2014 Preliminary Results
London, 3 March 2015
Mt Owen coal, Australia
Basis of preparation and disclaimer
Basis of preparation
The reported financial information has been prepared on the basis as outlined in note 1 of the financial statements with the exception of the accounting treatment applied to certain
associates and joint ventures for which Glencore’s attributable share of revenues and expenses are presented (see note 2).
The unaudited and unreviewed pro forma financial information for 2013 has been prepared in a manner consistent with the accounting policies applicable for periods ending on or after 1
January 2013 as outlined in note 1 of the financial statements with the exception of the accounting treatment applied to certain associates and joint ventures for which Glencore’s
attributable share of revenues and expenses are presented (see note 2) and reflects the final fair value adjustments arising from the acquisition of Xstrata on 2 May 2013 as if the
acquisition and full consolidation of such had taken place as of 1 January 2013. These adjustments primarily relate to depreciation, amortisation and the release of onerous and
unfavourable contract provisions. The pro forma financial information has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and
therefore does not reflect the Group’s actual financial position or results.
A reconciliation of the pro forma results to the reported results for the year ended 31 December 2013 is included in the Glossary on page 117 of Preliminary Results 2014.
The reported and pro forma financial information is presented in the Financial Review section before significant items unless otherwise stated to provide an enhanced understanding and
comparative basis of the underlying financial performance. Significant items (refer to page 8 of Preliminary Results 2014) are items of income and expense which, due to their financial
impact and nature or the expected infrequency of the events giving rise to them, are separated for internal reporting and analysis of Glencore’s results.
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 terminology, or the negative thereof such as “outlook”, "plans", "expects" or "does not expect", "is expected", "continues", "assumes", "is subject to",
"budget", "scheduled", "estimates", "aims", "forecasts", "risks", "intends", "positioned", "predicts", "anticipates" or "does not anticipate", or "believes", or variations of such words or
comparable terminology and phrases or statements that certain actions, events or results "may", "could", "should", “shall”, "would", "might" or "will" be taken, occur or be achieved. Such
statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements are not based on historical facts, but rather
on current predictions, expectations, beliefs, opinions, plans, objectives, goals, intentions and projections about future events, results of operations, prospects, financial condition and
discussions of strategy.
By their nature, forward looking statements involve known and unknown risks and uncertainties, many of which are beyond Glencore’s control. Forward looking statements are not
guarantees of future performance and may and often do differ materially from actual results. Important factors that could cause these uncertainties include, but are not limited to, those
discussed in Glencore’s Annual Report 2013 and “Risks and uncertainties” in Glencore’s Half-Year Results 2014.
Neither Glencore nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied
in any forward-looking statements in this document will actually occur. You are cautioned not to place undue reliance on these forward-looking statements which only speak as of the
date of this document. Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure and Transparency Rules of the Financial
Conduct Authority and the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and the Listing Requirements of the Johannesburg Stock Exchange
Limited), Glencore is not under any obligation and Glencore and its affiliates expressly disclaim any intention, obligation or undertaking to update or revise any forward looking
statements, whether as a result of new information, future events or otherwise. This document shall not, under any circumstances, create any implication that there has been no change
in the business or affairs of Glencore since the date of this document or that the information contained herein is correct as at any time subsequent to its date.
No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per Glencore share for
the current or future financial years would necessarily match or exceed the historical published earnings per Glencore share.
This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities. The making of this
document does not constitute a recommendation regarding any securities.
