Glencore has decided not to pay a $2.6bn (€2.1bn, £1.9bn) dividend after reporting a drop in half-year profits due to a fall in commodity prices and the impact of the coronavirus pandemic.
The Swiss miner and commodities trader said it was focused on strengthening its balance sheet as net debt rose 12 per cent to hit $19.7bn at the end of June.
Ivan Glasenberg, Glencore’s CEO, said the board had concluded it would be “inappropriate to make a distribution to shareholders in 2020”, and it would instead prioritise debt reduction.
He said the board would review whether to resume dividend payments next year when there would be greater visibility on the future.
“Let’s see how the market performs, how Covid is affecting supply and demand for commodities,” he said. “As you can see we will be generating $4.1bn free cash flow this year based on current prices. Debt will come down,” he added.
In the six months to June, Glencore announced a net loss of $2.6bn for the period after taking $3.2bn of impairment charges, including a $1bn hit on the value of its Colombian coal assets.
Revenue fell 34 per cent to $70bn, mainly due to lower commodity prices. The increase in borrowings came as Glencore tapped its credit lines to take advantage of falling oil prices in March and April to buy cheap barrels of crude and sell them in the futures market for a profit.
As a result, Glencore’s “marketing”, or trading arm, reported record earnings before interest, which doubled to $2bn.
Overall, Glencore reported adjusted earnings before interest, depreciation and amortisation of $4.8bn in the six months to June, down 13 per cent on the same period a year ago.
Glasenberg said he expected net debt to be within the company's target range of $10bn to $16bn by the end of the year as the big oil trades unwind and higher metal prices help the company generate more cash. Glencore is targeting a minimum net debt reduction of $2.8bn in the second half of the year.
Shares in Glencore fell 3.4 per cent to 189p today, August 6.