Glencore Preliminary Results 2012 5 March 2013
I 1
Ivan Glasenberg
Chief Executive Officer
I 2
2012 highlights
Resilient EBIT performance, highlighting robustness of Glencore’s marketing business and industrial
assets
– Adjusted EBIT(1) down 17% to $4.5bn
• Marketing Adjusted EBIT up 11%, with strong performance in Metals and Agriculture
• Adjusted EBIT in consolidated Industrial activities down 27%(2), compares favourably to peers
Sector-leading growth pipeline remains overall on time and on budget
Continued growth of operating cash flow, up 17% to $4.1bn(3)
Strong balance sheet with close to $9bn committed liquidity(4)
– FFO to Net debt at 35.9% (adjusted for Viterra acquisition) from 27.2% in 2011
Final dividend of $10.35 cents per share (total dividend of $15.75 cents per share, up 5%)
Xstrata and Viterra transactions represent major strategic advances(5)
Continued value-accretive bolt-on acquisitions Notes: (1) Pre other significant items. (2) Excluding Xstrata contribution. (3) Funds from operations. (4) Cash and committed undrawn credit facilities. (5) Investors’ attention is drawn to the fact that the completion of the merger with Xstrata remains conditional upon the receipt of the outstanding regulatory approval in China; completion of the Xstrata court
process and Glencore giving effect to the commitments required by the European Commission. The merger long stop date has been extended to 16 April 2013, with the consent of Xstrata and the Panel.
I
Robust 2012 financial and operating performance
Marketing Marketing activities delivered improved results in 2012, generating adjusted EBIT of $2.1bn, an increase of 11% compared to 2011
Strong performance despite lower prices across all base metals and coal - driven by volume growth and generally healthy physical premia
Industrial Adjusted EBIT from industrial activities down 27%(1) – compares favourably with diversified miner peer group – reflects continuing delivery on pipeline of mainly brownfield expansion – reflects focus on cost control and capital efficient growth philosophy
2012 saw the peak of the current capex programme
3
(25%)
(52%) (54%)
(40%)
Glencore (includingstake in Xstrata)
Peer 1 Peer 2 Peer 3
Net Income change 2012 vs 2011(2) (%)
Notes: (1) Excluding stake in Xstrata. (2) Underlying net income before exceptional items.
I
(27%)
(46%)(44%)
(39%)
Glencore (excluding stake in Xstrata)
Peer 1 Peer 2 Peer 3
(340)
(1,730)
(1,160)(1,110)
Glencore (excluding stake in Xstrata)
Peer 1 Peer 2 Peer 3
2012 relative operating performance – in controlled industrial activities
4
EBIT margin change 2012 vs 2011 (bps)
Absolute EBIT change 2012 vs 2011 (%)
Glencore’s relative EBIT performance arises from quality of assets, diversified commodity mix and high margin growth
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-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2012A 2014E 2016E
Other assets Kazzinc Katanga Mopani Mutanda Prodeco South Africa coal Oil E&P
Organic growth – Glencore’s own production
Cu equivalent production volume
(in thousand tonnes, 100% basis)
Note: Cu conversion based on spot prices on 26 February 2013.
5
2014E – 2016E CAGR: 3.6%
2012A – 2014E CAGR: 19.3%
2012A – 2016E CAGR: 11.2%
Kazzinc Katanga Mopani Mutanda Prodeco South Africa coal Oil E&P
Other assets
I 6
Steven Kalmin
Chief Financial Officer
I
Key financial highlights
Notes: (1) Adjusted EBITDA is revenue less cost of goods sold, less selling and administrative expenses, plus share of income from associates and joint controlled entities, plus dividend income, plus depreciation and amortisation. (2) Adjusted EBIT is Adjusted EBITDA less depreciation and amortisation. (3) Pre significant items. (4) FFO is Operating cash flow before working capital changes less net interest paid, less tax paid, plus dividends received from associates.
