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Glencore - Profits up and debts down

George Salmon | 23 February 2017 | A A A
Glencore - Profits up and debts down

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Glencore plc Ord USD0.01

Sell: 344.05 | Buy: 344.10 | Change 7.70 (2.29%)
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The group delivered adjusted EBIT (earnings before interest, tax) of $3.9bn, up 81% on 2015. While commodity prices improved towards the end of the year, the group says higher prices were a relatively minor contributor to profit growth.

Glencore says that the improvement reflects a continuous focus on cost reduction, operational efficiency initiatives and some favourable currency movements.

The group operates through four divisions; 'Metal & Minerals', 'Energy products', 'Agricultural products' and 'Corporate and other'. In 2016, almost all of group profit came from the Metal & Minerals division, with losses from industrial activities in the 'Energy products' and 'Corporate and other' divisions negatively impacting performance.

Having reduced net debt by $10.4bn to $15.5bn, the group's debt reduction programme is now complete. Since September 2015, over $6.2bn was raised from disposals including 50% of its agriculture business ($3.1bn) and the Hunter Valley coal rail haulage business for $840m.

After suspending dividend payments for one year, in 2017 Glencore plans to return $1bn to shareholders in two equal tranches, after interim and full year results. Longer term, the new plan is to pay a fixed $1 billion component and a variable element representing a minimum pay-out of 25% of free cash flow from its industrial assets.

Unless otherwise stated, all estimated figures, including prospective dividend yields, are taken from a consensus of analyst forecasts compiled by Thomson Reuters. These estimates should not be taken as a reliable indicator of future performance.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.