Glencore scraps $2.6bn dividend after fall in half-year profits

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Glencore has determined to not pay a proposed $2.6bn dividend after reporting a drop in half-year income attributable to weaker commodity costs and the influence of the coronavirus pandemic. 

The Switzerland-based miner and commodities dealer mentioned on Thursday it was centered on strengthening its stability sheet as web debt rose 12 per cent to hit $19.7bn on the finish of June. 

Ivan Glasenberg, Glencore’s chief government, mentioned the board had concluded it might be “inappropriate to make a distribution to shareholders in 2020”, and it might as an alternative prioritise debt discount. He mentioned the board would evaluation whether or not to renew dividend funds subsequent 12 months when there could be better visibility on the place “the whole lot sits”.

“Let’s see how the market performs, how Covid is affecting provide and demand for commodities,” he mentioned throughout a media name on Thursday. “As you’ll be able to see we shall be producing $four.1bn free money circulate [this year] primarily based on present costs. Debt will come down,” he added.

Within the six months to June, Glencore introduced a web lack of $2.6bn for the interval after taking $three.2bn of impairment expenses, together with a $1bn hit on the worth of its struggling Colombian coal property. Income fell 34 per cent to $70bn, primarily attributable to decrease commodity costs.

The rise in borrowings got here as Glencore tapped its credit score traces to reap the benefits of falling oil costs in March and April to buy cheap barrels of crude and promote them within the futures marketplace for a revenue. Consequently, Glencore’s “advertising and marketing”, or buying and selling arm, reported report earnings earlier than curiosity, which doubled to $2bn.

This helped to offset a weak efficiency from its mining enterprise, the place earnings dropped 42 per cent due to sharply decrease costs for thermal coal — one among Glencore’s key commodities — and decrease manufacturing attributable to coronavirus-related lockdowns and disruptions in South Africa and South America.

Total, Glencore reported adjusted earnings earlier than curiosity, depreciation and amortisation — the measure most intently watched by analysts and traders — of $four.8bn within the six months to June, down 13 per cent on the identical interval a 12 months in the past. 

“Costs have recovered considerably since first half which ought to assist to bolster the mining unit going ahead, ” mentioned Tyler Broda, an analyst at RBC Capital Markets. Shares in Glencore fell three.four per cent to 189p on Thursday.

Mr Glasenberg mentioned he anticipated web debt to be inside the firm’s goal vary of $10bn to $16bn by the top of the 12 months as the massive oil trades unwind and better metallic costs assist the corporate generate more money. Glencore is focusing on a minimal web debt discount of $2.8bn within the second half of the 12 months.

On succession, Mr Glasenberg, who has led the corporate since 2002, mentioned Covid-19 may have an effect on the timing of his impending retirement — however not considerably.

Glencore has been transitioning to a brand new era of administration over the previous couple of years and just lately introduced the departure of Daniel Maté, its high zinc dealer. That leaves simply two executives from the time of its 2011 London inventory market flotation: Mr Glasenberg and Tor Peterson, the pinnacle of coal buying and selling.

“The final of the outdated guard is Tor and that [his departure] will occur in order we’re prepared with a substitute, ” mentioned Mr Glasenberg. “And as I’ve mentioned, as soon as the outdated guard has modified I’ll transfer on. Actual dates we haven’t mentioned but however we’re working by means of the method.”

The frontrunners to switch Mr Glasenberg are Gary Nagle, head of coal property, Kenny Ives, its high nickel dealer, and Nico Paraskevas, who runs copper advertising and marketing.

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