Glencore Plc · LSE:GLEN
Glencore — Investor Presentation (December 2018)
34 slides from Glencore's investor presentation, Dec 3, 2018
Slide 1: Investor Update
Investor Update 3 December 2018
Slide 2: Important notice concerning this document including forward looking statements
1 Important notice concerning this document including forward looking statements This document contains statements that are, or may be deemed to be, “forward looking statements” which are prospective in nature. These forward looking statements may be identified by the use of forward looking terminol
Slide 3: Highlights
Highlights Ivan Glasenberg - CEO Investor Update - December 2018
Slide 4: Highlights
Highlights 3 • Trade/China/Macro fears have impacted financial sentiment ◦ Sector reinvestment remains limited, demand is solid, inventories are low and likely to fall further • Diversified portfolio enabling transition to low carbon economy, while providing access to affordable energy ◦ Our copper,
Slide 5: Commodity fundamentals still positive
Commodity fundamentals still positive 4 Despite trade/China/Macro fears Policy uncertainty is rising(1) … … and trade/China/Macro fears are impacting sentiment(2) Global Economic Policy Uncertainty Index Manufacturing PMI Index 300 61 280 59 260 57 240 220 55 200 53 180 51 160 49 140 120 47 Feb-16 O
Slide 6: Commodity fundamentals still positive: reinvestment and demand growth
Commodity fundamentals still positive 5 Despite trade/China/Macro fears Sector reinvestment remains limited(1) … … demand growth remains solid(2) … Sector capex ($bn) 8.0% 6.0% Additional 2018 capex 4.0% Average: $43bn 2.0% 3 4 77 1 4 72 4 58 59 53 0.0% 41 44 42 Thermal Coal Zinc Nickel Aluminium Le
Slide 7: Commodity fundamentals still positive: inventories
Commodity fundamentals still positive 6 Despite trade/China/Macro fears … and inventories significantly reduced(1) In 2019 continued inventory draw downs are likely(2,3) Global inventories (rebased 100=Jan 2015) What’s the minimum 2019 demand growth needed for inventory draw? 180 7.1% 160 Minimum Co
Slide 8: ESG Update
ESG Update 7 Total recordable injury frequency rate (per million hours)(1) Safety • 12 fatalities from 11 incidents 2018YTD 8.05 • Fatality reviews undertaken and key focus areas identified Glencore ICMM (27 companies) • LTIFR 1.03 increase of 0.8% vs. 2017 5.00 4.70 4.25 3.94 • TRIFR 3.31 increase
Slide 9: Maintaining financial strength and flexibility
Maintaining financial strength and flexibility Steven Kalmin - CFO Investor Update - December 2018
Slide 10: Production update: Overview
Production update 9 Overview Group guidance – own source(1) 2018F 2019F 2020F 2021F Δ 2018-2021F Copper – Base(2) kt 1315 ± 15 1255 ± 30 1255 ± 30 1255 ± 30 Copper - Katanga guidance(3) kt 150 285 ± 15 285 ± 15 285 ± 15 Copper - Group kt 1465 ± 15 1540 ± 45 1540 ± 45 1540 ± 45 +5% Cobalt - Base(2) 2
Slide 11: Production update: Copper/Cobalt
Production update 10 Copper/Cobalt Key copper changes Copper guidance (kt) – own source(1,2) • Overall net guidance reduction across the outlook period reflects a slower ramp up at Mopani (c.-20ktpa), the sale of Punitaqui (-8ktpa) and changes to Mutanda 1465±15 1540±45 1540±45 1540±45 Mutanda • Pro
Slide 12: Production update: Katanga WOL commissioning update
Production update 11 Katanga WOL commissioning update Hot commissioning of Phase 2 of whole ore leach (WOL) Copper from WOL Phase 2 processing facility successfully completed(1) • Progressive ramp-up of the plant underway with a view to full capacity of the WOL plant by end Q1 2019 Revised productio
