Glencore plc · LSE:GLEN
Glencore — FY2016 Earnings Presentation
24 slides from Glencore's earnings presentation, Feb 23, 2017
Slide 1: Preliminary Results 2016
Preliminary Results 2016 23 February 2017 Mobile equipment, Raglan Nickel, Canada
Slide 2: Important notice concerning forward looking statements
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 terminolog
Slide 3: Ivan Glasenberg, Chief Executive Officer
Lydenburg ferrochrome smelter, South Africa Ivan Glasenberg Chief Executive Officer
Slide 4: 2016 Highlights
2016 Highlights Strong financial performance • Adjusted EBITDA(1,2) of $10.3bn, up 18%; Adjusted EBIT(1,2) of $3.9bn, up 81% • Net income pre-significant items of $2bn, +48% • Funds from operations of $7.8bn, up 17% • Capital expenditure of $3.5bn, down 41% Underpinned by outstanding cost performanc
Slide 5: Safety
Safety • Sadly, two incidents at operations in the DRC and Zambia resulted in ten fatalities. • A further six incidents resulted in six fatalities • Board and senior management committed to improving safety performance • 2016 Performance milestones: • South America: first fatality free year • Agricu
Slide 6: Steven Kalmin, Chief Financial Officer
Steven Kalmin Chief Financial Officer Spiral section, Tweefontein coal wash plant, South Africa
Slide 7: Financial highlights
Financial highlights Strong 2016 Outstanding cost Capital structure Capital allocation Strongly cash financial performance(1) repositioned policy to maximise generative business performance value creation at spot prices and throughout the cycle Adjusted +18% Reductions in 2016 cost Strong BBB/Baa ra
Slide 8: Marketing Adjusted EBIT up 14% to $2.8bn
Marketing Adjusted EBIT up 14% to $2.8bn Marketing Adjusted EBIT ($M) Strong marketing performance, up 14%, reflecting $2,815 the benefits of generally healthier demand and supportive marketing conditions in 2016 +14% 418 (1) $2,464 • Metals and minerals • Up 24%, on the back of improved demand cond
Slide 9: 2017 Marketing guidance $2.2-$2.5bn Adjusted EBIT
2017 Marketing guidance $2.2-$2.5bn Adjusted EBIT(1) Marketing Adjusted EBIT ($M) • Earnings guidance ranges reflect the sale of 50% of Glencore Agriculture in December 2016 3500 • Movement into the mid to upper part of long-term Long-term guidance range of $2.2-$3.2bn would require: Guidance range:
Slide 10: Industrial Adjusted EBITDA up 22% to $7.3bn
Industrial Adjusted EBITDA up 22% to $7.3bn Industrial Adjusted EBITDA Industrial Adjusted EBITDA Industrial Adjusted EBITDA up 22%, reflecting significantly lower cost by segment ($M) Bridge ($M) 7,343 structures, favourable FX movements 138 707 and improved mix towards higher +22% 1'322 margin bus
Slide 11: Industrial mining costs/margins
Industrial mining costs/margins Spot LME c/lb • Reductions in 2016 copper, Spot LME c/lb zinc and nickel cost 275 131 structures expected to be 250 sustained into 2017 Cu 221 Zn 87 95 • Supported by healthy by-product Costs (c/lb)(1) Costs (c/lb)(1) credits and extensive cost efficiencies/savings 41
Slide 12: Industrial capex spend has normalised
Industrial capex spend has normalised Total Industrial capex ($bn)(2) • A well capitalised business requiring modest 14 2009-2016 includes: capex going forward Lion II, Twelopele pelletiser, Antamina, • More than $38 billion of expansionary capital (c.$64bn total capital) Antapaccay, Mount invested
Slide 13: Optimisation of balance sheet capital structure
Optimisation of balance sheet capital structure Net funding ($bn) Net debt ($bn) • Capital structure successfully repositioned to 52.2 54.4 35.8 37.6 34.8 provide greater balance sheet strength and 49.2 flexibility 49.8 47.3 29.6 • Net funding and Net debt reduced by $14.7bn and $14.1bn 30.5 25.9 re
Slide 14: Maximising value creation through capital allocation
Maximising value creation through capital allocation • Our capital allocation framework balances preservation of our optimal capital structure along with business reinvestment/growth and 1 shareholder distributions • 2017 cash distribution of $1bn, to be paid in equal tranches in H1 and H2 2017 Main
Slide 15: Ivan Glasenberg, Chief Executive Officer
Ivan Glasenberg Chief Executive Officer Pre-shift safety check, Goedgevonden coal, South Africa
Slide 16: Rising supply risks are expected to underpin higher prices
Rising supply risks are expected to underpin higher prices Increasingly favourable fundamentals for copper … • Twenty-four months of low prices have induced stresses on the supply side: Annual % change in copper mine • voluntary supply cutbacks supply(1) • involuntary supply cutbacks (strikes/techni
Slide 17: Glencore's coal portfolio resilience
Glencore’s coal portfolio resilience • Drivers of seaborne coal demand Seaborne coal supply decays rapidly Installed coal generating capacity in Asia well known without further investment (Mt)(1) (GW) (4) 2500 1400 • Supply deficit supports existing 1200 Industry natural assets and demand for high-
Slide 18: Uniquely positioned for the challenges and opportunities ahead
Uniquely positioned for the challenges and opportunities that lie ahead Earnings diversified by Outstanding costs for our The right commodity mix to Significant growth potential: commodity and geography(1) key commodities – 2017F(2) feed the changing needs of capacity awaiting restart Coal maturing
Slide 19: Q&A
Drag line, Tweefontein coal mine, South Africa Q&A
Slide 20: Appendix
Power generation, Raglan Nickel, Canada Appendix
Slide 21: Notes
Notes Slide 11: Industrial mining costs/margins • (1) 2016 actual copper unit cost calculated on department production of 1,270.6kt (not including c.155kt additional copper produced as by-product in the zinc and nickel divisions) less 41.1kt produced at Mopani. 2017 forecast copper unit cost calcula
Slide 22: Production guidance
Production guidance Commodity Unit Actual Actual Actual Guidance FY 2014 FY 2015 FY 2016 FY 2017 Copper kt 1,546 1,502 1,426 1,355 ± 25 Zinc kt 1,387 1,445 1,094 1,190 ± 25 Lead kt 308 298 294 300 ± 10 Nickel kt 101 96 115 120 ± 4 Ferrochrome kt 1,295 1,462 1,523 1,650 ± 25 Coal Mt 146 132 125 135 ±
Slide 23: Distribution timetable
Distribution timetable H1 2017 distribution timetable Jersey Johannesburg Hong Kong Exchange rate reference date: 28 April Last time to trade on JSE to be recorded in the 9 May register on record date: Last day to effect removal of shares cum div 9 May between Jersey and JSE registers: Final Ex-Div
Slide 24: Power generation, Raglan Nickel, Canada
Power generation, Raglan Nickel, Canada 24