2
CCR copper refinery, Canada
Highlights
Ivan Glasenberg – Chief Executive Officer
2014 Highlights(1)
Strong financial performance despite difficult market conditions
•
Adjusted EBITDA(2) of $12.8bn, down 2%
•
Marketing Adjusted EBIT(2) of $2.8bn, up 18%
•
Net income(3) of $4.3bn, down 7%
•
Industrial synergies and cost savings of $1.9bn realised
Robust balance sheet and strong cash flow coverage
•
Funds from operations(4) of $10.2bn, down 2%
•
Net debt(4) of $30.5bn, down $7.1bn from H1 2014
•
BBB stable outlook reconfirmed by S&P
•
Capex of $8.6bn, down $2.8bn, further declining significantly in 2015
Confidence in our outlook
•
Exposure to the right commodities - market balances for our core commodities
are now in deficit or transitioning into deficit
•
$3.3bn returned to shareholders in 2014, c.$9.3bn returned since IPO in 2011
Notes: (1) Refer to basis of preparation on page 5 of Preliminary Results 2014. (2) Refer to note 2 of the financial statements for definition and reconciliation of Adjusted
EBIT/EBITDA and slide 21 in Appendix. (3) Attributable to equity holders pre-significant items; refer to significant items table on page 7 of Preliminary Results 2014. (4)
For Funds from operations (FFO) and Net debt definition refer to page 9 of Preliminary Results 2014.
4
Sustainability and governance
Safety
• Regrettably 16 fatalities in 2014 (26 in 2013)
• Reduction on 2013 reflects ‘SafeWork’ focus on safety
LTIFR(1) 2009 to 2014
2.96
2.74
leadership, culture and implementation of Fatal Hazard
Protocols
• Significant performance improvement at DRC, Zambia,
Bolivia and Kazakhstan operations
• 118,000 employees completed “SafeWork” awareness
2.49
47% reduction
2.06
1.87
Governance
1.58
• Consolidation of Board: A. Hayward, Chair; P. Grauer
SID; Patrice Merrin, new NED
• Published Code of Conduct and policies on bribery and
corruption, carbon and human rights
External Recognition and Memberships
2009
2010
2011
2012
2013
2014
• ICMM, UN Global Compact, EITI, PACI (Partnering
Against Corruption Initiative – World Economic Forum)
• Voluntary Principles on Security and Human Rights
(application in progress)
• Mopani Copper awarded “Company of the Year” from
Zambia for EITI reporting transparency
Note: (1) Lost time incidents (LTIs) are recorded when an employee or contractor is unable to work following an incident. In the past Glencore recorded LTIs which resulted in lost days from the next calendar
day after the incident whilst Xstrata recorded LTIs which resulted in lost days from the next rostered day after the incident - therefore the combined LTI figure is not based on data of consistent definition
(historically, prior to merger). From 2014 Glencore records LTIs when an incident results in lost days from the first rostered day absent after the day of the injury. The day of the injury is not included. LTIFR is
the total number of LTIs recorded per million working hours. LTIs do not include Restricted Work Injuries (RWI) and fatalities (fatalities were included up to 2013). Historic data has been restated to exclude
fatalities and to reflect data collection improvements.
5
Ulan West coal, long wall operation, Australia
Financial performance
Steven Kalmin – Chief Financial Officer
Financial performance highlights
• Robust financial
•
•
•
•
•
•
performance despite difficult
market conditions
Weaker prices largely offset
by resilience of the
marketing business
24% decline in capex and
the disposal of Las Bambas
supported $7.1bn reduction
in net debt from H1 2014
($5.3bn for full year)
Merger synergies/cost
efficiencies of c.$1.9bn
realised
$2.3bn working capital
release, excluding RMI(2)
Healthy cash flow coverage
ratios, well positioned within
current rating target metrics
BBB stable outlook
reaffirmed by S&P in Feb
2015
$12.8bn
$4.3bn
$33cents
Adjusted EBITDA,
down 2%
Net income presignificant items,
down 7%
Earnings per share,
down 6%
$8.6bn
$30.5bn
$2.3bn
Total capex,
down 24% (1)
Net debt,
down 19% over H1
2014
Release in working
capital (excluding RMI
movements)
$10.2bn
$1.9bn
33.3%
Funds from operations,
down 2%
Industrial synergies and
cost savings realised.
Streamlined cost
structures now
embedded
FFO to net debt
Target: >25%
2.39x
Net debt to adj.EBITDA
Target: <3x
Notes: (1) Excludes Las Bambas. (2) RMI (Readily Marketable Inventories) up $2.8bn during 2014 (mostly H2) on account of our strong financial position allowing us to
seize attractive marketing opportunities. The majority of this temporary increase is expected to reverse in 2015.
