Glencore (GLEN) will hold off on paying its 20¢ (16p) dividend for 2020 until later in the year or cancel it entirely because of the Covid-19 impact on commodity prices. The mining and trading company said its aim was to keep paying down debt and maintain its Baa/BBB credit ratings, which are important for its trading business.
Last year, copper mining was its largest driver of cash profits, providing a quarter of the company’s adjusted cash profit of $11.6bn (£9.4bn).
A major goal set out in the 2019 results released in February was getting the net debt-to-cash profit ratio down to 1, from 1.51 times at the end of 2019. Chief executive Ivan Glasenberg also made clear last month he would push to get net debt down to $14-$15bn at the end of 2020, from $17.6bn as of 31 December. The company has said this is still on the cards, helped along by the possible scrapping of the entire dividend of $2.6bn.
The news the company would “defer its decision as to whether to proceed” means this is not confirmed, however. The final call on the payout will be made when the first-half results are released in August. Glencore has also added $200m to its $9.975bn 12-month revolving loan and extended another $4.6bn billion loan’s maturity to 2025.
On top of the commodity price fall (which Glencore is also exposed through its oil production and refining), the company has had to reduce production at several operations as governments have tried to stop the spread of Covid-19. Base metal operations in Quebec have been put on care and maintenance, as has the Prodeco coal mine in Colombia, and oil production has stopped in Chad.
Glencore’s share price is down almost a third in the past month to 119p.
