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Glencore - Bumper dividend as commodity prices lift profits

Nicholas Hyett | 21 February 2018 | A A A
Glencore - Bumper dividend as commodity prices lift profits

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Glencore plc Ord USD0.01

Sell: 165.92 | Buy: 166.00 | Change 1.86 (1.14%)
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Glencore reported operating profits of $8.6bn in 2017, up 118%. A 49% increase in funds from operations, to $11.6bn, supported a dividend of $0.20 per share.

The dividend totals $2.9bn and is well ahead of its new policy of paying a base $1bn dividend plus 25% of free cash flow from the industrial business. Analysts are forecasting a prospective dividend yield of 3.6% for the coming year.

The share rose 3.7% in early trading.

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Full Year Results

The industrial business, which operates mines around the world, was the leading contributor to group profits at $5.5bn or 65% of the group total. That represents a 447% improvement on the previous year, with good results from both Metal & Minerals and Energy Products.

The strong industrial result was driven by an improved price environment, and lower costs, with production volumes actually falling in many areas.

Marketing, which includes Glencore's commodity trading business, also delivered operating profit growth, albeit a more modest 3%. This reflects the sale of a 50% stake in Glencore Agri during the period.

However, at $3bn Marketing still accounts for 35% of total operating profit.

Net debt has fallen substantially over the period, and now stand at $10.7bn (2016: $15.5bn). That leaves the group with a net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio of 0.7 times.

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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 disclosure for more information.