priced domestic coal, while some regulatory uncertainty persists.

On the supply side, some increases from Indonesia (despite a significant proportion of this production currently being loss-making) and higher supply from Russia (greatly assisted by the weaker Rouble) have continued to put pressure on prices. Supply, however, from Colombia, South Africa and Australia remained relatively flat during 2014.

Industrial activities

Total industrial Adjusted EBITDA was US$2841 million, down 16% from US$3378 million, while Adjusted EBIT was US$486 million, down 61% from US$1244 million. The reduction in Adjusted EBITDA relates to lower prices impacting both the coal and oil results (average realised coal prices and Brent oil down 8-20% and 9% respectively), while the greater reduction in Adjusted EBIT reflects a higher depreciation charge, consistent with the higher production levels. The reductions were mitigated somewhat by the higher production, real unit cost savings and the stronger US dollar, whereby the Australian dollar and South African rand depreciated by 7% and 12% respectively during 2014. The price driven reduction in profitability resulted in a small decline in energy’s industrial EBITDA margin from 30% to 28%.

Operating highlights

Total coal production was 146.3 million t, 6% (8.2 million t) higher than 2013. The increase mainly relates to productivity improvements and the delivery of various advanced stage Australian thermal coal projects.

A three week shutdown at the Australian coal operations was carried out over December 2014 and January 2015, in response to the current oversupply situation.

Australian coking

Australian coking coal production was 6.0 million t, 18% (1.3 million t) lower than 2013, mainly relating to cost reduction initiatives that resulted in mine plan / roster changes at Newlands, Oaky Creek and Collinsville.

Australian thermal and semi-soft

Australian thermal and semi-soft production was 63.5 million t, 10% (5.8 million t) higher than 2013. The increase reflects productivity improvements, completion of the Ravensworth North and Rolleston projects and the commencement of longwall operations at Ulan West.

South African thermal

South African thermal coal production was 46.1 million t, 6% (2.6 million t) higher than 2013. The increase reflects inclusion of the Hlagisa open cut mine for a full year in 2014, the benefits of productivity improvements at the Tweefontein underground operations and the opening of the Wonderfontein open cut mine. These increases were tempered by the closure of certain higher cost mines.


Prodeco production was 19.5 million t, 5% (0.9 million t) higher than 2013, reflecting better equipment availability at Calenturitas and lower rainfall in 2014.


Cerrejón attributable production was 11.2 million t, 2% (0.2 million t) higher than 2013. The increase mainly relates to the impact of the 32 day strike that occurred in Q1 2013, offset by some minor mining restrictions in 2014.

Edited from various sources by Joe Green

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