Glencore Reinstates Dividend As 2020 Net Debt Falls

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Glencore has restored its dividend and has signaled other possible payouts due to high commodity prices as billionaire CEO Ivan Glasenberg prepares to hand over the reins of the trading and mining giant.

After removing its dividend in August after a first-half loss due to a pandemic, Glencore recommended a payout of $ 0.12 per share for 2021.

This represented a larger than expected total payment of $ 1.6 billion.

Glasenberg, Glencore’s second-largest shareholder, hands over to Gary Nagle in the first half of the year after 18 years at the helm but reiterated his intention to retain his 9% stake.

“I have no intention of selling my shares. I hope Gary does a good job of ensuring that he continues to pay dividends,” he told reporters.

Nagle, who becomes the CEO of the company’s coal business, said Glencore is a complicated company with many assets, but that he does not plan to make any major changes to the structure.

“The company’s 2020 results are exceptional considering this was the year of a global pandemic,” Jefferies analyst Chris LaFemina said, adding that its shares remain “grossly undervalued”.

Although well below the $ 2.6 billion announced last year before the dividend cancellation, the payout exceeds consensus market expectations of $ 1.3 billion and echoes the exceptional dividend from mining giant BHP Group.

BHP today declared a record interim dividend, citing strong demand for iron ore from China.

Glencore, one of the world’s largest commodities traders, could raise dividend or initiate a share buyback after reducing net debt to less than $ 13 billion and if commodity prices remain high, has CFO Steve Kamlin said after the company released its 2020 results.

“This provides a potential capacity, in August or certainly at the end of the year, for us to start thinking about a follow-up distribution or a buyout,” he told reporters.

Glencore’s trading activity benefited from the strength of the metals markets, in particular copper, nickel and zinc.

It was also boosted by oil storage when crude prices fell early last year, later selling it at higher prices and taking advantage of what’s known as a contango market structure.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) topped the expected $ 10.7 billion in a survey of 12 analysts compiled by Vuma, while marketing profit before interest and taxes (EBIT) jumped 41 % to $ 3.3 billion.

Although well below the $ 2.6 billion announced last year before the dividend cancellation, the payout exceeds consensus market expectations of $ 1.3 billion and echoes the exceptional dividend from mining giant BHP Group.

BHP today declared a record interim dividend, citing strong demand for iron ore from China.

Glencore, one of the world’s largest commodities traders, could raise dividend or initiate a share buyback after reducing net debt to less than $ 13 billion and if commodity prices remain high, has CFO Steve Kamlin said after the company released its 2020 results.

“This provides a potential capacity, in August or certainly at the end of the year, for us to start thinking about a follow-up distribution or a buyout,” he told reporters.

Glencore’s trading activity benefited from the strength of the metals markets, in particular copper, nickel and zinc.

It was also boosted by oil storage when crude prices fell early last year, later selling it at higher prices and taking advantage of what’s known as a contango market structure.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) topped the expected $ 10.7 billion in a survey of 12 analysts compiled by Vuma, while marketing profit before interest and taxes (EBIT) jumped 41 % to $ 3.3 billion.

The sales division had its best year since 2008, driven by the extreme volatility of the oil market due to coronavirus lockdowns and a difficult cobalt market.

Net debt fell to $ 15.8 billion in 2020 from $ 17.6 billion in 2019, helped by strong cash flow in the second half of the year. This was within its target range and exceeded market expectations.

Glencore CEO Ivan Glasenberg

“The balance sheet is now in a stronger position,” Glasenberg said, adding that the miner aims to further reduce its net debt this year.

Glencore’s net debt is the largest among its peers, in part due to its trading activities.

The group recorded a primarily non-cash impairment charge of $ 5.9 billion, primarily against its Mopani mine in Zambia and its Colombian coal and African oil assets, bringing its net loss to $ 1.6 billion against $ 404 million the year before.

In coal, Glencore continued to divert production from Australia to other markets due to a trade dispute between Australia and China, Glasenberg said.

He ruled out buying BHP’s Mount Arthur thermal coal mine in Australia, but said he could consider trading some coal assets without compromising the miner’s production cap of 150 million tonnes per year.

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