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Glencore Inter (GLEN)

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Tuesday 21 August, 2012

Glencore Inter

Interim Results 2012

RNS Number : 4124K
Glencore International PLC
21 August 2012
 



NEWS RELEASE

 

Baar, 21 August 2012

 

Interim Results 2012

 

Highlights

 

US $million

H1 2012

H1 2011

Change

2011






Key statement of income and cash flows highlights:





Revenue

107 957

92 120

17%

186 152

Adjusted EBITDA¹

3 199

3 845

- 17%

6 464

Adjusted EBIT ¹

2 508

3 303

- 24%

5 398

Net income attributable to equity holders pre significant items ²

1 809

2 439

- 26%

4 060

Net income attributable to equity holders

2 275

2 474

- 8%

4 048

Earnings per share (Basic) (US $)

0.33

0.57

- 42%

0.72

Funds from operations (FFO) 3

1 930

2 145

- 10%

3 522






US $million

30.06.2012

31.12.2011

Change

Annualised






Key financial position highlights:





Total assets

93 665

86 165

9%


Equity attributable to equity holders 

30 988

29 265

6%


Current capital employed (CCE) ¹

22 242

22 479

- 1%


Net debt 3

14 466

12 938

12%


Ratios:





Adjusted current ratio ¹

1.48x

1.53x

- 3%


FFO to Net debt 4

22.9%

27.2%

- 16%

26.7%

Net debt to Adjusted EBITDA 4

2.49x

2.00x

25%

2.26x

Adjusted EBITDA  to net interest

7.09x

7.63x

- 7%



¹ Refer to glossary on page 64 for definitions and calculations.  

² Refer to page 9.

³ Refer to page 11.  

4 2012 ratio based on last 12 months' FFO and Adjusted EBITDA, refer to page 65.

 

• Strong financial results supported by solid performance in marketing.

• Adjusted EBIT $2.5 billion, a 24% reduction in H1 2012 versus H1 2011, but up 20% on H2 2011. 

   - Resilient performance from marketing business. Adjusted EBIT $1.12 billion, down 11% compared to $1.25 billion in H1 2011, a good   performance in the current economic environment, with metals and minerals and agricultural segments performing strongly, while energy results came in below the relatively strong prior year period.

• Adjusted EBITDA $3.2billion, a 17% reduction in H1 2012 versus H1 2011, but up 22% on H2 2011; annualised H1 2012 tracking closely with 2011 full year.

   - Industrial Adjusted EBITDA decreased 21% to $2.05billion in H1 2012 predominately due to lower average metals' prices,
impacting our own consolidated operations and that of our equity accounted associates.

• Performance of our directly owned industrial operations compares favourably with the sector, assisted by the ramp-up in operations in oil E&P, Kazzinc, Mutanda and our expanding coal portfolio.

• Strong cash flow generation, with funds from operations (FFO) of $1.9 billion and an Adjusted EBITDA interest cover in excess of 7 times. Annualised H1 2012 FFO is tracking 10% ahead of full year 2011, pointing to an improving credit metric trend. 

• Abundant liquidity with $9.0billion of committed headroom and no material refinancings in the next 12 months. This liquidity is spread across more than 100 banks globally.

• Strong and capital efficient volume growth supported by low risk brownfield expansions. Overall, growth pipeline in our industrial operations remains on time and on budget.

   - Conservatively in excess of 50% copper equivalent volume growth to 2014.

   - Oil E&P and Mutanda/Kansuki copper/cobalt development projects are ahead of schedule and expectation, balancing some ramp-up delays at Katanga and Kazzinc. Prodeco expansion on track.

• Strategy of value-driven merger and acquisitions has continued: Xstrata and Viterra transactions in progress; Optimum, Mutanda, Rosh Pinah have recently completed with Vale's European manganese ferroalloys acquisition expected to close shortly.

• The Board has declared an interim dividend of $5.4c per share, an 8% increase over 2011 reflecting our confidence in the diversification of our commodity mix, the robustness of our marketing business, the visibility of the ramp-up of our brownfield industrial assets and the strength of our balance sheet.

 

Glencore's Chief Executive Officer, Ivan Glasenberg, commented:

 

"Glencore has continued to deliver strong financial results supported by a solid performance in marketing. The improvement on the second half of 2011 is particularly pleasing. This demonstrates the strength of Glencore's capital-efficient volume growth and diversified business model, underpinned by the strong relationships we have with our customers, suppliers and finance providers.

"The first half of 2012 also saw a number of material corporate transactions including the merger of equals with Xstrata. The acquisition of Viterra will transform our already strong agricultural business at a time when industry fundamentals are the most positive they have been for some time.

"Looking forward, we neither anticipate nor assume any material improvement in overall market or economic conditions in the near term. We will continue to diligently look to our own growth pipeline and end markets to maximise performance for our shareholders."

 

 

For further information please contact:

 

Investors & analysts

Paul Smith

t: +41 (0)41 709 24 87

e: paul.smith@glencore.com

Media

Charles Watenphul

t: +41 (0)41 709 24 62

e: charles.watenphul@glencore.com

Finsbury (Media)

Guy Lamming

Dorothy Burwell

t: +44 (0)20 7251 3801

Elisa Morniroli

t: +41 (0)41 709 28 18

e: elisa.morniroli@glencore.com

Company secretary

John Burton

t: +41 (0)41 709 26 19

e: john.burton@glencore.com

 

 

website: www.glencore.com

 

Chief Executive Officer's Review

 

Financial markets were relatively optimistic entering 2012, following the sovereign debt-related challenges experienced during H2 2011. This optimism generally faded as the half progressed and, with it, expectations for economic growth and commodity prices. Concerns over how precisely the European situation would and could be resolved have continued to erode global risk appetite. For the world's two most important economies, the US and China, 2012 is essentially a year of political transition. Each of these factors extends into H2 2012 and is likely to continue to hinder the gradual process of underlying economic recovery
following the 2008 financial crisis.

 

Against the backdrop of this challenging economic environment, which saw most commodity prices down over 15% period-on- period, we are pleased to report that Glencore has continued to deliver a healthy financial performance with net income, pre-significant items, of $1.8 billion and statutory net income of $2.3 billion for H1 2012. While below the first half of last year, this is an improvement on the second half of 2011, and the annualised first half of 2012 is tracking closely the full 2011 performance.

 

We achieved solid underlying profitability in our marketing businesses, with healthy volume growth in key commodities. Metals were a particular highlight with much stronger profitability despite materially weaker prices. The marketing result in H1 2012 demonstrates the strength of Glencore's highly diversified business model underpinned by its strong relationships with customers, suppliers and finance providers.