Slide 13: Production update: Coal
Production update 12 Coal Key changes: Coal guidance (Mt) – own source(2) • 2019: +2Mt, 2020: +3Mt vs previous guidance(1) +13Mt Hail Creek 145±3 145±3 145±3 • Acquisition completed early August 2018. c.10Mt predominantly hard coking coal (100%; Glencore 82% 132±2 interest). Re-design of the mine pl
Slide 14: Production update: Zinc
Production update 13 Zinc Key changes – subject to market conditions: Zinc guidance (kt) – own source(2,3) • 2019: +35kt, 2020: +35kt vs previous guidance(1) +305kt McArthur River 1395±30 1335±30 • Recent EIS approval allows production of c.300ktpy from 2019 (2017 production of 210kt) 1195±30 Progre
Slide 15: Production update: Nickel
Production update 14 Nickel Key changes: Nickel guidance (kt) – own source(2) • 2018 reduction of 6kt reflects timing of own unit feed processing at INO and slightly slower ramp up at KNS +12kt • 2020: 2kt lower reflecting slower ramp at KNS 138±5 140±5 138±5 • 2021: slightly lower overall Ni unit p
Slide 16: 2019 unit costs/margins
2019 unit costs/margins 15 • Robust unit cost / margin outlook(1) for our two largest Industrial businesses – Copper and Coal. Nickel in Cu costs(1,2) vs price (c/lb) Zn costs(1,2) vs price (c/lb) transition mode with the achievement of “commercial” production at Koniambo 280 297 282 131 132 120 Spo
Slide 17: Capex update
Capex update 16 2019-2021 guidance – Industrial total capex average of c.$4.8bn per annum Average c.$0.3bn p.a. uplift over Dec 2017 guidance Industrial total capex ($bn)(1) • Reinvestment in fast payback/high returning Industrial Capex history ($bn) acquisitions/brownfield extension options 12 4.8
Slide 18: Marketing 2018 update
Marketing 17 2018 update Marketing Adjusted EBIT guidance revised to $2.7bn ± $100M(1) Marketing Adjusted EBIT ($bn) • Previous 2018 guidance expected to be within the top half of the $2.2bn to $3.2bn long-term guidance range Lowered guidance largely reflects the following second half impacts: 2.6-2
Slide 19: Marketing 2019 guidance
Marketing 18 2019 guidance Unchanged long-term guidance range of $2.2-$3.2bn for Long-term Marketing Adjusted EBIT guidance ($bn) Marketing Adjusted EBIT • Additional business/volume opportunities from recent M&A 3500 (Hail Creek, HVO, Chevron SA, Alesat) expected to offset the accounting impact on
Slide 20: 2019 illustrative spot annualised cashflows
2019 illustrative “spot” annualised cashflows 19 Group $bn Copper(5) Guidance Nickel(6) Guidance Copper EBITDA 5.5 Total copper production (kt) 1540 Production (kt) 138.0 Cu from Zn & Ni departments. (kt) -140 Spot Ni price (c/lb) 505 Zinc EBITDA 2.2 Net relevant production (kt) 1400 Cost guidance (
Slide 21: Illustrative spot free cash flow scenario analysis
Illustrative spot free cash flow scenario analysis(1) 20 Free cash flow through the cycle: c.$5-10bn Trough Downside Spot Upside Supercycle $3.6bn $4.9bn $7.5bn $10bn $14.4bn Unsustainable Through the cycle free cash flow $M 0 2000 4000 6000 8000 10000 12000 14000 16000 Notes: (1) See slide 28 for u
Slide 22: Capital allocation
Capital allocation 21 • Our capital allocation framework seeks to balance the preservation of our optimal capital structure, with Equity attractive business reinvestment / growth opportunities and shareholder distributions cash • 2018E distributions / buybacks total $5.2 bn flows • $2.85bn base dist
Slide 23: Focusing on the long-term
Focusing on the long-term Ivan Glasenberg - CEO Investor Update - December 2018
