Lower commodity prices, in particular cobalt, and operating setbacks at copper mines in Africa meant adjusted EBIT (earnings before interest and tax) for the first half was down 56% to $2.2bn.
The group is now around $1.1bn of the way through the $2bn buyback announced in February. A dividend of 10 cents per share will also be paid to shareholders in September, as part of the next tranche of the $2.7bn returns agreed earlier this year.
Glencore will be halting production at the Mutanda cobalt mine by the end of the year, following the continued weakness in cobalt prices.
The shares fell 4.4% following the announcement.
Half year results
Industrial revenues were down 6.4% to $20.4bn, with adjusted EBIT decreasing to $1.3bn, from $3.6bn last year.
Within this, aggregated metals and mineral profits fell 80% to $535m, on account of weakness in African copper mines and lower Copper, Zinc, Nickel and Iron Ore prices. Energy products' revenue was $6.8bn, down 14.8% on last year as higher production in recently acquired interests in two Australian coal mines helped offset weaker pricing, but higher costs saw profits fall 23% to $947m.
Glencore expects production of copper, Zinc, Nickel, Coal and Oil to be weighted towards the second half of the year.
The Marketing business reported adjusted EBIT of $969m, down 35%. However, this was largely driven by cobalt purchase commitments from the group's own mines. Without this, EBIT was down 12%. Higher oil prices offset a lower contribution from coal in the energy business.
Excluding Cobalt, the division is tracking to meet the midpoint of annualised adjusted EBIT guidance of $2.2-$3.2bn.
Weaker operational performance saw underlying operating cash flow decrease to $5.4bn from $6.8bn. Net debt increased 11% to $16.3bn - which is at the upper end of Glencore's guidance range. Just over half of that increase was due to new accounting rules which count leases as debt.
As a result, the group's net debt to EBITDA ratio rose to 1.24, with the group aiming to achieve a ratio closer to 1 in the future.
Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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.