 

Aside from oil, our industrial operations experienced materially weaker average prices for the key commodities produced. We have meanwhile continued to deliver on our growth projects including Mutanda, Oil E&P, Prodeco, and South African coal. Our key industrial expansion projects continued to progress, with the portfolio overall on track and within budget. This has already shown in our first half results as the magnitude of the decline in earnings from our industrial operations compares favourably with our diversified peers. Furthermore this gives us confidence that we can deliver substantial growth in the next twelve months even absent an improvement in the economic environment. The performance of our oil growth projects and copper at Mutanda has been particularly pleasing.

 

The first half of 2012 also saw a number of material corporate transactions. Firstly, we announced the merger of equals with Xstrata. Then we also announced the acquisition of Viterra, which transforms our already strong agricultural business at a time when industry fundamentals are the most positive they have been for some time. Other highlights included the purchase of a majority stake in Mutanda and the acquisition of Vale's European manganese operations and associated marketing agreements, which demonstrate our continued ability to deploy capital in innovative ways beyond the reach of our peer group. We will continue to endeavour to deploy capital wisely and selectively, subject to our long-standing value driven criteria, maintenance of a conservative financial profile, all guided by our strong management ownership culture.

 

The Board of Directors proposes an interim dividend of $5.4c per share for H1 2012, an increase of 8% over the prior year. This increase reflects our confidence in the diversification of our commodities mix, the robustness of our marketing business, the visibility of the ramp-up of our brownfield industrial assets and the strength of our balance sheet.

 

Looking forward, we neither anticipate nor assume any material improvement in overall market or economic conditions in the near term. From a Glencore perspective, we will continue to diligently look to our own growth pipeline and end markets to maximise performance for our shareholders.

 

 

 

 

 

Ivan Glasenberg

Chief Executive Officer

 

Financial Review

 

BASIS OF PRESENTATION OF FINANCIAL INFORMATION

The financial information has been prepared on a basis as outlined in note 2 of the financial statements. It is presented in the Financial review sections before significant items unless otherwise stated to provide an enhanced understanding and comparative basis of the underlying financial performance. Significant items (refer to page 10) are items of income and expense which, due to their financial impact and nature or the expected infrequency of the events giving rise to them, are separated for internal reporting and analysis of Glencore's results.

 

RESULTS

The first half of 2012 contrasted markedly with the first half of 2011 as the global economy and financial markets were weighed down by the European sovereign debt crisis and corresponding softening growth outlooks in many developed and emerging economies. Against this challenging backdrop, where average period on period prices for many key own produced commodities fell between 14% and 28%, Glencore, owing to its diversified business model, reported a respectable Adjusted EBIT of $2,508 million compared to $3,303 million over the corresponding period in 2011. Contribution from the marketing activities was $1,115 million (2011: $1,251 million) representing 44% of Adjusted EBIT for the period, an increase from a 38% contribution in the previous period, reinforcing the strength and resilience of Glencore's business model and the diversification benefits associated with combining and integrating, across a broad spectrum of commodities, a portfolio of industrial assets with large scale physical sourcing, marketing and logistics capabilities.

 

Adjusted EBIT

Adjusted EBIT by business segment is as follows:

 

US $million

Marketing activities

Industrial activities

H1 2012

 Adjusted
EBIT


Marketing  activities

Industrial activities

H1 2011

 Adjusted
EBIT











Metals and minerals

688

399

1 087

43%

633

950

1 583

48%

Energy products

350

345

695

28%

552

211

763

23%

Agricultural products

114

- 11

103

4%

92

- 17

75

2%

Corporate and other ¹

- 37

660

623

25%

- 26

908

882

27%

Total

1 115

1 393

2 508

100%

1251

2 052

3 303

100%


¹ Corporate industrial activities include $721 million (H1 2011: $977 million) of Glencore's equity accounted share of Xstrata's income.
See note 3 of the interim financial statements for Adjusted EBITDA details.

 

 

Marketing Adjusted EBIT for the six months ended 30 June 2012 was $1,115 million. The period saw a strong performance by metals and minerals, in particular copper and aluminium, with physical premia remaining healthy reflecting continued tight physical supply and demand conditions. The energy result was weaker than the corresponding period due to a less favourable freight market and generally fewer arbitrage opportunities. Agricultural products showed improved performance year on year despite lacklustre fundamentals up to May. The sequential performance was materially stronger with events surrounding cotton now firmly behind us. Agricultural fundamentals appear strong for H2 2012.

 

Industrial Adjusted EBIT declined by 32% to $1,393 million for the six months ended 30 June 2012, owing primarily to weaker average period on period commodity prices, such as nickel, coal, zinc and copper, down 28%, 18%, 15% and 14% respectively, impacting our own controlled operations as well as our share of associate earnings, including Xstrata. The commencement of oil production at the Aseng field in Q4 2011 accounted for the increase in energy products' industrial performance.

 

Corporate and other primarily relates to the equity accounted interest in Xstrata and the variable pool bonus accrual, the net result of which was down 29% to $623million over the first half of 2012 compared to the corresponding 2011 period.

 

Revenue

Revenue for the period ended 30 June 2012 was $107,957million, a 17% increase from $92,120million in the 2011 comparable period. Given the relatively high contribution of Glencore's oil division to Group revenue, the increase in revenue was primarily due to higher oil volumes handled and a slightly higher period-on-period average oil price (e.g. Brent up 3%), partially offset by lower period-on-period metals prices as noted above.

 

Cost of goods sold

Cost of goods sold for the period ended 30 June 2012 was $105,819 million, an 18% increase from $89,411million over the comparable 2011 period, primarily due to the higher oil prices and volumes noted above and the resulting impact on the purchases of such commodities.

 

Selling and administrative expenses

Selling and administrative expenses for the period ended 30 June 2012 were $478million, a 5% increase from $457million in 2011.

 

Share of income from associates and jointly controlled entities

Share of income from associates and jointly controlled entities for the first half 2012 was $684 million, a 34% decrease from $1,040million in 2011. The decrease is primarily due to the lower earnings flow-through from Xstrata primarily due to the decrease in commodity prices ($634 million, post exceptional items of $87 million, H1 2011: $977 million).

 

(Loss)/gain on disposal of investments

Loss on disposal of investments for the first half 2012 was $157 million, compared to a gain of $2 million in the first half of 2011. The amount in 2012 comprised primarily an accounting dilution loss following Xstrata's share issuance in March 2012 as part of its employee stock ownership plan, which saw Glencore's effective ownership reduce from 34.5% to 34.2%.

 

Other income/(expense) - net

Net other income for the first half of 2012 was $447million, compared to a net other expense of $368million in the first half of 2011. 2012 primarily comprised a net $497 million accounting gain predominantly related to the revaluation of Glencore's initial 40% interest in Mutanda at the time of the acquisition of an additional 20% interest in April 2012. There were also $169million of positive mark to market adjustments related to certain fixed priced forward coal sales contracts in respect of Prodeco's future production, offset by $100 million of asset impairments, $29 million of negative mark to market adjustments related to foreign currency hedge contracts associated with the announced Viterra transaction and $33million of expenses related to the phantom equity awards granted upon Glencore's listing. See note 5 to the interim condensed consolidated financial statements for further explanations.

