Glencore to pay US$0.12 per share

GLENCORE has announced that it would pay out 0.12 US cents per share

The company said this in its 2020 year-end presentation as it resumed dividends as flagged in December.

The payment is set to be equivalent to $1.6bn in total.

However, it added that, provided that annualized free cash flow as of the end of January had been $7.2 billion, it will consider a “top-up” payment at the intermediate point in June. It had a preference for dividend payments over equity buy-backs, the company said.

“Credit Suisse said in an early morning note on the figures, “Net leverage is now back in line with the company’s targeted range, enabling it to reinstate the dividend, which also came in above consensus estimates.

The decision to press ahead with a dividend payment was also based on having becalmed the balance sheet. Net debt came in at $15.8bn – in line with analyst assumptions – and which falls within Glencore’s $10bn to $16bn comfort range.

Glencore said again today, however, that it would be more comfortable at a net debt to adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) ratio of 1x. As of December 31, this ratio was 1.37x.

Adjusted EBITDA for the 2020 financial year was flat year-on-year. The contribution from its industrial assets (mines) declined largely owing to weaker thermal coal pricing, although Katanga Copper reported a $1bn year-on-year turnaround in adjusted EBITDA – a positive $700m in contribution for the year.

But the mainstay of the numbers was Glencore’s marketing division which performed strongly. On earnings before interest and tax basis, it made a contribution to adjusted EBITDA of $3.3bn, an increase of 41%.

The dividend comprises $1bn from the group’s marketing division cash flow and 25% ($600m) of cash flow from the industrial assets.

Steve Kalmin, Glencore CFO said the firm could address capital management and dividends before the interim juncture if desired even though a net debt target of $13bn had been set for this year. “It was not inconsistent to achieve both,” said Kalmin when asked if it was necessary to keep reducing debt when dividends were the priority.

The group reported a deepening of its loss per share of -0.14 cents for the year, however. Non-cash impairments more than doubled to $5.9bn (2019: $2.4bn) after Glencore opted to hand over its stake in the Mopani Copper Mine assets in Zambia and relinquish its mining rights held in Prodeco in Colombia. It also wrote down a portion of its African oil assets.

Ivan Glasenberg, CEO of Glencore, used the results to formally sign off from the company after around 20 years in office. He will hand over to successor Gary Nagle by end-June. He said: “Gary’s appointment largely concludes completion of a seamless senior management transition to Glencore’s next generation of leadership,” said Glasenberg.

“All senior management positions have been promoted from within the business, demonstrating the strength in depth across the group.”

Asked for his view on taking the job, Nagle said: “It’s a difficult job, but it’s not an impossible one. I wouldn’t have taken it otherwise.”

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