Glencore PLC (LSE:GLEN) reported a loss for the first half of the year and said it was keeping hold of its coal business.
The miner and commodities trading giant said lower energy prices, particularly for thermal coal, led to underlying earnings (EBITDA) sinking 33% to $6.3 billion, though revenue was up 9% to $117.1 billion.
A net loss of $233 million was reported after the FTSE 100 group recognised $1.7 billion of ‘significant items’, including almost $1.0 billion of impairment charges, a big swing from first-half net income of $4.6 billion a year ago.
Net debt finished the first half at $3.6 billion, down $1.3 billion from the end of 2023, with expected second-half cash outflows of $6.9 billion for July’s acquisition of the EVR steelmaking coal business from Teck and $0.8 billion for the second tranche of promised shareholder buybacks.
Chief executive Gary Nagle said this meant deleveraging of $0.3 billion would be required to reach the $10 billion net debt cap under the framework for excess return top-up payments, compared to at least $5.3 billion of deleveraging that would have been required under the original scenario for the coal demerger.
He explained the decision on the immediate future of the coal and carbon steel materials business: “Following completion of the acquisition of EVR in early July, we undertook an extensive consultation with shareholders and based on the outcome of that process and the group's own analysis, Glencore's bard, considering both risk and opportunity scenarios, endorsed the retention, rather than demerger, of the coal and carbon steel materials business, as currently providing the optimal pathway for demonstrable and realisable value creation for Glencore shareholders.”
He said the overwhelming majority of shareholders had a “clear preference” against the demerger.
“This was primarily on the basis that retention should enhance Glencore's cash-generating capacity to fund opportunities in our transition metals portfolio, such as our copper growth project pipeline, as well as accelerate and optimise the return of excess cash flows to shareholders.”
Nagle said the “relatively modest” gap of $0.3 billion, together with the $1 billion Viterra (TSX:VT) cash disposal proceeds expected to be received over the next several months and current healthy illustrative annualised free cash flow generation of circa $6.1 billion, “augers well for potential top-up shareholder returns, above our base cash distribution, in February 2025”.
The shares fell almost 2% in early trading before bouncing back to 392.45p.