JOHANNESBURG (miningweekly.com) - Diversified mining and marketing company Glencore shot the lights out with a superlative set of 2017 results that coincided with a leap in its share price in Johannesburg, the reaffirmation of South Africa as an even more positive investment destination, and the mulling of a dividend "top up" later in the year.
The benefit of higher commodity prices and cost containment pushed up mining margins within the London- and Johannesburg-listed company's metals and energy operations, pushing up cash flow from operations to $11.6-billion on net debt of $10.7-billion.
"Glencore surprises positively on dividend," said Goldman Sachs Metals & Mining in a note.
"Mission accomplished as net debt hits lower end of target," Bernstein analyst Paul Gait commented.
"Expect the stock to outperform its peers," Goldman Sachs equity research added.
Barclays analysts Ian Rossouw, Amos Fletcher and Kennedy Nyangoni headlined their commentary "top pick Glencore - beat and raise".
Last year was the company's strongest on record, Glencore CEO Ivan Glasenberg said at the results presentation conference call, during which he remarked, in response to analyst questioning, that Cyril Ramaphosa coming in as President should be good for South Africa.
"Unfortunately, it's going to affect costs, because the rand has got stronger, so it's a win-loss on each, but it's good for the country and bodes well for the country going forward," he responded during the conference call in which Creamer Media's Mining Weekly Online participated.
"We still continue to believe South Africa will be okay as an investment opportunity. We thought so under the old regime and we're happy to continue investing in South Africa. We're more confident about the future with the new President, but we've never pulled back out of South Africa. We continue to have big investments there, with our coal and our ferroalloys,' he said.
A $2.9-billion dividend will be paid as the company looks to the future with confidence.
"Clearly, there's an opportunity, come interim results of August, to look at a top-up of the dividend distribution of 20c a share we've come up with, given our financial strength and how we see the world at the moment," Glencore CFO Steven Kalmin said.
The company is convinced that its positioning in 'tier 1' commodities and 'tier 1' assets will continue to create compelling value for all stakeholders.
Adjusted earnings before interest and tax of $8.6-billion were 118% up; earnings before interest, taxation, depreciation and amortisation of $14.8-billion were 44% up; net income attributable to equity holders of $5.8-billion was 319% up and the company got paid 16c for every pound of zinc that it produced thanks to coproduct credits.
After flashing up a slide that showed guidance to be spot-on with performance, Kalmin reported core commodities like copper being up 30% during the year start-to-finish, zinc up 40%, cobalt 130%, aluminium 32% and nickel 28%.
"There was a very strong correlation between pricing and where we ended up the year," Kalmin added.
The company did $1.6-billion in acquisitions, taking up interests in Mutanda and Volcan, and continues to generate a lot of surplus capital relative to financial targets.
Glencore is one of the world's largest global diversified natural resource companies and a major producer and marketer of more than 90 commodities. The group's operations comprise around 150 mining and metallurgical sites, oil production assets and agricultural facilities.
With a strong footprint in both established and emerging regions for natural resources, Glencore's industrial and marketing activities are supported by a global network of more than 90 offices located in over 50 countries.
Its customers are industrial consumers, such as those in the automotive, steel, power generation, oil and food processing sectors.
It also provides financing, logistics and other services to producers and consumers of commodities.
Glencore's companies employ around 146 000 people, including contractors, and tragically suffered nine fatalities from nine incidents in 2017, with two people dying in South Africa, two in Kazakhstan, two in Bolivia, one in Zambia, one in Italy and one in Peru.
Glencore is a member of the Voluntary Principles on Security and Human Rights and the International Council on Mining and Metals and a participant in the Extractive Industries Transparency Initiative.