 

Interest income

Interest income over the first half 2012 was $202 million, a $42 million increase over the prior period due to higher average cash and related balances. Interest income includes interest earned on various loans extended, including to the Russneft Group.

 

Interest expense

Interest expense for the first half 2012 was $653million, a 4% increase from $626million in the first half of 2011. The increase was predominately due to higher average debt levels.

 

Interest expense on floating rate debt increased by $56million to $331million from $275million in the corresponding 2011 period. Floating rate debt is predominantly used to fund fast turning and liquid working capital, the funding cost of which is taken into account in transactional pricing and terms and accordingly is sought to be "recovered" in Adjusted EBIT of our marketing activities.

 

Interest expense on fixed rate funding was $322million over the first half 2012, a decrease of $29million over the corresponding 2011 period. The net decrease is due to the redemption and repayment at maturity of various higher coupon bonds (including the Perpetual bond) during 2011, partially offset with new Euro and GBP bond issuances in April 2012.

 

 

Income taxes

A net income tax credit of $152 million was recognised over the first half of 2012 compared to a credit of $201 million over the first half of 2011. The 2012 credit resulted primarily from the recognition of crystallised tax benefits (resulting in losses carried forward), following an internal reorganisation of our existing ownership interest in Xstrata. The 2011 credit resulted primarily from the recognition of tax deductions associated with the conversion of the Glencore Group from private to public ownership as part of its listing. It has been Glencore's historical experience that its effective tax rate pre significant items on pre-tax income, excluding share of income from associates and jointly controlled entities and dividend income, has been approximately 10%, particularly in years where the marketing to industrial profit contribution mix is higher. This rate has been reflected in the table below. It is likely that the future effective tax rate will increase relative to the past, however, as noted above, this will largely be a function of Glencore's profit mix (marketing vs industrial).

 

Earnings

A summary of the differences between Adjusted EBIT and income attributable to equity holders, including significant items, is set out in the following table:

 

US $million

H1 2012

H1 2011




Adjusted EBIT ¹

2 508

3 303

Net finance costs

- 451

- 466

Foreign exchange (loss)/gain²

- 18

26

Income tax expense

- 130

- 226

Non controlling interests

- 100

- 198

Income attributable to equity holders pre significant items

1 809

2 439

Earnings per share (Basic) pre significant items (US $)

0.26

0.56




Other income/(expense) - net



  Mark to market movements on investments held for trading ²

9

6

  Mark to market valuation of forward contracts ²

169

- 161

  Mark to market valuation of certain foreign currency forward contracts ²

- 29

0

  Revaluation of previously held interests in newly acquired businesses ²

497

0

  (Impairment)/impairment reversal ²

- 100

16

  (Loss)/gain on disposal of property, plant and equipment ²

- 10

1

  Phantom equity awards granted on listing and other listing related expenses ²

- 33

- 258

  Other ²

- 38

2

Mark to market valuation of certain natural gas forward contracts 3

- 65

0

Share of Associates' exceptional items 4

- 87

0

Net (loss)/gain on disposal of investments

- 157

2

Net deferred tax asset recorded - mainly restructuring/listing benefits 5

282

427

Non controlling interests share of other income/(expense) 6

28

0

Total significant items

466

35

Income attributable to equity holders

2 275

2 474

Earnings per share (Basic) (US $)

0.33

0.57


1 Refer to glossary on page 64.

2 Recognised within other income/(expense) - net, see note 5 of the interim financial statements.

3 Recognised within cost of goods sold, see note 3 of the interim financial statements.

4 Recognised within share of income from associates and jointly controlled entities, see note 3 of the interim financial statements.

5 Recognised within income tax credit, see note 6 of the interim financial statements.

6 Recognised within non controlling interests.

 

 

 

 

significant items

 

Significant items are items of income and expense which, due to their financial impact and nature or the expected infrequency of the events giving rise to them, are separated for internal reporting and analysis of Glencore's results to provide a better understanding and comparative basis of the underlying financial performance.

 

In the first half of 2012, Glencore recognised $466million of other significant income which comprised a net $497 million accounting gain primarily related to the revaluation of the 40% interest in Mutanda held prior to the acquisition of an additional 20% interest in April 2012 and $169million (2011: $161million) of mark to market adjustments associated with certain fixed price forward coal sales contracts relating to Prodeco's future production that did not qualify for "own use" or cash flow hedge accounting offset by $100 million of asset impairments, $29 million of negative mark to market adjustments entered into to hedge the acquisition price foreign currency risk associated with the announced Viterra transaction, $65 million of negative mark to market adjustments of certain natural gas contracts entered into in 2008 (previously in cash flow hedge reserves) and $157million loss on disposal of investments mainly due to an accounting dilution loss arising on a change in Glencore's ownership interest in Xstrata following a share issuance in March 2012. In addition a resulting net tax credit of $282million was recognised, relating primarily to crystallised income tax benefits, following the internal reorganisation of Glencore's ownership stake in Xstrata. 

 

 

Liquidity and capital resources - Cash Flow

 

Cash generated by operating activities before working capital changes

Net cash generated by operating activities before working capital changes over the first half 2012 was $2,374million, a decrease of 4% compared to the corresponding 2011 period, consistent with the lower earnings from marketing and industrial activities. On a more comparable basis, the reduction is 14%, taking into account $297 million of listing related cash expenses in the 2011 period (see movement in net debt table below).

 

Working capital changes

Over the first half of 2012, there was a release of net working capital of $710million compared to an increase of $984million in the comparable 2011 period. The release is primarily attributable to the partial unwinding of the significant build-up in December 2011, with a further release expected in H2 2012.

 

Net cash used by investing activities

Net cash used by investing activities over the first half 2012 was $2,536million compared to $1,282million in the first half of 2011. The net outflow in 2012 primarily related to the acquisition of an additional 32% interest in Optimum Coal, an additional 20% interest in Mutanda and an 80% interest in Rosh Pinah, along with continued capital expenditure programs in respect of the various E&P upstream oil development projects, the development of the Mutanda and Kansuki copper/cobalt operations and the production expansions at Katanga and Prodeco.

 

Net cash generated by financing activities

Over the first half of 2012, Glencore issued $2,149 million of long term bonds: 6 year 4.125% Euro 1,250 million bonds and 10 year 5.50% GBP 300 million bonds.

 

 

ASSETS, LEVERAGE AND WORKING CAPITAL

 

Total assets were $93,665million as at 30 June 2012 compared to $86,165million as at 31 December 2011, a period over which,  current assets increased from $45,731million to $46,681million. The adjusted current ratio at 30June 2012 was a healthy 1.48 compared to 1.53 at 31 December 2011. Non current assets increased from $40,434million as at 31 December 2011 to $46,984million as at 30 June 2012, primarily due to the acquisitions of the new subsidiaries (including Mutanda) and the capital expenditure programs noted above.

