Ernest Henry copper mine, Australia 2016 Half-Year Results 24 August 2016
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Highlights Ivan Glasenberg – Chief Executive Officer New wheelhouse, Synclinorium shaft, Mopani, Zambia
Solid H1 performance in difficult market conditions • Strong cash generation despite lower commodity prices and production • EBITDA (1,2) $4bn, -13%; industrial EBITDA $2.7bn, -20%; marketing EBIT (2) $1.2bn, +14% • Solid cash flow generation with FFO of $2.8bn • Capex of $1.6bn, -51% • Industry-leading cost positions • Outstanding first-half operational unit cost performance in key commodities; Copper 97c/lb, Zinc -3c/lb (15c/lb ex gold), Nickel 246c/lb and Thermal coal $37/t • Marketing remains a unique, low-risk defensive earnings driver • Adjusted EBIT up 14% to $1.2bn • Full year guidance unchanged at $2.4-2.7bn • Continued strong liquidity and balance sheet flexibility • Committed available liquidity of c.$15bn • Public market credit spreads and CDS substantially normalised • Targeting even lower Net Funding and Net Debt of $31-32bn and $16.5-17.5bn respectively by the end of 2016 • $2.3bn reduction in Net funding and Net debt to $39bn and $23.6bn respectively at 30 June • Agreed asset disposals of $3.9bn, successfully delivering towards $4-5bn target; opportunity to be selective around remaining sales processes • Annualised free cash flow generation >$4.5bn (3) at current spot prices Note: (1) Refer to basis of preparation on page 4 of 2016 Half-Year Report. (2) Refer to note 3 of the financial statements for definition and reconciliation of Adjusted 4 EBITDA/EBIT. (3) After estimated taxes and interest of $2.2bn, estimated industrial capex of $3.5bn and $0.1bn of marketing capex, pre the impact of any asset disposal processes yet to be completed, basis spot annualised EBITDA of c.$10.5bn as calculated in reference to note 2 on slide 18. Excludes working capital changes.
Sustainability and governance LTIFR (1) 2010 to June 2016 Safety • Regrettably 12 fatalities from 4 incidents YTD • All fatalities at our “focus assets” 2.74 • LTIFR 1.28, 4% improvement • TRIFR 4.79, 5% improvement 2.49 • Continued effort on ensuring leading practice at our “Focus Assets” 2.06 53% reduction Environment 1.88 • Global tailings storage facility review under way 1.58 Governance • Analysis of implications of climate change on 1.32 1.28 our portfolio published, with a particular focus on the coal business • Publication of our payments to host governments underscores our commitment to 2010 2011 2012 2013 2014 2015 2016 transparency H1 Note: (1) Lost time incidents (LTIs) are recorded when an employee or contractor is unable to work following an incident. In the past Glencore recorded LTIs which resulted in lost days from the next 5 calendar day after the incident whilst Xstrata recorded LTIs which resulted in lost days from the next rostered day after the incident - therefore the combined LTI figure is not based on data of consistent definition (historically, prior to merger). From 2014 Glencore records LTIs when an incident results in lost days from the first rostered day absent after the day of the injury. The day of the injury is not included. LTIFR is the total number of LTIs recorded per million working hours. LTIs do not include Restricted Work Injuries (RWI) and fatalities (fatalities were included up to 2013). Historic data has been restated to exclude fatalities and to reflect data collection improvements.
Altyntau-Vostok, Precious Metals refinery, Kazzinc Financial performance Steven Kalmin – Chief Financial Officer
Summary Solid H1 2016 performance in difficult market conditions ... • EBITDA of $4bn, down 13%; EBIT $875M, down 38% • Marketing EBIT of $1.2bn, up 14% • Net income pre-exceptional items $300M (1) , down 66% • Industrial capex of $1.5bn, down 51% • Funds from operations of $2.8bn, down 21% … underpinned by industry-leading cost performance … • Significant declines in H1 unit operating costs compared to FY2015: Copper 97c/lb, Zinc -3c/lb (15c/lb ex gold credit), Nickel 246c/lb and Thermal coal $37/t … and our unique balance sheet flexibility • Net funding of $39bn, down $2.3bn (5%) • Net debt of $23.6, down $2.3bn (9%) • Committed liquidity of c.$15bn Focussed on preserving our investment grade ratings • Moodys and S&P ratings currently at Baa3/BBB- with stable outlooks • Targeting upgrade to strong Baa/BBB rating in the medium term • Delivery of revised Net funding and Net debt targets by end 2016 ensures high probability that Net debt to Adjusted EBITDA falls closer to 2x • pro-forma ratio comfortably <2x basis debt reduction targets and relevant Adjusted EBITDA at spot prices (1) Attributable loss to equity holders pre-significant items of $369M; refer to significant items table on page 5 of 2016 Half-Year Report. 7
Solid marketing EBIT performance of $1.2bn Marketing EBIT contribution, up 14%, Adjusted Marketing EBIT ($M) reflecting some normalisation of trading conditions that impacted H1 1,217 +14% 2015. 1,071 122 • Metals and minerals 199 252 • Strong performance, up 92% y/y driven by strong contributions from copper and zinc as well as improved earnings from aluminium and nickel relative to the impact that lower premiums and weak stainless 479 production had on the prior period • Energy • Weaker year-on-year performance reflects 852 particularly supportive oil market conditions seen in H1 2015, along with a continued challenging coal market 444 backdrop • Agriculture • Weaker earnings in large part due to a 2015 H1 2016 H1 lower Viterra Canada contribution. Seasonally, H2 much better for Viterra Metals and Minerals Energy Products Canada and Australia, which is again Agricultural Products Corp and Other expected to be the case 8
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