Adjusted EBITDA of $4.6 billion, down 29% compared to H1 2014 owing to substantially weaker commodity prices:
- Marketing Adjusted EBITDA down 27% to $1.2 billion and Adjusted EBIT down 29% to $1.1 billion, with tough metals' trading conditions, particularly aluminium and nickel affected by the collapse in physical premiums and subdued levels of global stainless steel production. We expect better second half contributions from metals and agriculture to underpin full year Marketing EBIT guidance of $2.5-$2.6 billion.
- Industrial Adjusted EBITDA down 29% to $3.4 billion, due to the substantially weaker net commodity price / exchange rate environment. Despite the weaker price environment, Metals and minerals' Adjusted EBITDA mining margin was still a healthy 24% compared to 30% in 2014 and Energy Adjusted EBITDA margin was 28% compared to 29%, reflecting the quality of our asset portfolio.
• H1 2015 production included:
- Period-on-period growth from African copper, albeit overall copper production was down 3% to 730,900 tonnes reflecting anticipated grade changes at Alumbrera and Antamina and planned maintenance activities at Collahuasi.
- Zinc production up 12% to 730,300 tonnes, mainly due to the ramp-up of the expansion projects in Australia.
- Coal production down 4% to 68.7 million tonnes, primarily due to the market driven decision to cut production.
• The sharp decline in oil prices in late 2014, which continued into 2015, led to significant amendments to the work programme at our assets in Chad, including changes to capex and production profiles and the number of drilling rigs in operation. As a result, the carrying value of these fields/blocks has been impaired by $792 million.
• Unfortunately, Optimum Coal has commenced business rescue proceedings given the continued and unsustainable financial hardship as a result of its agreement with Eskom. The directors of Optimum are of the view that if the supply agreement with Eskom can be renegotiated, there is a reasonable prospect of rescuing Optimum.
• FFO was $3.5 billion, down 29% compared to H1 2014 as a result of the weaker price environment noted above.
• Net debt decreased by $982 million to $29.6 billion, reflecting a 21% reduction in net capital expenditure (excluding Las Bambas) and a release of non-RMI working capital of $3.2 billion, due naturally to lower commodity prices and some additional proactive working capital management to ensure a more efficient balance sheet.
• Strong and flexible balance sheet, with $10.5 billion of committed available liquidity at period end.
• Capital management:
- During the period, $240 million of own shares were acquired under the previously announced $1.0 billion share buyback programme, completing this initiative.
- In June, the distribution of the investment in Lonmin plc was completed.
- The Board has declared an interim distribution of $6 cents per share, consistent with the 2014 interim distribution, reflecting our confidence in the prospects and strength of our underlying operations, commodities mix and sustainable cashflow profile.
• Ongoing portfolio management reflects:
- August completion of the sales of Glencore's interest in the Tampakan copper project, the Falcondo nickel operations and the Sipilou nickel project, for total proceeds of approximately $290 million.
• Full year production guidance is provided in the Appendix on page 82.
• The target industrial capex ceiling for full year 2015 is now $6 billion, compared to the range of $6.5-6.8 billion previously communicated. We currently anticipate that industrial capex for 2016 will be no more than $5.0 billion.
Glencore's Chief Executive Officer, Ivan Glasenberg, commented:
"Against a challenging backdrop for many of our commodities, we have taken a range of pre-emptive actions in respect of our balance sheet, operations and capital spending/recycling in order to preserve our current credit rating and sustain our track record on equity distributions.
Our core industrial assets remain well positioned on their respective cost curves. We remain by far the most diversified commodity producer and marketer and are well positioned to benefit from any improvement in pricing when it finally and inevitably materialises. Our principal objective remains to grow our free cash flow per share and return any excess capital in the most sustainable and efficient manner."