Glencore cuts dividend after rocky half

In April, the mining and trading giant said it would defer its decision on the 2020 dividend because of the pandemic. 

Net debt has climbed 12 per cent since the end of 2019, to $19.7bn (£14.96bn), and will dip below $16bn by the end of the year, according to chief executive Ivan Glasenberg. The dividend – which would have been 20¢ this year, or $2.6bn – will come back once net debt is within the $10bn-$16bn target range. 

The other major miners in London have comfortably paid dividends this year because of the iron ore price. Glencore is more exposed to copper and coal prices, as well as steelmaking ingredients such as metallurgical coal and vanadium that did not get a boost like iron ore. 

The focus of the first half was the trading division, which had record adjusted operating profits for a half year, at $2.2bn. This was double last year’s figure, and it provided 46 per cent of overall cash profits, compared with 19 per cent last year. 

Glencore struggled on the production side in the first half due to Covid-19 shutdowns, with coal production hardest hit. The energy division’s adjusted cash profit was down 65 per cent, to $700m, against a 16 per cent drop for mining overall. 

Poorer oil, thermal coal and zinc forecasts, as well as the production stoppages, saw Glencore write-off $3.2bn for the period. 

Mr Glasenberg said the company would look at shuttering more mines to “rebalance markets with oversupply risk”. This will largely be coal production, with the Atlantic market in a weak spot. The Prodeco operation and the one-third-owned Cerrejón have been closed since March. 

Glencore has successfully done this for zinc in the past and is trying to put the Mopani copper and zinc operation in Zambia into care and maintenance, although the government has refused permission so far.

The latest in the various fraud investigations into Glencore is a shareholder suit in New Jersey being dismissed over jurisdictional issues. Authorities in the UK, US, Switzerland and Brazil are looking into corruption allegations in various jurisdictions. 

Consensus forecasts (compiled by FactSet) put 2020 cash profit at $9.2bn, a 20 per cent drop on last year. The marketing division’s cash profit is forecast to increase 28 per cent this year compared with 2019, to $3.4bn.