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Glencore announces preliminary results

Published by , Digital Assistant Editor
World Coal,

Glencore's Chief Executive Officer, Ivan Glasenberg, commented: "Since our IPO in 2011 and subsequent acquisition and integration of Xstrata, Glencore has never been so well positioned as it is today. Our swift and decisive actions to reposition and optimise our capital structure and industrial asset portfolio have reduced Net funding by US$14.7 billion over the past eighteen months and generated more than US$1.3 billion in cost savings at our industrial assets in 2016.”

"As we look forward, increasingly favourable fundamentals provide the potential to create significant long-term value for Glencore shareholders via our leading portfolio of well capitalised tier one assets and resilient marketing business, combined with significant low-cost copper and zinc growth options and disciplined approach to supply."

Strong 2016 financial performance in challenging market conditions

    Adjusted EBITDA of US$10.3 billion, up 18%; Adjusted EBIT of US$3.9 billion, up 81%. Net income pre-significant items of US$2 billion, up 48%. Funds from operations of US$7.8 billion, up 17%. Capital expenditure of US$3.5 billion, down 41%.

Underpinned by outstanding cost performance

  • Full year operational unit cost performance in our key commodities: copper 87c/lb, zinc -5c/lb (16c/lb ex gold), nickel 265c/lb and thermal coal
  • US$39/t at a US$18/t margin.
  • Significant reductions in copper and zinc cost structure expected to be sustained into 2017.
  • Marketing Adjusted EBIT of US$2.8 billion, up 14%, supported by improved demand conditions.
  • Strong 2H16 contribution from all 3 segments.

Capital structure repositioned

  • Net funding reduced by US$14.7 billion over the past eighteen months to US$32.6 billion.
  • Cash flow coverage ratios improved to strong investment grade levels
  • FFO to Net debt: 50%.
  • Net debt to Adjusted EBITDA: 1.5x.
  • Available committed liquidity of US$16.7 billion.
  • Achievement and maintenance of strong Baa/BBB credit ratings remains a top priority.
  • Optimised capital structure ensures less risk, more flexibility and stability of distributions.

Positioned for the challenges and opportunities that lie ahead

  • Uniquely diversified by commodity and geography.
  • Major low-cost supply positions in copper, zinc, nickel, coal, cobalt and ferroalloys.
  • Favourable fundamentals for our key commodities - already in deficit or transitioning to deficit.
  • Modest total capex guidance of CAN$4 billion per annum going forward (includes CAN$3 billion of sustaining capex) - no greenfields.
  • Substantial volumes of low-cost capacity that can be restarted as and when appropriate.
  • Fixed plus variable distribution policy effective from 2018 that leverages the resilience of marketing cash flows, while providing upside to commodity prices. US$1 billion distribution recommended for 2017.
  • Strong investment grade balance sheet that offers headroom for highly selective growth opportunities.
  • Annualised free cash flow of US$6.9 billion at current spot prices, based on spot annualised Adjusted EBITDA of US$14.6 billion.

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