7
Marketing EBIT up 18%
Adjusted EBIT 2013 vs 2014 ($M)
Strongest performance
since 2008. Adjusted EBIT
up 18% to $2.8bn,
reflecting strong
contribution from
agricultural products and
resilient earnings in
metals
Metals & Minerals:
Modestly lower adjusted
EBIT largely reflects the
impact of challenging
iron ore marketing
conditions. The
remaining business was
relatively consistent
year-on-year
Energy:
decrease in EBIT
reflects oversupplied
coal and ‘flat’ oil
markets. Conditions for
oil improved towards
year end with higher
volatility and supportive
curve structure
Agriculture:
Strong contribution from
Viterra’s grain handling
operations (large crops)
and the traditional oilseed
marketing business
+18%
2'790
2'356
(7)%
1'622
1'515
+332%
856
(17)%
629
2013
2014
Total
2013
2014
Metals & Minerals
2013
524
2014
Energy
198
2013
2014
Agriculture
8
Robust industrial financial performance despite weaker prices
Adjusted pro forma EBITDA/EBIT 2013 vs 2014 ($M)
EBITDA
Healthy industrial
performance despite
generally weaker
commodity prices.
Prices partially offset by
cost reductions, higher
production in copper,
coal and oil as well as
favourable FX. EBIT
impacted by higher
volume related D&A
Metals & Minerals:
Impact of weaker copper
and precious metals
prices largely offset by
higher copper production,
stronger zinc and nickel
prices and US dollar
strength
Energy:
Higher production
volumes and productivity
improvements were more
than offset by weaker
prices. Negative EBIT
impact from higher
depreciation in line with
the rising volumes
Agriculture:
Significant improvement in
earnings supported by
higher crush volumes and
ownership at Timbues.
Processing/production
volumes rose 16% over the
year
(7)%
10'472
9'763
(2)%
EBIT
7'203
5'078
(23)%
3'916
7'077
(9)%
4'036
3'674
3'378
(16)%
2'841
1'244
(61)%
486
2013
2014
Total
2013
2014
Metals & Minerals
2013
2014
Energy
61
-6
2013
213
136
2014
Agriculture
9
Benefit of merger synergies/cost efficiencies, volume growth and FX
gains only partially offset lower prices and extra depreciation (non-cash)
Industrial Adjusted EBIT pre-exceptional items – 2012 to 2014 ($M)(1)
$1.9bn cost savings
1'020
1'738
389
1'299
(997)
(517)
215
(453)
666
(227)
1'344
6'461
(1'969)
(693)
5'078
3'916
(4'360)
2012
EBIT
Price Volume Cost Inflation
Note: (1) 2012 and 2013 pro forma for the Xstrata merger.
FX
D&A
Other
2013
EBIT
Price Volume Cost Inflation
FX
D&A
Other
2014
EBIT
10
Robust balance sheet and strong cashflow coverage
Net
funding(1)
($bn)
52.2
• Robust liquidity position with $9.4bn of
54.4
committed undrawn credit facilities and cash
as of 31 December 2014
49.2
49.8
Net debt(1)
34.8
($bn)
• FFO to Net debt of 33.3%
• Net debt to Adjusted EBITDA of 2.39x
37.6
35.8
30.5
33%
FFO to
net debt
29%
(Target >25%)
29%
2.8
• 2014 debt activities
• April: issued $2bn and EUR1.1bn of bonds
• June: new $15.3bn multi-tranche committed RCF
• September: issued AUD500M and EUR700M of
•
28%
Net debt to
Adjusted
EBITDA(2)
• Strong cashflow coverage ratios:
bonds
December: issued CHF500M of bonds
• Moody’s and S&P’s investment grade credit
2.8
ratings at Baa2 (stable) and BBB (stable)
• maintenance of strong Baa/BBB levels remains a
2.7
financial target/priority
(Target <3x)
2.4
Adjusted
EBITDA(2) to
net interest
9.1
9.5
8.7
• Average VaR (1 day 95%) of $36M in 2014,
representing less than 0.1% of shareholders’
equity ($32M in 2013)
7.8
H113
FY13
H114
FY14
Notes: (1) Refer to page 9 of Preliminary Results 2014. (2) Refer to note 2 of the financial statements for definition and reconciliation of Adjusted EBIT/EBITDA and slide
21 in Appendix.