7
US$ m 2012 2011 % change
Revenue 214,436 186,152 15%
Adjusted EBITDA (1) (3) 5,943 6,464 (8%)
Adjusted EBIT (2) (3) 4,470 5,398 (17%)
Net income attributable to equity holders (3) 3,060 4,060 (25%)
Statutory net income attributable to equity holders 1,004 4,048 (75%)
Funds from operations (FFO) (4) 4,115 3,522 17%
Adjusted for Viterra acquisition 2012 2011 % change
Equity attributable to equity holders (US$ m) 31,266 29,265 7%
Net debt (US$ m) 11,457 15,416 12,938 19%
FFO to Net debt (%) 35.9% 26.7% 27.2%
Net debt / Adjusted EBITDA 1.93x 2.59x 2.00x
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1,242 1,363
697 435
(8)
371
(39)(20)
1,911
(800)
0
800
1,600
2,400
3,200
4,000
2011 2012
2,130
Adjusted EBIT 2012 vs 2011 (US$ m)
8
Strong underlying profitability, with Adjusted EBIT up 11% over 2011, highlighting strength and resilience of Glencore’s diversified and integrated business model
Metals and minerals
Improved results generating Adjusted EBIT of $1,363m, 10% higher than 2011
Performance driven by volume growth and healthy physical premia reflecting continued tight supply/demand conditions
Energy products
Reported Adjusted EBIT of $435m in 2012, weaker than prior year due to reduced volatility and continued weak freight markets and generally fewer arbitrage opportunities
Weak price environment for coal primarily as a result of US shale gas substitution
Agricultural products
Normalisation of performance with Adjusted EBIT of $371m – 2011 performance affected by cotton losses
2013 will see benefits of consolidation and integration of Viterra
11%
2012 financial performance – Marketing activities
Agriculture Metals and Minerals Energy Corporate
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Key industrial growth projects continued to deliver overall volume improvement and remain on time and within budget
Decline in Industrial Adjusted EBIT owing primarily to weaker average period-on-period commodity prices
Metals and minerals
Decline in Adjusted EBIT to $708m, driven by weaker average commodity prices:
- Nickel, zinc and copper prices, down 23%, 11% and 10% respectively versus 2011
Overall volume growth
Energy products
Adjusted EBIT of $594m, up 58% versus 2011, driven by full year of oil production at the Aseng field and growth in South African coal production
Spot coal prices significantly down year-on-year
Agricultural products
2012 Industrial EBIT improved on 2011, reflecting higher processing volumes
9
2012 financial performance – Industrial activities
Agriculture Metals and Minerals Energy Corporate Corporate (XTA)
1,357
708
375
594
1,893
1,174
(10)(39)(99) (126)
(800)
0
800
1,600
2,400
3,200
4,000
2011 2012
3,487
2,340
(33%)
Adjusted EBIT 2012 vs 2011 (US$ m)
I 10
2012 Adjusted EBIT bridge for industrial activities
3,487
(537)
807
(237)
61
(352) (68)
(821)2,340
0
1,000
2,000
3,000
4,000
5,000
2011 Adj. EBIT Price Volume Cost FX D&A Other AssociateIncome
2012 Adj. EBIT
(US$ m)
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Robust balance sheet(1)
Robust balance sheet with $9bn of committed liquidity
headroom as at 31 December 2012
– Current capital employed ($23.9bn) plus liquid stakes in
listed associates(3) covers 115% of total gross debt
Strong cashflow coverage ratios:
– FFO to Net debt at 35.9%(2)
– Net debt to Adjusted EBITDA at 1.93x vs. 2.00x in 2011(2)
S&P and Moody’s investment grade credit ratings targeted:
following the Viterra acquisition, the Xstrata merger
shareholder approval and assumed completion thereof, the
enlarged Group’s credit ratings were confirmed as Baa2
(stable) from Moody’s and BBB (stable) from S&P
Average VaR (1 day 95%) of $40m, representing 0.1% of
shareholders’ equity
Notes: (1) All definitions as per Preliminary results release 2012. (2) Adjusted for Viterra acquisition (3) At book carrying value
11
2012 2011
Gross debt $35.5bn $28.1bn
Net funding $32.7bn $26.7bn
Net debt(2) $11.5bn $12.9bn
FFO to Net debt(2) 35.9% 27.2%
Net debt(2) to Adjusted EBITDA 1.93x 2.00x
Adjusted EBITDA to net interest 6.13x 7.63x
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DRC Copper
Telis Mistakidis Co-Director of Zinc, Copper and Lead
I
DRC Copper – 2012 in perspective
13
Power a major issue
Mutanda expansion to 200ktpa on track
– Ownership increased to 60%
– Put / call option for additional 20% in
