News Column

UPDATE: Glencore Profit Buoyed By Production Increase, Raises Payouts

August 20, 2014

Alice Attwood

LONDON (Alliance News) - Glencore PLC Wednesday reported a higher profit for the first half of the year as it continued to benefit from the synergies it is eking out of its Xstrata and Viterra acquisitions, and as higher production offset commodity price falls and a hit from currency movements.

The metals and mining giant also raised its interim dividend and announced a buyback of up to USD1 billion over the next seven months.

Net profit more than tripled in the first-half, reaching USD1.72 billion compared with USD645 million a year earlier. Profit in the year-earlier period was lowered by USD466 million after the company finalised the fair value adjustments relating to the Xstrata acquisition.

Excluding the impairments and some other items like losses on disposal of investment, its profit rose to USD2.01 billion, from USD1.86 billion. Its closely-watched adjusted earnings before interest, tax, depreciation and amortisation rose to USD6.46 billion, from USD6.00 billion, as revenue rose to USD114.06 billion, from USD112.04 billion.

Glencore increased its interim distribution to USD0.06 cents per share, an 11% increase over the 2013 interim distribution, which the company said reflects its "confidence in the prospects and strength of our underlying commodities and business and cashflow profile."

The company also said that it will start a share buy-back programme of up to USD1 billion in the period to March 31, 2015.

The metals giant said its adjusted Ebitda was buoyed by "generally increased" volumes and improved market and procurement conditions, notably in grains, copper, zinc and nickel. Glencore said higher volumes, notably in copper, offset generally weaker net commodity prices and a currency translation hit.

Its metals and minerals adjusted Ebitda mining margin improved to 32%, from 29%, while the adjusted Ebitda margin in its energy business was stable at 29%, "reflecting the higher overall industrial profitability and improving asset quality," it said.

On a divisional basis, Glencore said revenue in the metals and minerals business fell to USD31.60 billion in the half-year, from USD36.40 billion a year earlier, including marketing and industrial activities. Adjusted Ebitda rose to USD4.41 billion, from USD3.90 billion, boosted by a 25% increase in marketing Ebitda on higher volumes of copper, zinc and lead, supportive market conditions, notably in copper, zinc and nickel and synergy benefits following the acquisition of Xstrata.

The energy products division saw revenue increase to USD71.31 billion, from USD68.83 billion in the first-half of 2013. Adjusted Ebitda was down at USD1.72 billion, from the USD2.01 billion reported last year, as marketing faced challenging and oversupplied coal markets and as flat oil market conditions persisted through the first six months of the year.

Agricultural products revenue fell to USD12.60 billion, from USD16.10 billion. However, adjusted Ebita more than quadrupled to USD619 million, from USD126 million last year, due to a stronger performance across its marketing and industrial activities. That included a robust contribution from Viterra’s grain handling operations on the back of a record crop in Canada and an above average crop in South Australia.

The company said Viterra's results benefited from a full period of integration-related cost synergies and that Glencore’s traditional marketing business also delivered an overall improved performance, compared with a lacklustre first-half last year.

"Glencore continued to make decisive progress in delivering on the potential created by the Xstrata acquisition over the first half of 2014... We look to the future with optimism," said Chief Executive Ivan Glasenberg in a statement.

Last week the metals giant reported higher copper, ferrochrome and oil production in the first-half of the year as it ramped up output at some mines and oil facilities, although zinc and nickel production was down on the year as other mines depleted reserves or were placed on care and maintenance.

Glencore shares were trading 0.43% higher at 360.55 pence per share Wednesday morning, amongst the top gainers on the FTSE 100.

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Source: Alliance News

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