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Glencore PLC (LSE:GLEN) reported a mixed set of results for the first half of 2024, reflecting significant shifts in the energy markets. The company's adjusted EBITDA stood at $6.3 billion, down 33% from the same period last year. This decline was mainly due to the normalization of energy markets after the severe disruptions and volatilities experienced over 2022/23.
Marketing adjusted EBIT fell by 16% to $1.5 billion, annualizing at $3.0 billion. The reduced contribution from the energy sector, attributed to previously elevated volatilities, was partially offset by a robust performance in the metals sector during H1 2024.
Industrial Assets and Production Guidance
Industrial assets adjusted EBITDA saw a significant decrease of 39% to $4.5 billion. This drop was primarily driven by a $2.7 billion lower contribution from coal operations, due to substantial declines in key thermal coal pricing benchmarks.
Despite these challenges, Glencore maintained its full-year 2024 production guidance, excluding EVR, with expectations of second-half weighted production. EVR steelmaking coal volumes are now incorporated into H2 guidance.
Capital Expenditure and Income
Net cash purchase and sale of property, plant, and equipment (PP&E) rose by 15% to $2.9 billion. Net income attributable to equity holders before significant items was $1.5 billion, while the net loss attributable to equity holders stood at $233 million.
Adjusted EBITDA mining margins were healthy, at 28% in metals operations and 31% in energy operations.
Balance Sheet Strength
Glencore's balance sheet remains robust, with healthy cash generation in the first half of 2024. After funding $2.9 billion of net capital expenditure and $1.0 billion in shareholder returns, net debt decreased to $3.6 billion from $4.9 billion at the end of 2023.
Net funding, including lease liabilities, fell to $29.4 billion, supported by a $0.4 billion reduction in readily marketable inventories. The company has available committed liquidity of $16.6 billion, with bond maturities capped at around $3 billion annually.
Strategic Transactions and Future Outlook
In June 2023, Glencore agreed to dispose of its interest in Viterra through a cash and shares transaction with Bunge. For its approximately 50% stake, Glencore will receive $1.0 billion in cash and around $3.1 billion in Bunge stock, based on Bunge's stock price at the date of announcement and as of August 5, 2024. This merger, subject to regulatory approvals, is expected to close in the coming months.
The company reported a spot illustrative annualized free cash flow generation, including EVR, of approximately $6.1 billion from an adjusted EBITDA of about $17.3 billion. This positions Glencore with significant financial headroom and strength, underscored by a net debt/adjusted EBITDA ratio of 0.26x (approximately 0.75x proforma for EVR).
