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Glencore - commodity market turbulence, no dividend this year

Emilie Stevens, Equity Analyst | 6 August 2020 | A A A
Glencore - commodity market turbulence, no dividend this year

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No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Glencore plc Ord USD0.01

Sell: 445.15 | Buy: 445.40 | Change 3.45 (0.78%)
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First half underlying operating profits of $1.5bn were 34% lower than last year. The drop reflects an operating loss from the Industrial division, which suffered from lower commodity prices, more than offsetting a record first half for Marketing.

After taking into account one off items and $3.2bn in impairments, largely related to lower commodity prices in thermal coal, oil and zinc, Glencore reported a $2.6bn loss.

Glencore will not pay a dividend in 2020 and will prioritise reducing net debt to below the target of $16bn by year end.

The shares fell 5.7% in the morning following the announcement.

View the latest Glencore share price and how to deal

Glencore key facts

  • Current 12m forward price/book ratio: 0.5
  • 10 year average 12m forward price/book ratio: 1.0
  • Prospective yield: Glencore are not paying a dividend this financial year

We've introduced this section in response to recent survey feedback.

Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.

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Half Year Results

Marketing revenues of $62.0bn, were 37% lower than last year, reflecting lower sales volumes. However, opportunities presented by volatility in commodity markets and rapidly changing demand levels meant operating profits were more than double last year's at $2.0bn. Glencore noted the oil market turbulence as a particular driver, and the group benefitted from dislocation in crude vs refined product prices and soaring demand from oil storage. Glencore raised its expectations for full year profits to the upper end of its $2.2 - 3.2bn range.

Industrial revenue was down 12% at $17.9bn and the division made an operating loss of $543m, versus $1.3bn profit last year. Lower commodity prices, particularly in copper, zinc, coal and oil, were the main drivers of the decline. But coronavirus related production disruption also contributed.

Free cash generated by the business was negative this half, driven by movements in commodity contracts. At 30 June 2020, net debt was $19.7bn, up from $17.6bn last year. The group expects net debt to finish the year back in it $10-$16bn target range. Glencore has access to $10.2bn of liquidity.

Find out more about Glencore shares including how to invest

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. 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.