Glencore has decided not to pay a proposed $ 2.6 billion dividend after reporting a fall in half-year results due to weaker commodity prices and the impact of the coronavirus pandemic.
The Swiss-based miner and trader said on Thursday it was focused on strengthening its balance sheet as net debt rose 12 percent to $ 19.7 billion at the end of June.
Ivan Glasenberg, Glencore's CEO, said the board had concluded that it would be "inappropriate to make a distribution to shareholders in 2020", and it would instead prioritize debt reduction. He said that the board will consider whether they should resume dividends next year when there would be greater visibility of where "everything is".
"Let's see how the market performs, how Covid affects supply and demand for commodities," he said during a media interview on Thursday. "As you can see, we will generate $ 4.1
During the six months to June, Glencore announced a net loss of $ 2.6 billion for the period after taking $ 3.2 billion in write-downs, including a $ 1 billion hit on the value of struggling Colombian coal wealth . Revenue fell 34 percent to $ 70 billion, mainly due to lower commodity prices.
The increase in borrowing came as Glencore took advantage of its credit lines to take advantage of falling oil prices in March and April to buy cheap barrels raw and sell them in the futures market for a profit. As a result, Glencore's "marketing" or trading arm reported record earnings before interest, which doubled to $ 2 billion.
This helped offset a weak performance from mining, with revenues falling 42 percent due to sharply lower prices for thermal coal – one of Glencore's most important raw materials – and lower production due to coronavirus-related shutdowns and disruptions in South Africa and South America.
In total, Glencore reported adjusted earnings before interest, depreciation and amortization – the measure most closely watched by analysts and investors – of $ 4.8 billion over the six months to June, a decrease of 13 percent from the same period last year. one year ago.
"Prices have recovered significantly since the first half of the year, which should help strengthen the mining unit going forward," said Tyler Broda, an analyst at RBC Capital Markets. Shares in Glencore fell 3.4 percent to 189p on Thursday.
Mr Glasenberg said he expected net debt to be within the company's target range of $ 10 to $ 16 billion by the end of the year as major oil companies relax and higher metal prices help the company generate more money. Glencore is aiming for a minimum net debt reduction of $ 2.8 billion in the second half of the year.
Subsequently, Mr Glasenberg, who has led the company since 2002, said that Covid-19 could have an impact on the timing of his impending retirement – but not significantly.
Glencore has moved on to a new generation of management over the last couple of years and recently announced the departure of Daniel Maté, the most important zinc trader. That leaves only two leaders from the time of their London IPO in 2011: Mr Glasenberg and Tor Peterson, head of the coal trade.
"The last of the old guard is Tor and that [his departure] will happen as we are ready with a replacement," said Glasenberg. "And as I said, when the old guard has changed, I will move on. We have not yet said the exact dates, but we are working through the process. ”
The frontrunners to replace Mr Glasenberg are Gary Nagle, head of coal wealth, Kenny Ives, the main nickel dealer, and Nico Paraskevas, who runs copper marketing.