11
$2.8 billion reduction in 2014 capex
Total capex: $8.6bn(1)
(24%)
Expansionary
Metals & Minerals:$5.7bn(1) Energy: $2.2bn
-$2.8bn
Marketing and
capitalised interest
7'025
-$1,826M
4'175
4'224
-$1,164M
2'704
3'316
2013
3'146
2014
Sustaining
2'568
4'059
3'860
2013
2014
1'549
694
685
2013
2014
Notes: 2013 is pro forma for the Xstrata merger. (1) Excluding Las Bambas expansionary capex of $961M and $1,734M in 2014 and 2013 respectively.
12
2015E industrial capex at $6.5-6.8bn, down from $7.9bn
$7.9bn
Investor day 2014
forecast for 2015:
$3.6bn expansionary +
$4.3bn sustaining
• Reduction of $1.1 - 1.4bn of capital has been identified
•
•
•
across the business
Reduction of c.$200M in sustaining capital through further
cost efficiencies and lower cost inputs/stronger US dollar
Up to $1.2bn reduction in expansionary capital guidance,
including the slowing down of oil exploration and
development in West Africa and a range of coal project
deferrals
Text here
Text
here
Negligible expected direct impact on earnings
$6.5-6.8bn
$4.8-5.0bn
$1.4-1.5bn
2015 capex review:
Metals & Minerals total (was $5.1bn)
Energy total (was $2.5bn)
$2.4 to $2.7bn
expansionary +
$4.1bn sustaining
Text here
Reduction is c.50% from each of oil and
coal
Oil: reduced
Chad/Cameroon
exploration and
development
Coal: expansion
deferral
13
Returning excess capital to shareholders in 2014
+2.3bn
-8.4bn
Working
capital change
Capex net of
disposals
+4.5bn
Net acquisitions
and disposals
M&A /
brownfield
projects
screened against risk,
return and payback
criteria
Shareholder
returns
10.2bn
Funds from
operations
Excess capital allocation matrix
-3.3bn
Distributions
and share
buyback
=5.3bn
Total
movement in
net debt
progressive distribution
supplemented with
buybacks and/or special
distributions
Ensure
capital
structure
maintain strong
BBB/Baa credit metrics
• Investment
opportunities also
screened against
returns generated from
buybacks
• Generates growth in
profits and FCF
• $1bn buyback (93%
complete), generating
EPS accretion of c.1.2%
• Final 2014 cash
distribution of
$0.12/share; full-year
distribution of
$0.18/share
• Strong BBB/Baa target –
optimal balance
between growth and
shareholder returns
• Provides abundant
access to capital
markets
14
2015 Priorities
Ivan Glasenberg – Chief Executive Officer
Ulan West coal pre-shift safety briefing
Confidence in our outlook
• Our key earnings’ drivers accounted for 95% of EBIT in 2014
• Market balances for many of our commodities have transitioned (or are transitioning) into
•
•
deficit
Operational leverage provides significant earnings upside as and when prices inevitably
recover
Group is comfortably free cash flow positive at current spot FX and commodity prices
Cu
Zn
Ni
Coal
Marketing
Deficit
Deficit
Transitioning to deficit
Rebalancing
Resilient
“Consensus” surplus
elusive so far,
increasing downside
risk to supply in 2015/16
An additional 3-3.5Mt of
zinc supply needed over
the next 5 years to
balance the market
Balanced 2015 and
deficits thereafter;
substantial from 2018
Some supply shutting
and new investment
delayed. Coal essential
to meet energy demand
Defensive earnings,
less sensitive to falling
prices. Benefits from
own source production
36%
Data: 2014 Adjusted EBIT.
