10th Dec 2015 06:45
LONDON (Alliance News) - Glencore PLC on Thursday outlined plans to accelerate its debt reduction and capital preservation measures and to cut its capital expenditure for this year and the next amid the weak commodities market.
The multi-commodities miner and trading house said it will increase its debt reduction and capital preservation measures target to USD13.0 billion, from a previous target of USD10.2 billion, with USD8.7 billion of this either already achieved or locked-in.
Glencore said its new net debt target for the end of 2016 is USD18.0 billion to USD19.0 billion, from its previous target of the low twenties of billions.
The group has also further reduced its capital expenditure targets for 2015, down to USD5.7 billion from USD6.0 billion, and for 2016, where the cut is more severe, down to USD3.8 billion from USD5.0 billion.
Glencore said cuts made to its production have served to reduce its overall supply and its cash outlay and said it is preserving its resources in order to capitalise once margins in the commodities industry improve.
The group expects its commodities marketing business to deliver adjusted earnings before interest and taxation of around USD2.5 billion for 2015, as the unit's strength in oil and stronger contributions from metals and agriculture trading in the second half offset the significant decline in prices.
Glencore expects adjusted Ebit for the marketing unit will decline to USD2.4 billion to USD2.7 billion in 2016, reflecting lower working capital levels and reduced volumes of copper, zinc, lead and coal.
The group said it has more than USD2.0 billion of free cash flow at spot prices and said it will remain cash flow positive despite materially lower commodity price levels. The group added it expects its earnings before interest, taxation, depreciation and amortisation to be around USD7.7 billion in 2016.
"In September, we announced a number of measures to reduce our debt. Today we show significant delivery on those commitments, with USD8.7 billion achieved to date, and are able to announce an increase in our net debt reduction target measures by almost USD3 billion to USD13 billion," said Chief Executive Ivan Glasenberg.
"Glencore is well placed to continue to be cash generative in the current environment ? and at even lower prices. We retain a high degree of flexibility and will continue to review the need to act further as required," Glasenberg added.
By Sam Unsted; [email protected]; @SamUAtAlliance
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