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Cobalt, Africa setbacks shrink Glencore’s first-half profit

Glencore’s Chief Executive Officer, Ivan Glasenberg, commented: “Our performance in the first half reflected a challenging economic backdrop for our commodity mix, as well as operating and cost setbacks within our ramp-up/development assets. Adjusted EBITDA declined 32% to $5.6 billion.

“The rest of our business, however, remained strong and performed well. Excluding our African copper assets and Koniambo, our metals and coal industrial assets delivered robust Adjusted EBITDA mining margins◊ of 39%. In particular, our copper business, excluding African copper, recorded an EBITDA mining margin of 52% and a full unit cash cost of 72c/lb, while our coal business again generated margins in excess of $30/t, basis a $46/t thermal unit cash cost. Similarly, our marketing business is tracking towards the middle of our full-year Adjusted EBIT guidance range of $2.2-$3.2 billion, after adjusting for some $350 million of non-cash cobalt losses reported in the first half.

“However, our African copper business did not meet expected operational performance. We have moved to address the challenges at Katanga and Mopani with several management changes as well as overseeing a detailed operational review, targeting multiple improvements to achieve consistent, cost-efficient production at design capacity. Our teams have identified a credible roadmap towards delivering on the significant cash flow generation potential of these assets, at targeted steady-state production levels. At Mutanda, we are planning to transition the operation to temporary care and maintenance by year-end, reflecting its reduced economic viability in the current market environment, primarily in response to low cobalt prices. We continue to progress studies on the sulphide project, having the potential to extend operations for many years, and anticipate being able to provide an update at our Investor Day in December.

“Looking ahead, we are confident that commodity fundamentals will move in our favour and that our diverse commodity portfolio will continue to play a key role in global growth and the transition to a low-carbon economy. Our asset teams are focussed on delivering the full potential of our business, which together with our promising range of commodities, should see us well positioned for the future. Through continued constructive collaboration, we remain focussed on creating sustainable long-term value for all stakeholders.”

US$ million H1 2019 H1 2018 Change % 2018
Key statement of income and cash flows highlights2:
Net income attributable to equity holders                     226                  2,776                       (92 )                  3,408
Adjusted EBITDA◊                   5,582                   8,180 1                       (32 )                 15,767
Adjusted EBIT◊                  2,229                    5,091 1                       (56 )                   9,143
Earnings per share (Basic) (US$)                    0.02                     0.19                       (89 )                    0.24
Funds from operations (FFO)3                    3,516                   5,566 1                       (37 )                   11,595
Cash generated by operating activities before working capital changes                  5,409                  6,805                        (21 )                  13,210
Net purchase and sale of property, plant and equipment3                    2,193                   2,055 1                          7                  4,899


US$ million 30.06.2019 31.12.2018 Change %
Key financial position highlights:                            
Total assets                127,183               128,672                          (1)
Net funding3                 33,238                 32,138                          3
Net debt3                 16,308                  14,710                          11
FFO to Net debt3,4                  58.5%                 78.8%                       (26 )
Net debt to Adjusted EBITDA4                     1.24                     0.93                        33

1    Restated to present Glencore Agri on a basis consistent with its underlying IFRS treatment (equity accounting), previously proportionately accounted, refer to APMs section for reconciliations and note 2 of the 2018 annual report.
2    Refer to basis of presentation on page 5.
3     Refer to page 9.
4    H1 2019 and H1 2018 ratio based on last 12 months’ FFO and Adjusted EBITDA, refer to APMs section for reconciliation.
◊    Adjusted measures referred to as Alternative performance measures (APMs) which are not defined or specified under the requirements of International Financial Reporting Standards; refer to APMs section on page 66 for definition and reconciliations, to note 3 of the financial statements for reconciliation of Adjusted EBIT/EBITDA and to page 18 for reconciliations of Mining Margins.