December 2013 (when exercised
ownership of 80%)
Katanga continues the plant refurbishment
program to replace old plant and machinery
with new – concentrator, SX and refinery
Mutanda
Katanga
I
DRC power situation (1/2)
14
Glencore investing $320m (in the form of loans to SNEL) in generation, transmission and distribution
Project makes available a total of 450 MW (345 MW new power generation and 105 MW transmission) of power allocation by end of 2015
– Glencore requires 400 MW
– Surplus available to SNEL
MW 2012 2013E
Katanga province demand (650) (683)
Katanga province generation 340 340
INGA supply – pre World Bank converter and synchronous condenser 150 -
INGA supply – post World Bank converter and synchronous condenser - 220
Zambian supply 100 100
Nzilo supply – Glencore project - 25
Surplus / (Deficit) (60) 2
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DRC power situation (2/2)
15
Investment
$95m investment in 345 MW of generation (3 turbines at Inga and Nzilo)
$110m investment in transformers (Inga and Kolwezi)
$115m investment in transmission and associated infrastructure
Timeline for power generation
25 MW – Q4 2013
160 MW – Q4 2014
160 MW – Q4 2015
Synchronous condenser after explosion
New synchronous condenser
I
Mutanda expansion on track
16
87kt of copper production in 2012
18 days lost production due to power
2012 peak power 45 MW; 2013E peak power 78 MW
Expansion update
– 6 of 7 EW lines operating
– EW 7 – March 2013
– New Mill – August 2013 (matches front end to EW
capacity)
Annualised 200ktpa of cathode by December 2013
Tankhouses, Mutanda
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Katanga 2012
17
Mined total of 228k MT of copper in ore in 2012
67 days lost production due to power
– Poor power stability and frequency from Katanga’s sub-station impacted by loss of the synchronous condenser
– Katanga’s subscribed peak power for 2012 budget was 128 MW – load shed down to 93 MW
– Greater sensitivity due to energy intensive Luilu
Improved power efficiencies
– Luilu – 150 tpd – 53 MW
– New plant – 220 tpd – 34 MW
– 2012 peak power draw was c.103 MW
– Power peak at 200ktpa will be c.100 MW
I
Katanga expansion
18
First cathode from new SX/EW plant on 17 December
2012
Annualised 200 ktpa run rate expected by December
2013
– Sulphide receiving – April 2013
– EW 2 – May 2013
– Roaster – September 2013
– Oxide receiving / CCD’s – September 2013
– KTC flow changes – October 2013
Identical technology to Mutanda
Expansion to 300 ktpa by Q4 2014
SX, Katanga
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Katanga – EW1 and EW2
19
EW1
EW2
I
Katanga – before and after
20
Before After
Flot
atio
n C
oppe
r Cat
hode
s
I
Katanga – KTC
21
Mills, Katanga
Flotation, Katanga
I
DRC operations annual production
22
Katanga Copper Mutanda Copper Note: Production data rounded to nearest 1,000.
7 11 16
64
87
22
44
58
91
93
29
55
74
155
180
0
50
100
150
200
2008 2009 2010 2011 2012 2013
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Thank you
23
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Agricultural Products and Viterra
Chris Mahoney Director of Agricultural Products
I 25
Acquisition and integration of Viterra
Final regulatory approval from MOFCOM (China) received on 7 December 2012
Transaction closed on 17 December 2012
Moved rapidly to streamline and integrate Viterra
– Viterra international marketing offices in Geneva, Hamburg and Barcelona closed
– International marketing concentrated in Rotterdam and Singapore
All Canadian functions moved to Regina
– Offices in Calgary and Vancouver will be
closed by Q2 2013
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Sale of various businesses
26
Sale of various Canadian handling assets to Richardson expected to complete in Q1 2013
– Richardson has already received Canadian competition clearance
Sale of Agri Products business to Agrium expected to complete in Q2 2013
– Agrium’s competition filing is in progress
Auction processes established for the sale of various non-core assets
– Sales, subject to price, expected to be completed in 2013
I
Illychevsk 2.5M mt 220k mt
Tilbury 500k mt 79k mt
Szczecin 1.25M mt
50k mt
Muuga 4.0M mt 300k mt
Dunaújváros 300k mt 7k mt
Constanza 300k mt 69k mt
Taman 3.0M mt 84k mt
Rostov 1.25M mt 600k mt
Bahia Blanca 3.0M mt 210k mt
Cascadia 6M mt
280k mt
