Glencore, whose operations comprise of over 150 mining and metallurgical sites, oil production assets and agricultural facilities, today provided investors with an update.
The Chief Executive commented: "In September, we announced a number of measures to reduce our debt. Today we show significant delivery on those commitments, with $8.7 billion achieved to date, and are able to announce an increase in our net debt reduction target measures by almost $3 billion to $13 billion. 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." The share price rose by over 10% in early UK stock market trading.
Positive free cash flow
- More than $2 billion of free cash flow at spot prices; Glencore will remain comfortably free cash flow positive at materially lower price levels
- Estimated 2016 earnings before interest, tax, depreciation and amortization (EBITDA) of c.$7.7 billion at current commodity prices
Strong and increasing liquidity
- Current liquidity increased to more than $14 billion and will be further enhanced as the debt reduction plan measures are delivered
- Debt reduction/capital preservation measures increased to $13 billion (previous target of $10.2 billion) with $8.7 billion already achieved/locked-in
- New net debt target of $18 to19 billion by the end of 2016 (previous target of low $20s billion)
Industrial asset cash positioning significantly enhanced
- Further reduction in capex: $5.7 billion for 2015E and $3.8 billion in 2016E, down from $6 billion and $5 billion respectively
- Production cuts have reduced overall supply and cash outlay; resources preserved for an improved future margin environment
Marketing remains a unique, low risk defensive earnings driver
- Despite significantly lower commodity prices, Marketing adjusted Earnings Before Interest and Tax (EBIT) for 2015E of c.$2.5 billion; underpinned by continued strength in oil and stronger contributions from Agriculture and Metals during the second half
- 2016E marketing EBIT guidance of $2.4 to 2.7 billion reflects lower working capital levels and reduced copper, zinc, lead and coal volumes
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