 

 

Consistent with 31 December 2011, 99% ($13,309million) of total marketing inventories were contractually sold or hedged (readily marketable inventories) as at 30 June 2012. These inventories are considered to be readily convertible into cash due to their liquid nature, widely available markets, and the fact that the associated price risk is covered either by a physical sale transaction or a hedge transaction. Given the highly liquid nature of these inventories, which represent a significant share of current assets, Glencore believes it is appropriate to consider them together with cash equivalents in analysing Group net debt levels and computing certain debt coverage ratios and credit trends. Balance sheet liquidity is very healthy such that current capital employed plus liquid stakes in listed associates (at book carrying value) covers 135% of Glencore's total gross debt as at 30 June 2012.

 

Net debt

 

US $million


30.06.2012

31.12.2011





Borrowings


29 312

28 029

Commodities sold with agreements to repurchase


0

39

Gross debt


29 312

28 068

Cash and cash equivalents and marketable securities


- 1 537

- 1 345

Net funding


27 775

26 723

Readily marketable inventories


- 13 309

- 13 785

Net debt


14 466

12 938

 

 

Movement in net debt

 

US $million

30.06.2012

30.06.2011




Cash generated by operating activities before working capital changes

2 374

2 472

Listing related cash expenses included in number above (via statement of income)

0

297

Net interest paid

- 561

- 543

Tax paid

- 188

- 311

Dividends received from associates

305

230

Funds from operations

1 930

2 145




Working capital changes, excluding readily marketable inventory movements and other

235

- 1 200

Payments of non current advances and loans

- 227

- 64

Acquisition of subsidiaries, net of cash acquired

- 1 058

0

Purchase and sale of investments

- 192

- 409

Purchase and sale of property, plant and equipment

- 1 364

- 1 039

Margin (payments)/receipts in respect of financing related hedging activities

- 292

477

Share issuance, net of issue costs and Listing related cash expenses included in the statement of income (see above)


0


7 377

Acquisition and disposal of additional interests in subsidiaries

- 127

0

Dividends paid

- 692

0

Cash movement in net debt

- 1 787

7 287

Foreign currency revaluation of non current borrowings and other non cash items

259

- 550

Profit participation certificates redemptions

0

- 268

Non cash movement in net debt

259

- 818

Total movement in net debt

- 1 528

6 469

Net debt, beginning of period

- 12 938

- 14 756

Net debt, end of period

- 14 466

- 8 287

 

 

 

Net debt as at 30June2012 increased to $14,466 million from $12,938million as at 31December2011.

 

The ratio of net debt to 12 months rolling Adjusted EBITDA increased from 2.00 times in 2011 to 2.49 times as at 30 June 2012 (a more modest 2.26 times, based on annualised first half results). While the ratio of 12 months rolling FFO to Net debt reduced from 27.2% in 2011 to 22.9% as at 30 June 2012, however was relatively steady at 26.7%, based on annualised first half results, signalling an improving trend.

Capital resources and financing

 

During the first half of 2012, the following significant financing activities took place:

• In April 2012, Glencore issued EUR 1,250 million 4.125% bonds maturing in 2018 and GBP 300 million 5.5% bonds maturing in 2022, totalling $2.15 billion equivalent;

• In April 2012, Glencore updated its revolving credit facilities totalling $12.8 billion. The facilities comprise: 1) a $4,435 million 14 month revolving credit facility with a 10 month term-out option and 10 month extension option, that refinanced Glencore's existing $3,535 million 364-day revolving credit facility, i.e. an increase of $900 million and 2) an amount of $8,030 million of the existing $8,370 million 3-year revolving credit facility was extended for a further year to May 2015;

• In April 2012, Glencore signed a $3.1 billion syndicated loan backing the proposed merger with Xstrata, after raising $11 billion in syndication from 31 banks, a scale-back exceeding 70%; and

• In June 2012, Glencore concluded a 1 year syndicated term loan facility with a 1 year term out option at Glencore's discretion of some $1.5 billion in support of the announced acquisition of Viterra, once again scaling back an oversubscribed syndication process.

 

Going concern

Glencore's main refinancing requirements over the next twelve months relate to various secured borrowing base working capital -facilities which ordinarily require extension/renewal each year. However, these tend to be routine given the underlying strong collateral and their modest amounts in the context of the overall balance sheet and funding/liquidity levels. As at 30 June 2012, Glencore had available committed undrawn credit facilities and cash amounting to $9 billion (as financial policy, Glencore seeks to maintain a $3billion minimum threshold requirement). Based on these available capital resources and Glencore's financial forecasts and projections, which take into account reasonable possible changes in performance, consideration of the principle risks and uncertainties noted on page 14, and the announced potential Xstrata and Viterra transactions, the directors believe Glencore can continue as a going concern for the foreseeable future, a period not less than 12 months from the date of this report.

 

Value at risk

One of the tools used by Glencore to monitor and limit its primary market risk exposure, namely commodity price risk related to its physical marketing activities, is the use of a value at risk (VaR) computation. VaR is a risk measurement technique which estimates the potential loss that could occur on risk positions as a result of movements in risk factors over a specified time horizon, given a specific level of confidence. The VaR methodology is a statistically defined, probability based approach that takes into account market volatilities, as well as risk diversification by recognising offsetting positions and correlations between commodities and markets. In this way, risks can be measured consistently across all markets and commodities and risk measures can be aggregated to derive a single risk value. Glencore has set a consolidated VaR limit (1 day 95%) of $100million representing less than 0.3% of equity.

 

Glencore uses a VaR approach based on Monte Carlo simulations and is either a one day or one week time horizon computed at a

95% confidence level with a weighted data history.

 

Average market risk VaR (1 day 95%) during the first half of 2012 was $32million, representing a modest 0.1% of equity. Average equivalent VaR during the first half of 2011 was $48million.

 

Credit ratings

In light of Glencore's extensive funding activities, maintaining investment grade ratings is of the utmost importance. Following the Xstrata merger and the Viterra acquisition announcements, Glencore's current credit ratings are Baa2 (review with direction uncertain) from Moody's and BBB (watch positive) from S&P.

 

 

Dividends

The directors have declared a 2012 interim dividend of $0.054 per share amounting to $374million. The dividend will be paid on 13September 2012.

 

Interim dividend

2012



Ex-dividend date (UK and Hong Kong)

29 August

Last time for lodging transfers in Hong Kong

4:30 pm (HK) 30 August

Interim dividend record date in Hong Kong

Opening of business (HK) 31 August

Interim dividend record date in UK

Close of business (UK) 31 August

Deadline for return of currency election form (Jersey shareholders)

3 September

Applicable exchange rate date

7 September

Payment date

13 September

 

 

As the interim dividends will be paid out of capital contribution reserves, they are exempt from Swiss withholding tax. As at
30 June 2012, Glencore International plc had CHF 13.8 billion of such capital contribution reserves in its statutory accounts.