Prince Rupert 6M mt
230k mt
Thunderbay 2M mt
500k mt
Montreal 3M mt
250k mt
Port Lincoln 1.9m mt 395k mt
Port Giles 800k mt 296k mt
Pt Adelaide OH 1.9M mt 65k mt
Pt Adelaide IH 850k mt 338k mt
Wallaroo 750k mt 765k mt
100% ownership Leased JV
Name of port Normalized annual throughput Storage capacity
Thevenard 600k mt 347k mt
Newcastle 1.5M mt 150 k mt
Timbúes 2.7M mt 450k mt
Pacific 2M mt
180k mt
Grain port facilities, 22 with 5.9m MT storage capacity and normalised annual throughput of c.46m MT
27
Glencore’s logistics infrastructure (1/2)
I
Storage facilities, 274, with cumulative 13.2m MT storage capacity Ukraine
38 facilities 1,267k mt
Bulgaria 2 facilities
64k mt
Romania 10 facilities
337k mt
Russia 11 facilities
710k mt
Hungary 4 facilities 240k mt
Kazakhstan 3 facilities 233k mt
Poland 5 facilities 180k mt
Argentina 8 facilities 372k mt
Uruguay 2 facilities 100k mt
Canada 82 facilities
1.9M mt
Australia 109 facilities
7.8M mt
28
Country Number of storage facilities Storage capacity
Glencore’s logistics infrastructure (2/2)
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Processing facilities
29
Facilities no. Capacity (000 MT)
Crushing 12 7,010
Milling 14 1,840
Biofuels 6 830
Malt 7 740
Feed compound 6 340
Pasta 2 250
Glencore now has a global processing network
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11
38
80
1980 2012 2013
30
Mato Grosso
Paranaguá
Infrastructure opportunities
Source: Company estimates, USDA.
Long term demand growth
China China Hong Kong
Pork consumption (kg per capita)
Crop sizes volatile
Brazil
China
Production
Transport costs from Mato Grosso to Paranaguá c. $125 / mt
– Equivalent to 45-50% of corn price FOB Paranaguá
– Equivalent to 20-25% of soy price FOB Paranaguá
Peak waiting time at port of Paranaguá
– 2011: 20 days
– 2012: 40-45 days
Chinese pork consumption per capita increased from 11 kg in 1980 to c.38 kg in 2012
Pork consumption in Hong Kong in 2013 was c.80 kg per capita
If China reaches the same pork consumption per capita as Hong Kong, this would require c.160m MT of corn
Today’s seaborne trade of corn is c.80m MT
Production of grains can be volatile
– Production corn in US in 2012-13 was 29% less than production in 2009-10
– Production wheat in Russia in 2012-13 was 40% less than production in 2008-09
Opportunities
I 31
Ivan Glasenberg
Chief Executive Officer
I 32
Concluding remarks and outlook
Overall On-going focus on cost control to defend operating margins
See healthy long-term outlook for Glencore’s commodities based on the continuing growth within emerging market economies and sustained levels of consumption within developed markets
Robust balance sheet with high levels of committed liquidity
Acquisition of Viterra transforms Glencore’s agricultural business into a global operation
Merger with Xstrata will, when completed, provide Glencore with full access to Xstrata’s production flows and allow optimization of the combined capex pipeline and operating structure(1)
− Comprehensive market update following completion
Industrial
Marketing Robust performance in 2012
Future performance expected to be driven by organic growth in industrial assets and integration of Viterra and Xstrata
Tight cost control and diversification mitigated commodity price weakness and led to overall strong performance relative to peers
Significant production ramp-up expected from Mutanda, Katanga, Prodeco, Oil, Kazzinc and various agricultural facilities
Note: (1) Investors’ attention is drawn to the fact that the completion of the merger with Xstrata remains conditional upon the receipt of the outstanding regulatory approval in China; completion of the Xstrata court process and Glencore giving effect to the commitments required by the European Commission. The merger long stop date has been extended to 16 April 2013, with the consent of Xstrata and the Panel.
I 33
Q & A
I 34
Appendix
I
(3%)
(36%) (35%)
(32%)
Glencore (excluding stake in Xstrata)
Peer 1 Peer 2 Peer 3
(150)
(1,420)
(1,000)
(900)
Glencore (excluding stake in Xstrata)
Peer 1 Peer 2 Peer 3
2012 relative operating performance – in controlled industrial activities
35
EBITDA margin change 2012 vs 2011 (bps)
Absolute EBITDA change 2012 vs 2011 (%)
Glencore’s relative EBITDA performance arises from quality of assets, diversified commodity mix and high margin growth