Glencore skips top-up dividend as focus falls on coal demerger

Gary Nagle, CEO, Glencore

GLENCORE will skip the ‘top up’ dividend this year telling shareholders its focus was on concluding the previously announced $6.93bn cash takeover of Elk Valley Resources (EVR) this year and containing net debt below $5bn.

Commenting in the group’s 2023 annual results, CEO Gary Nagle said his business was “expected to be cash generative at current spot commodity prices … which augurs well for top-up returns to recommence in the future”.

For 2024, Glencore is recommending a $0.13 per share base cash distribution consisting of $1bn in cash flow from its marketing division and 25% from attributable cash flow from its mining assets, equal to $1.6bn and $600m in cash respectively.

For the 12 months ended 2023, basic share earnings came in 74% lower year-on-year at $0.34/share compared to $1.33/share in 2022. Net debt “was contained” at $4.9bn as at December 31 compared to $100m at the close of the 2022 financial year. This was after a payout of $10.1bn in dividends last year.

Analysts said the numbers were as guided with no major surprises. “Base dividend of $1.6bn is +18% versus our estimate with no other top​-​up returns as expected,” said Ian Roussouw, analyst for Barclays Capital. Production and unit cost guidance provided by Glencore for 2024 were also in-line.

Based on 2024 guidance, Ebitda to free cash flow would be higher than expected, said Morgan Stanley in a note. “The company has maintained its 2024 volume guidance. As such, its illustrative spot free cash flow comes in at about $5.2bn, yielding 9%. “The spot EBITDA, using the above assumptions, comes in at $15bn, which compares to our previous spot estimate of $13.6bn and a 2024 consensus EBITDA of $16.5bn,” the bank’s analysts said.

In November,  Glencore announced a bid for Canadian group Teck’s coal business for $6.93bn with an intention of demerging and separately listing the business with its existing thermal coal assets in about two years’ time.

Glencore said today it hoped to finalise the EVR transaction in the third quarter pending regulatory clearances.

Glencore’s performance is a consequence of significant downward pressure on metal prices last year but Nagle said interest rate cuts and “restocking along the supply chain” were set to “bring an improvement in demand conditions in western markets later this year”.

Shares in Glencore fell 4.3% in Johannesburg taking the stock’s 52-month performance to a negative 19.7%.