 

The interim dividend is declared and ordinarily paid in US dollars. Shareholders on the Jersey register may elect to receive the dividend in Sterling, Euros or Swiss Francs. The Sterling, Euro or Swiss Franc amount will be determined by reference to the exchange rates applicable to the US dollar seven days prior to the dividend payment date. Shareholders on the Hong Kong branch register will receive their dividends in Hong Kong dollars. Further details on dividend payments, together with currency election and dividend mandate forms, are available from Glencore's website (www.glencore.com) or from the Company's Registrars.

 

Notional allocation of debt and interest expense

Glencore's indebtedness is primarily arranged centrally, with the proceeds then applied to marketing and industrial activities as required.

 

Glencore does not allocate borrowings or interest to its three operating segments. However, to assist investors in the assessment of overall performance and underlying value contributors of its integrated business model, Glencore notionally allocates its -borrowings and interest expense between its marketing and industrial activities as shown below. Further details as to the methodology used can be found in the 2011 Annual Report.

 

US $million

Marketing

 activities

Industrial

 activities

Total





Adjusted EBIT - H1 2012

1 115

1 393

2 508

Interest expense allocation

- 172

- 481

- 653

Interest income allocation

0

202

202

Allocated profit before tax - H1 2012




Allocated borrowings - 30 June 2012 1

14 164

15 148

29 312

Allocated borrowings - 31 December 2011

14 247

13 821

28 068

Allocated borrowings - quarterly average

14 464

15 351

29 815


1 Allocated borrowings in industrial activities increased as a result of the acquisitions and capital expenditure programs.

 

 

Risks and uncertainties

 

Glencore is exposed to a number of risks and uncertainties which exist in its business and which may have an impact on the -ability to execute the strategy effectively in the remaining six months of the financial year and could cause the actual results to differ materially from expected and historical results. The directors do not consider that the principal risks and uncertainties as summarised below and detailed in the Glencore International plc prospectus dated 31 May 2012 filed in connection with the proposed merger with Xstrata plc on pages 7 to 27 and in the 2011 Annual Report on pages 24 to 34, copies of which are available at www.glencore.com, have changed materially.

 

Risks relating to the Glencore Group:

• Declines in the current and expected volumes of supply or demand for commodities, to commodity prices and to deterioration in economic and financial conditions.

• Significant geopolitical risk.

• Liquidity risk.

• A reduction in Glencore's credit rating.

• Glencore's ability to attract, retain and compensate key employees.

• Fluctuations in currency exchange and interest rates.

 

Risks relating to Glencore's marketing activities:

• Its ability to identify and take advantage of arbitrage opportunities.

• The effectiveness of its hedging strategy.

• Counterparty risk.

• Risk management policies and procedures that may leave it exposed to unidentified or unanticipated risks.

• Reliance on third parties to source the majority of its products.

• Reliance on certain agreements for the sourcing of commodities.

• Significant amounts of freight, storage, infrastructure and logistics support required by its marketing activities and increases in costs thereof.

 

Risks relating to Glencore's industrial activities:

• Delays in or failure to develop planned expansions or new projects.

• Operating risks and hazards at its industrial assets.

• Title to the land, resource tenure and extraction rights of industrial activities.

• Infrastructure at its industrial assets being adequate and remaining available.

• Increases in production costs.

• Stated mineral and hydrocarbon reserves, resources and mineralised potential are only estimates.

• The processes and chemicals used in Glencore's extraction and production methods and its shipping and storage activities.

• Accidents at Glencore's industrial activities, logistics and storage facilities which could result in injuries and fatalities.

 

 

Subsequent events Affecting OUR FINANCIAL POSITION

 

• On 3 July 2012, Glencore issued CHF 450 million ($473 million) 2.625% interest bearing bonds due December 2018.

• On 11 July 2012, Glencore entered into a share purchase agreement to acquire Vale's European manganese ferroalloys operations for a cash consideration of $160 million. The transaction is still subject to certain regulatory approvals expected to be received in Q4 2012.



 

Metals and Minerals

 

 

US $million

Marketing activities

Industrial activities

H1 2012

Marketing activities

Industrial activities

H1 2011








Revenue

26 439

3 595

30 034

20 666

4 556

25 222

Adjusted EBITDA

698

832

1 530

635

1 345

1 980

Adjusted EBIT

688

399

1 087

633

950

1 583

Adjusted EBITDA margin (%)

2.6%

23.1%

-

3.1%

29.5%

-

 

 

 

Market conditions

 

Selected average commodity prices

 


H1 2012

H1 2011

Change





S&P GSCI Industrial Metals Index

390

470

-17%

LME (cash) zinc price ($/t)

1 980

2 324

-15%

LME (cash) copper price ($/t)

8 107

9 396

-14%

LME (cash) lead price ($/t)

2 036

2 576

-21%

Gold price ($/toz)

1 651

1 449

14%

Metal Bulletin alumina price ($/t)

317

400

-21%

LME (cash) aluminium price ($/t)

2 084

2 552

-18%

LME (cash) nickel price ($/t)

18 432

25 573

-28%

Metal Bulletin cobalt price 99.3% ($/lb)

14

18

-22%

Iron ore (Platts 62% CFR North China) price ($/DMT)

142

179

-21%

 

 

Currency table

 


Average

H1 2012

Spot

30.06.2012

Average

H1 2011

Spot

30.06.2011

Change in
average prices







AUD : USD

1.03

1.02

1.03

1.07

-0%

USD : COP

1 792

1 784

1 837

1 771

-2%

EUR : USD

1.30

1.27

1.40

1.45

-7%

GBP : USD

1.58

1.57

1.62

1.61

-2%

USD : CHF

0.93

0.95

0.90

0.84

3%

USD : KZT

148

149

146

146

1%

USD : ZAR

7.94

8.16

6.89

6.77

15%

 

 

Zinc/Copper/Lead

Zinc and copper average H1 2012 prices were 15% and 14% below corresponding 2011 levels respectively. It is our view that these price declines appear to have been principally driven by a more pessimistic outlook on global growth and risk appetite by -financial markets, a view supported by the tight correlation in price performance between the various industrial metals. In terms of physical end demand, our experience has been more consistent with conditions at least as favourable as those experienced during 2011. In addition, the supply side provided fundamental support to physical markets, as production across the sector, once again, failed to keep pace with expectations as a result of a continuation of long-term, industry-wide trends of grade declines, cost inflation, project delays and other supply-side constraints. The market continues to underestimate the potential for supply-side weakness to keep key commodities such as copper, in deficit. These factors are reflected in the robust levels of physical premia for zinc and copper during H1 2012.

Alumina/Aluminium

The alumina/aluminium markets continued to be affected by the on-going sovereign debt issues in Europe and the ensuing pressure on the rate of global demand growth. In addition, the industry continued to over-produce despite cuts in production in response to materially lower flat prices. The LME aluminium average cash settlement price for H1 2012 was $2,084 per tonne, compared to approximately $2,400 per tonne for 2011. By contrast, the available physical inventory positions remained tight. This is reflected in the fact that premia for in warehouse, duty unpaid aluminium increased significantly during the first half of 2012, with current published premiums of between $185-220 per tonne compared to $95-120 per tonne at the end of 2011.

