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Glencore’s Chief Executive Officer, Gary Nagle, commented:
“Against the backdrop of a rebalancing and normalisation of international energy trade flows, our Marketing and Industrial segments posted a lower, albeit healthy, earnings performance in 2023, delivering Group Adjusted EBITDA of $17.1 billion, cash generated by operating activities of $15.1 billion and Net income attributable to equity holders of $4.3 billion.
“Aided by healthy operational cash generation, after funding $5.6 billion of net capex and $10.1 billion of shareholder returns, the 2023 year-end Net debt outturn was contained to $4.9 billion vs $0.1 billion in 2022. With a Net debt/Adjusted EBITDA of 0.29x, we continue to enjoy significant financial headroom and strength.
“For 2024, basis 2023 cash flows, we are recommending to shareholders a $0.13 per share (c.$1.6 billion) base cash distribution, comprising $1 billion from Marketing cash flows and 25% ($0.6 billion) of Industrial attributable cash flows.
This distribution, along our shareholder return journey, must be contextualised by the significant announcement in November 2023 that we had entered into a binding agreement with Teck Resources Limited (Teck) to acquire a 77% effective interest in its steelmaking coal business, Elk Valley Resources (EVR) for $6.93 billion in cash. These are world-class assets, expected to meaningfully complement our existing thermal and steelmaking coal production in Australia, Colombia, and South Africa. EVR also supports the transition as an input into steel production needed for certain renewable energy infrastructure. The transaction is subject to mandatory regulatory approvals and, while closing could occur earlier, it is expected no later than Q3 2024. The acquisition of EVR unlocks the potential, subject to shareholder approval, for a value accretive demerger of our combined coal and carbon steel materials business and, in support thereof, we advised that Glencore could demerge the combined company, only once Glencore had sufficiently delevered towards a revised $5 billion Net debt cap, expected to occur within 24 months from close.
Over the past few years, our capital structure and credit profile has been managed around a $10 billion Net debt cap, with sustainable deleveraging (after base distribution) below the cap periodically returned to shareholders via special distributions and buybacks. Under this framework, we announced $20.3 billion of shareholder returns since 2020, comprising $10 billion of base distributions and $10.3 billion of “top-up” returns. Following the EVR announcement, we are now managing the balance sheet around a revised $5 billion Net Debt cap, alongside our continued commitment to minimum strong BBB/Baa ratings.
Although there are no “top-up” returns at this point, the business is expected to be highly cash generative at current spot commodity prices (spot illustrative annualised free cash flow generation of c.$5.2 billion from Adjusted EBITDA of c.$15.0 billion), which augers well for top-up returns to recommence in the future.
“As the world moves towards a low-carbon economy, we remain focused on supporting the energy needs of today whilst investing in our transition commodities portfolio. During 2023, we acquired a 30% equity stake in Alunorte alongside a 45% equity stake in Mineracao Rio do Norte S.A., securing low carbon and cost alumina units for our Marketing business. In copper, we acquired the remaining 56.25% interest in the MARA brownfield copper project in Argentina that we did not already own, as well as the balance of Polymet shares (c.18%). Polymet formed a 50:50 JV with Teck, establishing the New Range Copper Nickel venture in Minnesota. These additions, along with a near doubling of El Pachon’s resource, added more than 5 billion tonnes of resource to our copper resource inventory in 2023.
“While we continue to remain focused on operating safely, responsibly and ethically and creating sustainable long-term value for all our stakeholders, the strength of our diversified business model, across industrial and marketing, focusing on metals and energy, has again in 2023 proved itself adept in a range of market conditions.”
Source: Glencore