Glencore (GLEN) was badly hit by weak metals prices in the first half of 2019 while other major miners have seen big earnings increases thanks to iron ore. Its adjusted cash profits (Ebitda) for the period fell 32 per cent on the year before and net income crashed from $2.8bn (£2.3bn) to $226m. The mining and commodities trading giant also announced it was suspending its Mutanda operation in the Democratic Republic of Congo (DRC), saying it was uneconomic because of low cobalt prices and the new tax regime in the country. This will remove 20 per cent of global cobalt supply in one swift move, possibly encouraging prices back towards the highs of 2017 after a miserable 2018 and 2019.
Glencore also cut copper output forecasts for the year, knocking 50,000 tonnes off Katanga’s estimated production. Chief executive Ivan Glasenberg said the African copper division (which includes cobalt) had dragged down the company’s half-year results. “The rest of our business, however, remained strong and performed well,” he said. “Excluding our African copper assets and Koniambo, our metals and coal industrial assets delivered robust adjusted cash profit mining margins of 39 per cent.”
African copper recorded an adjusted cash loss of $319m, compared with $817m in earnings the year before. A $350m write-down on 10,000 tonnes of cobalt held by the marketing division didn’t help the balance sheet, either.
But it wasn’t just copper and cobalt that hit earnings. The zinc price was down 16 per cent compared with last year, lead 20 per cent, nickel 11 per cent and coal 14 per cent. Glencore also reported net debt growing 11 per cent in the period to $16.3bn because of the addition of operating leases to the liabilities list under new accounting rules.
Glencore’s turnaround plan for the central African assets has some big goals. It wants to get Katanga and Mopani producing over 400,000 tonnes of copper a year compared with the current sub-300,000 tonnes a year performance, while also cutting costs. Mr Glasenberg said there was a “credible roadmap” to these targets.
The consensus forecast for full-year cash profits is $12.8bn, climbing to $14bn in 2020.
| GLENCORE (GLEN) | ||||
| ORD PRICE: | 224.65p | MARKET VALUE: | £30.6bn | |
| TOUCH: | 224.5-224.7 | 12-MONTH HIGH: | 335p | LOW: 220p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | 39 | |
| NET ASSET VALUE: | 310¢ | NET DEBT: | 37%** | |
| Half-year to 30 June | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
| 2018 (restated) | 100 | 3.70 | 19.0 | 10.0 |
| 2019 | 97.6 | 0.50 | 2.0 | 10.0 |
| % change | -2 | -86 | -89 | - |
| Ex-div: | 5 Sep | |||
| Payment: | 24 Sep | |||
| £1=$1.22 *Second tranche of 20¢ distribution for Jersey-listed shares **Does not include lease liabilities of $1.1bn | ||||