 

Ferroalloys/Nickel/Cobalt/Iron Ore

The global stainless steel industry experienced a brief recovery during the first two months of the year, prompting a partial restocking process. However, this subsequently unwound as the impact of the negative macroeconomic sentiment took hold. Overall demand for nickel and chrome therefore disappointed, despite continued growth in some sectors including plating and superalloys.

 

The H1 2012 cobalt price was 22% lower than the comparable period in 2011, due to factors which have driven the cobalt market in H2 2011, including destocking in China and the increased use of intermediary products.

 

Iron ore prices were fairly stable during the first four months of H1 2012 however, towards the end of the H1 2012, reduced steel demand and production in China as well as increased spot volumes offered from Brazil and Australia pulled the market down to a low of around $130 per DMT.

 

 

MARKETING

 

Highlights

The metals and minerals marketing business delivered a strong performance during H1 2012, continuing to grow profits despite continued economic uncertainty and a lower flat commodity price environment. This performance serves to highlight the strength of Glencore's unique global platform, combining its own production with long term and close relationships across a diverse supplier and consumer base.

 

Marketing revenues in H1 2012 were $26.4billion versus $20.7 billion in H1 2011, an increase of 28%. This growth was principally driven by increased volumes, particularly in copper and, to a lesser extent, iron ore.

 

Adjusted marketing EBITDA and EBIT for H1 2012 were $698million and $688million respectively, compared to $635million and $633million in H1 2011. As noted above, although H1 2012 was characterised by materially weaker flat prices for most of our core metals, the premia for physical delivery remained robust, indeed some reached new highs during the period. This reflects, with some exceptions, generally sound and consistent levels of end demand as well as physical inventory availability at levels below average, both on exchanges and within the global supply chain. The improved result also partly reflects increased volumes in key metals year-on-year, notably copper. H1 2012 saw strong performances from copper and aluminium while iron ore was weaker.

 

Financial information

 

US $million

H1 2012

H1 2011

Change





Revenue

26 439

20 666

28%

Adjusted EBITDA

698

635

10%

Adjusted EBIT

688

633

9%

 

 

Selected marketing volumes sold

 



H1 2012

H1 2011

Change






Zinc metal and concentrates 1

million MT

1.3

1.3

0%

Copper metal and concentrates 1

million MT

1.3

0.9

44%

Lead metal and concentrates 1

million MT

0.3

0.3

0%

Gold

thousand toz

352

414

- 15%

Silver

million toz

11.8

4.9

141%

Alumina/aluminium

million MT

5.9

6.2

- 5%

Ferroalloys (incl. agency)

million MT

1.6

1.2

33%

Nickel

thousand MT

102.8

97.8

5%

Cobalt

thousand MT

8.4

12.3

- 32%

Iron ore

million MT

8.3

2.9

186%


1 Estimated metal unit contained.

 

 

Zinc/Copper/Lead

H1 2012 volumes for zinc and lead were in line with H1 2011 at 1.3 million tonnes and 0.3 million tonnes respectively, while copper volumes increased from 0.9 million tonnes to 1.3 million tonnes over the same period. Global demand for physical copper has remained at the higher level experienced during H2 2011.

 

Alumina/Aluminium

Marketed volumes for alumina/aluminium decreased from 6.2 million tonnes in H1 2011 to 5.9 million tonnes in H1 2012. This reduction was mainly in alumina where volumes in Q1 2012 remained at the lower level of Q4 2011 before recovering into Q2 2012.

 

 

Ferroalloys/Nickel/Cobalt/Iron Ore

The decline in cobalt volumes sold during H1 2012 reflects a change in mix versus H1 2011. H1 2012 saw more crude hydroxide and less concentrates sales. The former has a materially higher cobalt content therefore distorting the comparability of headline volumes sold.

 

In line with our objective of building market share in iron ore, spot volumes increased materially in comparison to the prior year period. China remained key to global demand and to spot prices.

 

 

INDUSTRIAL ACTIVITIES

 

Highlights

Total industrial revenues for metals and minerals in H1 2012 were $3.6billion, down 21% from H1 2011's $4.6billion. Adjusted EBITDA for the period was $832million, down 38% compared to H1 2011 but an increase of 7% compared to H2 2011. As noted above, sovereign and macroeconomic concerns have weighed on commodity prices, with the S&P GSCI Industrial Metal Index (reflecting a basket of commodity prices) falling on average 17% from 470 in H1 2011 to 390 in H1 2012, tempering the performance of the metals' industrial assets portfolio.

 

Despite short term production declines seen in certain commodities, the growth strategy to establish high quality, large scale, long life and low cost assets remains on track and on budget. The significant future growth in own source copper volumes and to a lesser extent gold, is expected to deliver substantially enhanced returns on invested capital.

 

 

Financial information

 

US $million

 H1 2012

 H1 2011

Change





Revenue




Kazzinc

1 384

1 161

19%

Other Zinc

505

502

1%

Zinc

1 889

1 663

14%

Katanga

207

322

- 36%

Mutanda

108

-

n.m.

Mopani

422

597

- 29%

Other Copper

467

1 300

- 64%

Copper

1 204

2 219

- 46%

Alumina/Aluminium

201

281

- 28%

Ferroalloys/Nickel/Cobalt/Iron ore

301

393

- 23%

Total

3 595

4 556

- 21%





Adjusted EBITDA




Kazzinc

463

524

- 12%

Other Zinc

116

154

- 25%

Zinc

579

678

- 15%

Katanga

37

141

- 74%

Mutanda

26

-

n.m.

Mopani

79

208

- 62%

Other Copper

112

114

- 2%

Copper

254

463

- 45%

Alumina/Aluminium

4

52

- 92%

Ferroalloys/Nickel/Cobalt/Iron ore

- 1

110

n.m.

Share of income from associates and dividends

4

42

n.m.

Total

832

1 345

- 38%

Adjusted EBITDA margin (%)

23.1%

29.5%






Adjusted EBIT




Kazzinc

294

372

- 21%

Other Zinc

53

98

- 46%

Zinc

347

470

- 26%

Katanga

- 9

106

n.m.

Mutanda

18

-

n.m.

Mopani

26

144

- 82%

Other Copper

81

93

- 13%

Copper

116

343

- 66%

Alumina/Aluminium

- 2

47

n.m.

Ferroalloys/Nickel/Cobalt/Iron ore

- 58

48

n.m.

Share of income from associates and dividends

- 4

42

n.m.