5%
7%
5%
42%
16
Our priorities for 2015
Deliver
growth
from remaining key
projects: McArthur
River, Katanga,
Koniambo and Chad oil
Operating
efficiency
Achieving at or near first
quartile costs/margins
Confidence
Capital
discipline
to maximise free cash
flow generation;
portfolio NPV is key
BBB/Baa
Maintain strong
investment grade credit
rating
• Grow base dividend
• Return excess capital to
shareholders
• Be opportunistic, but
within our capital
allocation framework
Continuous
improvement
in health, safety,
sustainability and
governance
performance
17
Installing ground support at the George Fisher zinc mine, Australia
DVM
Q&A
Temperature monitoring, Raglan nickel, Canada
Appendix
Final 2014 distribution
• Increased final distribution reflects
Distribution payments (US cents per share)
confidence in our outlook and
financial position
+9.1%
18.0
• Final cash distribution of 12 cents
per share declared, representing a
9% increase in the full year dividend
to 18 cents per share
+4.8%
16.5
+5%
• Excluding proposed in specie
15.8
distribution of our non-core 23.9%
stake in Lonmin
15.0
• Payment date: 21 May 2015
2011
Final distribution timetable (2015)
Jersey
Exchange rate reference date:
Last time to trade on JSE to be recorded in
the register on record date:
Last day to effect removal of shares cum div
between Jersey and JSE registers:
Final Ex-Div Date:
Last time for lodging transfers in Hong Kong:
Final Distribution record date:
Deadline currency election (Jersey):
Removal of shares between Jersey and JSE:
Exchange rate reference date:
Final Distribution payment date:
2012
Johannesburg
2013
2014
Hong Kong
9 April
17 April
17 April
23 April
20 April
24 April
27 April
24 April
22 April
23 April
24 April
From 27 April
30 April
21 May
21 May
Note: Dematerialisation and rematerialisation of registered share certificates in South Africa may not be effected during the period from Monday 20 April 2015 to Friday 24 April 2015, both days
inclusive. Distributions will be declared and paid in U.S. dollars, although Shareholders on the Jersey register will be able to elect to receive their distribution payments in Pounds Sterling, Euros or
Swiss Francs. Shareholders on the Hong Kong branch register will receive their distributions in Hong Kong dollars. Shareholders on the Johannesburg register will receive their distributions in South
African Rand.
30 April
21 May
20
Adjusted and reported EBITDA
The impact of the proportionate consolidation of certain associates and joint ventures and the
Xstrata acquisition pro forma adjustments, are set out in the following table:
2014
Reported
Adjustment
for
proportionate
consolidation
2014
Adjusted
Reported
2013
Reported
Adjustments for
proportionate
consolidation
and Xstrata
2013
Pro forma
221,073
2,910
223,983
232,694
6,979
239,673
11,825
939
12,764
9,684
3,387
13,071
Adjusted EBIT
6,377
329
6,706
5,635
1,799
7,434
Net income attributable
to equity holders – pre
significant items
4,285
-
4,285
3,666
917
4,583
(1,977)
-
(1,977)
(11,712)
9,602
(2,110)
Net income attributable
to equity holders – post
significant items
2,308
-
2,308
(8,046)
10,519
2,473
FFO
9,968
201
10,169
7,136
3,239
10,375
Capex
9,060
467
9,527
9,587
3,463
13,050
US$ million
Revenue
Adjusted EBITDA
Significant items
21
Industrial 2015 EBIT sensitivity
Indicative
full year(1)
US$M
10% movement in copper price
10% movement in zinc price
10% movement in lead price
10% movement in nickel price
10% movement in ferrochrome price
10% movement in gold price
10% movement in silver price
10% movement in coal price
10% movement in oil price
1,300
280
60
160
125
110
60
725
neutral exposure
10% movement in Glencore currency basket vs. USD
10% movement in AUD vs. USD
10% movement in CAD vs. USD
10% movement in ZAR vs. USD
Note: (1) Assuming no currency or commodity hedging and no contracted, priced sales and purchases, as at 31 December 2014. In practice, at a point in time, some
volumes (particularly coal) are likely forward sold, which has the effect of lowering the impact of the e.g. coal price sensitivity.
1,500
540
150
270
22