Financial Data and Key Metrics - Adjusted EBITDA for H1 2024 was $6.3 billion, with industrial EBITDA at $4.5 billion, down from the previous year due to lower coal prices and reduced realizations in cobalt and nickel [5][6] - Marketing EBIT was $1.5 billion, annualizing to $3 billion, which is at the top end of the guidance range of $2.2 to $3.2 billion [7] - Net debt decreased to $3.6 billion, with net funding reduced by $1.7 billion to $29.4 billion [15] - Free cash flow generation was strong, with $4 billion from operations and $2.9 billion in net CapEx cash flow [34] Business Line Performance - Coal earnings were significantly impacted by lower pricing, particularly in thermal coal, contributing to a $2.6 billion reduction in energy and steelmaking coal EBITDA [16] - Copper and zinc custom smelting businesses saw lower contributions due to historically low TCRCs, with copper down $180M and zinc down $107M [17] - Zinc production saw positive volume growth, particularly from the Zhairem ramp-up, while coal volumes were modestly negative due to infrastructure challenges [20] Market Performance - Newcastle coal prices have normalized but remain strong, with prices picking up post-H1 2024 [5] - Cobalt and nickel markets are oversupplied, leading to lower realizations and netbacks, with nickel prices down 28% [19] - Copper prices were up period-on-period, but cobalt and zinc prices were down, impacting overall earnings [19] Strategic Direction and Industry Competition - The company decided to retain its coal and carbon steel materials business, citing shareholder support and ESG considerations [8] - Significant investments are being made in copper projects, particularly in Argentina, with plans to bring an additional 1 million tonnes of copper to market as needed [9][47] - The acquisition of EVR adds a Tier 1, low-cost, high-quality asset, contributing to growth in copper equivalents and steelmaking coal [11][47] Management Commentary on Operating Environment and Future Outlook - Management highlighted the strong performance of the marketing business, particularly in metals, despite energy price normalization [7] - The company remains committed to its climate action transition plan, with over 90% shareholder support [8] - Management expressed confidence in the copper market's long-term demand, driven by decarbonization and infrastructure needs [77][78] Other Important Information - The company reported three fatalities in H1 2024 and is doubling down on safety efforts [10] - The resolution of government investigations and the completion of one year with independent compliance monitors were noted as positive developments [10] - The company is spending $400 million on copper development projects in Argentina and North America, with additional CapEx expected for EVR integration [42][43] Q&A Session Summary Question: Marketing EBIT Guidance and EVR Integration - The company expects marketing synergies from EVR integration, with potential upside to the $2.2 to $3.2 billion guidance range [55][56] Question: Net Debt Target and Capital Returns - The $10 billion net debt target remains firm, with potential for upward revision as copper units and cash flow capacity increase [57][58] Question: M&A vs Capital Returns - The company remains open to M&A but will prioritize capital discipline and shareholder returns, including buybacks and dividends [61][62] Question: Viterra Disposal and Equity Treatment - The equity portion of the Viterra disposal may be treated differently, with potential for offsetting against acquisitions or distributions [63][64] Question: Marketing CapEx and Leases - Marketing CapEx in H1 2024 was $600 million, primarily related to leases [65] Question: Argentina Projects and Battery Metals Theme - The company is optimistic about Argentina's political and economic stability, with significant investments in MARA and El Pachon copper projects [71][72] - The battery metals theme remains under pressure, but the company sees long-term demand for copper, cobalt, and nickel, despite current oversupply [74][75][76] Question: South African Thermal Coal Assets - Logistical constraints in South Africa are improving, with Transnet performance showing green shoots [81] Question: MARA and El Pachon Syndication - The company is unlikely to syndicate MARA but remains open to partnerships for El Pachon [83][84] Question: EVR Capitalization and Production Outlook - EVR assets are sufficiently capitalized, with ongoing investments in waste stripping and new mining areas [95][96] Question: Operational Performance and Koniambo Care and Maintenance - Operational performance in H1 2024 was impacted by abnormal events, but recovery is expected in H2, particularly in Africa and Kazakhstan [99][100] - Koniambo care and maintenance expenses are expected to decrease, with ongoing costs in the low double digits [101] Question: Copper Market Tightness and Price Outlook - Copper supply remains constrained, with demand in China holding up, particularly in grid spending and renewables [104][105] Question: Primary Listing and Smelting Business - The company remains committed to its London listing but will continually assess the best exchange for its shareholders [109][110] - The custom smelting business may face challenges if low TC/RCs persist, with potential for smelter shutdowns [108]
Glencore(GLNCY) - 2024 Q2 - Earnings Call Transcript