Total

399

950

- 58%





Capex




Kazzinc

168

218


Other Zinc

134

57


Zinc

302

275


Katanga

208

137


Mutanda

39

-


Mopani

75

56


Other Copper

89

41


Copper

411

234


Alumina/Aluminium

14

3


Ferroalloys/Nickel/Cobalt/Iron ore

25

36


Total

752

548


 

Production data

 

thousand ¹


Using feed from own sources

Using feed from third party
sources

H1

 2012

Total

Using feed from own sources

Using feed from third party
sources

H1

 2011

Total

Own feed change










Kazzinc









Zinc metal

MT

113.7

35.8

149.5

126.0

23.3

149.3

-10%

Lead metal 2

MT

13.9

29.7

43.6

18.8

34.2

53.0

-26%

Copper metal 3

MT

24.5

1.4

25.9

25.8

0.7

26.5

-5%

Gold

toz

233

43

276

207

17

224

13%

Silver

toz

2 636

7 330

9 966

2 296

1 740

4 036

15%

Katanga









Copper metal 3

MT

43.1

-

43.1

43.3

-

43.3

0%

Cobalt 4

MT

1.07

-

1.07

1.30

-

1.30

-18%

Mutanda









Copper metal 3

MT

38.3

-

38.3

25.8

-

25.8

48%

Cobalt 4

MT

3.63

-

3.63

3.59

-

3.59

1%

Mopani









Copper metal 3

MT

39.4

45.9

85.3

49.6

52.8

102.4

-21%

Cobalt 4

MT

0.04

0.14

0.18

0.41

0.13

0.54

-90%

Other Zinc (Los Quenuales, Sinchi Wayra, AR Zinc, Portovesme, Rosh Pinah)



Zinc metal

MT

26.6

43.0

69.6

31.3

45.6

76.9

-15%

Zinc oxide

DMT

22.9

-

22.9

13.2

-

13.2

73%

Zinc concentrates

DMT

201.0

-

201.0

247.2

-

247.2

-19%

Lead metal

MT

5.8

-

5.8

5.9

-

5.9

-2%

Lead concentrates

DMT

29.6

-

29.6

30.7

-

30.7

-4%

Tin concentrates

DMT

2.35

-

2.35

2.19

-

2.19

7%

Silver metal

toz

389

-

389

368

-

368

6%

Silver in concentrates

toz

3 421

-

3 421

4 243

-

4 243

-19%

Other Copper (Cobar, Pasar, Punitaqui, Sable)







Copper metal

MT

-

17.8

17.8

-

80.6

80.6

n.m.

Copper concentrates

DMT

90.4

0.1

90.5

93.8

-

93.8

- 4%

Cobalt

MT

-

0.35

0.35

-

-

-

n.m.

Silver in concentrates

toz

596

-

596

388

-

388

54%

Alumina/Aluminium (Sherwin)









Alumina

MT

-

634

634

-

751

751

n.m.

Nickel/Cobalt (Murrin Murrin)








Nickel metal

MT

15.33

0.72

16.05

13.95

0.68

14.63

10%

Cobalt

MT

1.08

0.03

1.11

0.91

0.03

0.94

19%










Total Zinc contained

MT

258.3

78.7

337.0

292.6

68.9

361.5

- 12%

Total Copper contained

MT

169.5

65.1

234.6

169.7

134.1

303.8

0%

Total Lead contained

MT

37.0

29.7

66.7

41.8

34.2

76.0

- 11%

Total Tin contained

MT

1.15

-

1.15

0.99

-

0.99

16%

Gold (incl. Gold equivalents) 5

toz

365

181

546

382

59

441

- 4%

Total Alumina

MT

-

634

634

-

751

751

n.m.

Total Nickel

MT

15.33

0.72

16.05

13.95

0.68

14.63

10%

Total Cobalt

MT

5.82

0.52

6.34

6.21

0.16

6.37

- 6%


1 Controlled industrial assets only (with the exception in 2011 of Mutanda (40% owned) where Glencore had operational control). Production is on a 100% basis.

2 Lead metal includes lead contained in lead concentrates.

3 Copper metal includes copper contained in copper concentrates and blister copper.

4 Cobalt contained in concentrates and hydroxide.

5 Gold/Silver conversion ratio of 1/53.16 and 1/41.09 for H1 2012 and 2011 respectively based on average prices.

 

Operations

 

Kazzinc (Glencore interest: 50.7%)

Gold and silver production from own sources in H1 2012 increased by 13% and 15% respectively compared with the same period last year. The increases reflect the ramp up at Altyntau Kokshetau and an increase in gold recovered from the lead smelter.

 

In H1 2012 gold recoveries at Altyntau Kokshetau, Kazzinc's flagship gold asset, increased by 4% compared to H1 2011. An operational review process is currently nearing completion, the results of which are intended to drive capacity debottlenecking initiatives to allow the plant to reach design throughput with improved recovery levels by H2 2013.

 

Zinc, lead and copper production from own sources in H1 2012 were lower than in H1 2011, with lead reflecting an expected small reduction in grade during 2012 and a decision to process gold rich concentrates at the lead smelter to prioritise gold production at the expense of lead.

 

Kazzinc's new copper smelter, commissioned in August 2011, is still in ramp-up phase and operating at 80% of design capacity. It is expected to reach design capacity in H1 2013. Cold commissioning of the IsaSmelt lead smelter started in June 2012 with full commissioning expected in August, ahead of its original schedule in September. Kazzinc is also currently finalising the feasibility study for its Dolinnoye-Obruchevskoye gold deposit.

 

Katanga (Glencore interest: 75.2%)

Total ore mined in H1 2012 was 2,531,500 tonnes, an increase of 8% over H1 2011, which at a grade of 3.88%, resulted in contained copper in ore mined of 98,100 tonnes.

 

Ore mined at KTO underground mine for H1 2012 was 872,900 tonnes, a 9% increase over H1 2011, at an average copper grade of 3.65%. Ore mined at KOV open pit during H1 2012 was 1,658,600 tonnes, 44% above H1 2011, at an average copper grade of 4%; higher grade ore will be available during Q3 2012 in Cut 1D, as mud has now been removed from the bottom of KOV open pit.

 

Ore milled at KTC concentrator for H1 2012 was 2,236,700 tonnes, an increase of 13% over H1 2011.

 

Copper produced in metal and concentrate in H1 2012 was 43,100 tonnes, with copper metal production increasing by 12% during the same period in 2011.

 

Copper and cobalt production continued to be adversely affected by persistent general power disruptions in the DRC. During H1 2012, there were approximately 671 hours or 28 days of resulting lost production across the operation. This lost production time excludes the adverse impact on equipment availability following such unplanned shut downs and subsequent equipment start-ups. Katanga expects power disruptions to decrease during H2 2012, due to a new convertor expected to be commissioned by the end of August 2012, as part of the World Bank power project. A new synchronous condenser is also expected to be commissioned at the end Q3 2012. In the medium to long term, improvements in infrastructure, following launch of the Power Project (as previously announced in March 2012 and discussed below) are expected to improve reliability and availability of overall electricity supply.