Slide 24: Our Management structure
Our Management structure 23 Experienced management team with a proven track record of value creation CEO Ivan Glasenberg CFO Steven Kalmin Head of Industrial Mining Assets Peter Freyberg Copper Zinc Aluminium Ferroalloys Nickel Iron Ore Coal Oil Agriculture Marketing Marketing Marketing & Marketing
Slide 25: Focusing on the long-term
Focusing on the long-term 24 • Diversified portfolio enabling transition to low-carbon economy while providing access to affordable energy ◦ Our copper, nickel and cobalt helps underpin the technologies that enable the looming energy and mobility transformation ◦ Our affordable, premium quality, hig
Slide 26: Appendix
Appendix Investor Update - December 2018
Slide 27: New reporting presentation for Agricultural Products
New reporting presentation for Agricultural Products 26 2017 H1 2018 • In line with the continued Less: Add: Agri Less: Add: Agri progression of Glencore Financial Agri associate Financial Agri associate Agricultural Limited’s (GAL) review 50% net income Adjusted review 50% net income Adjusted Adjus
Slide 28: 2019 Key EBITDA sensitivities
2019 Key EBITDA sensitivities 27 Approximate estimated impact on FY2019 EBITDA given a change of: $M $100/t on copper price 140 $10/t on NEWC thermal coal price 480 $10/t on coking coal (HCC) price 60 $100/t on zinc price 130 $1000/t on nickel price 140 $1/lb on realized cobalt price 100 Australian
Slide 29: Illustrative spot free cash flow scenario analysis: scenario assumptions
Illustrative spot free cash flow scenario analysis 28 Scenario assumptions Trough Downside Spot Upside Supercycle (Q1 2016) (FY 2016 ave.) EBITDA $bn 9.0 11.1 17.1 21.7 29.0 Free cash flow $bn 3.6 4.9 7.5 10.0 14.4 Copper $/t 4678 4867 6227 7000 10000 Zinc $/t 1686 2094 2655 3250 3750 Nickel $/t 854
Slide 30: Listed entity market valuations and selection of other entities
Listed entity market valuations and selection of other entities 29 Listed entities % owned Market value $M Russneft 25.0% 587 Volcan 23.3%(1) 515 Century 47.4% 374 Rusal 8.8% 371 Rosneft 0.6% 380 Yancoal 6.8% 215 Other(2) Various 333 Total 2744 Selection of other entities US oil infrastructure BaseC
Slide 31: Buy back update
Buy back update 30 Shares eligible for distribution $2bn announced buy backs Shares eligible for distribution (million shares) • 358,442,002 shares purchased to date for $1.45bn(1) Issued share capital • Completion of the balance of program can run until close of dealings on 20 February 2019 14300 S
Slide 32: Commodity fundamentals: copper
Commodity fundamentals: our key commodities have capacity to buffer a demand slow-down 31 Copper: demand growth has been resilient… … and inventory drawdowns persist in a slow-down Copper demand (kt)(1) Copper supply vs. demand scenarios (kt)(2) +3.1% 2013-2017 CAGR demand Supply Demand 2013-2017 In
Slide 33: Commodity fundamentals: nickel
Commodity fundamentals: our key commodities have capacity to buffer a demand slow-down 32 … inventory drawdowns likely to persist in a Nickel demand growth has been strong … slow-down, even allowing for strong supply scenarios Nickel demand (kt)(1) Nickel supply vs. demand (kt)(1) Supply 2013-2017 +
Slide 34: Commodity fundamentals: zinc
Commodity fundamentals: our key commodities have capacity to buffer a demand slow-down 33 … inventory drawdowns are likely even with the Zinc demand growth has been resilient (kt)(1) … potential of significant supply growth Zinc demand (kt)(1) Zinc supply vs. demand (kt)(1) +1.0% Supply 2013-2017 CA