24th Aug 2016 06:20
LONDON (Alliance News) - Glencore PLC Wednesday said it has continued to reduce its debt pile as expected during the first half of the year and said debt will be lower than first thought by the end of the year as it confirmed it has stayed in the red in the period, as expected.
The company said net debt was reduced by 9.0% in the first six months of the year to USD23.58 billion from USD25.88 billion at the end of 2015 as it continues to carry out its debt reduction plan that is being driven by cost reductions and asset sales.
Net debt stood 2.91 times higher than the adjusted earnings before interest, tax, depreciation and amortisation generated in the period.
"We have already largely achieved our asset disposals target of USD4.00 to USD5.00 billion with a diverse and material pool of asset sales' processes also on-going. Our divestment strategy remains one of maximising value for shareholders through identifying assets where overall Glencore franchise positioning, optionality and value is substantially preserved or even enhanced," said Chief Executive Ivan Glasberg.
Asset sales, so far, have amounted to USD3.90 billion but more sales are expected before the end of 2016. Glencore said it is now aiming to reduce net debt to USD16.00 to USD17.50 billion by the end of this year compared to the original goal to have it at USD17.00 to USD18.00 billion.
Glencore had already revealed its production figures for the first half, revealing declines in the majority of production across the portfolio as the company purposefully curtails production in response to market conditions and downsizes its asset pool.
As expected, the company posted an ultimate net loss for the first half of USD369.0 million, but that is significantly narrower than the USD676.0 million loss reported last year. Exceptional items kept Glencore firmly in the red, but it did post a profit when those items are excluded.
The net income before items totalled USD300.0 million, down from USD1.41 billion last year.
Net funds from operations was down 21% to USD2.76 billion from USD3.48 billion.
Adjusted earnings before interest, tax, depreciation and amortisation amounted to USD4.02 billion, down from USD4.61 billion, and adjusted Ebit fell to USD875.0 million from USD1.41 billion.
The Marketing business which trades in commodities, one of the divisions that shareholders will be looking out for on Wednesday, generated adjusted Ebit of USD1.20 billion in the first half, up 14% from last year thanks to strong contributions from metals and minerals, the company said.
Full year guidance for the division remains intact at USD2.40 to USD2.70 billion.
Capital expenditure was less than half what it spent a year earlier, declining to USD1.57 billion from USD3.18 billion.
"After a difficult start to the year, the more constructive tone of markets in recent months has helped support the pricing of many of our key commodities. While we are highly cash generative at current spot prices, we remain mindful that underlying markets continue to be volatile. We are alert to and have a high degree of proven flexibility in adapting to changing market conditions," said Glasberg.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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