 

Katanga expects first copper cathode production through the new Solvent Extraction plants and converted copper electro-winning facility during Q3 2012. Mechanical completion of the Updated Phase IV Expansion is expected in Q3 2013.

 

The feasibility study for the T17 underground mine is expected to complete during Q3 2012. This will potentially allow for exploitation of additional T17 mineral resources below the bottom of the current open pit through advanced underground mining techniques.

 

For further information please visit www.katangamining.com.

 

 

Mutanda (Glencore interest: 60.0%)

Copper production in H1 2012, including cathode and copper in concentrate, was 38,300 tonnes, representing a 48% increase compared to H1 2011. Cathodes contributed 36,200 tonnes, 153% higher than H1 2011, as the hydrometallurgical plant ramped up production.

 

Cobalt production in H1 2012, including cobalt in hydroxide and cobalt in concentrate was in line with H1 2011 at 3,600 tonnes.

 

Following commissioning of the EW4 tankhouse in January and completion and optimisation of the front end (milling and leaching) of the Phase II plant in Q2 2012, Mutanda now has installed copper production capacity of 110,000 tonnes per annum at design feed grades. Mutanda is on track to complete the associated cobalt circuit in Q4 2012, which will result in 23,000 tonnes per annum of cobalt in hydroxide production capacity.

 

The 390 tonnes per day sulphuric acid and 73 tonnes per day SO2 plant was commissioned in February 2012 and at the end of March was operating at design capacity. A dedicated power generation plant is expected to be commissioned in Q3 2012 to ensure a reliable power supply to the acid plant.

 

Mutanda is currently preparing a feasibility study for the construction of a 100,000 tonnes (of copper contained) sulphide concentrator. The study is expected to be completed during Q1 2013.

 

During H1 2012, Glencore increased its attributable interest in Mutanda from 40% to 60% via an equity cash purchase of $420 million, as well as acquiring shareholder debts of approximately $60 million. Glencore also has the right, subject to the terms of a put and call option agreement, to acquire during December 2013 an additional 20% interest in Mutanda for a total cash consideration of $430 million.

 

The acquisition represents a significant first step towards achieving Glencore's previously announced intention to merge the Mutanda and Kansuki mining operations, which should result in the combined entity producing 200,000 tonnes per annum of copper cathodes and 23,000 tonnes per annum of cobalt in hydroxide by H1 2013.

 

Kansuki (Glencore interest: 37.5%)

Glencore holds a 50% interest in Kansuki Investments Sprl which in turn holds a 75% interest in the owner of the Kansuki concession, thereby giving Glencore an effective interest of 37.5%. Kansuki is a 185 square kilometre copper and cobalt pre-development project which borders the Mutanda concession. A total of $238 million of capital expenditure for mine and plant development has been committed of which $193 million had been spent as at 30 June 2012. Exploration of the Kansuki concession is on-going.

 

Katanga, Mutanda and Kansuki - Power Project

Mutanda, Katanga and Kansuki, are collectively undertaking a project to secure power for all three operations via the refurbishment of two turbines at the Inga dam which is expected to provide 450 megawatts of power by the end of 2015 (the 'Power Project'). The project is being executed in partnership with SNEL, DRC's national power operator and EGMF, the project contractor. The initial cost estimate is $284 million to be contributed by Mutanda, Katanga and Kansuki. The amount invested will be recovered via lower future energy tariffs.

 

Mopani (Glencore interest: 73.1%)

Total contained copper in ore hoisted and mined for the first half of 2012 was 3% below the same period of 2011, whilst total contained copper in concentrate for the same period was 2% higher than 2011. Gross anode production from the smelter for the first half of 2012 was 19% lower than 2011 levels, due to the planned smelter maintenance shutdown in May 2012, which was completed ahead of schedule and allowed Mopani to restart five days earlier than planned.

 

Total finished copper from own sources in H1 2012 was 21% below H1 2011 at 39,400 tonnes. Finished copper, including purchased material and toll, was 17% lower at 85,300 tonnes. The reduction in copper production was due to the planned smelter shutdown in May 2012, as described above, and to a lesser extent, the temporary suspension of the Mufulira West heap leach process earlier in the year.

 

Finished cobalt production in H1 2012 was 67% lower than H1 2011 due to the cobalt roaster being placed on care and maintenance in the second half of 2011, primarily due to lower cobalt grades in both Mopani and purchased concentrates.

 

The current capital expenditure projects to increase mine production and further improve and modernise the smelter remain on track, including the $323 million Synclinorium project, scheduled to come on line at the end of 2015.

 

Mopani announced earlier in the year that the smelter upgrade project (including improving sulphur dioxide emissions capture to above 97%) is expected to be completed by December 2013, 18 months ahead of the schedule initially agreed with the Zambian Government.

 

Other Zinc

 

Los Quenuales (Glencore interest: 97.5%)

Los Quenuales, which comprises the Iscaycruz and Yauliyacu mines, processed 3% less ore (1,282,900 tonnes) in H1 2012 compared to H1 2011, mainly due to disruptions associated with contractor union difficulties. Reductions in head grades at the Iscaycruz mine, owing to a general shift towards lower grade ore bodies, was the primary reason for the overall reduction in zinc concentrate production.

 

Sinchi Wayra (Glencore interest: 100%)

Ore treated at Sinchi Wayra during H1 2012 was 725,500 tonnes, 8% lower than the same period in 2011, mainly due to operational interruptions associated with elements of social unrest and the nationalisation of the Colquiri mine. Zinc head grades were also lower than during H1 2011, which contributed to the reduction in zinc concentrates production during H1 2012.

 

Negotiations with the Bolivian government to amend Sinchi Wayra's mining contracts in accordance with the new constitution are on-going.

 

AR Zinc (Glencore interest: 100%)

AR Zinc, comprising the Aguilar mine, Palpala lead smelter and AR zinc smelter, performed strongly in H1 2012, increasing ore processing by 23% to 354,500 tonnes and concentrate production by 38% to 33,600 tonnes and 24% to 18,600 tonnes for zinc and lead concentrate respectively compared to H1 2011.

 

Perkoa (Glencore interest: 50.1%)

Construction of the mine at Perkoa is on-going, with first production expected in H2 2012. The mine plan has been improved by introducing a new open-cut source of ore, providing the ability to produce lead concentrate, and increasing the planned plant capacity to 1 million tonnes of ore per annum. These improvements should also increase the life of mine and overall total production.

 

Rosh Pinah (Glencore interest: 80.1%)

Glencore acquired an 80.1% interest in the Rosh Pinah zinc and lead mine in June 2012. June's production of 4,666 tonnes of zinc contained and 1,203 tonnes of lead contained were both above expectations.

 

Other Copper

 

Sable (Glencore interest: 100%)

Sable, a Zambian processing plant, was purchased in September 2011 and has a current production capacity of 9,600 tonnes of copper cathode per annum (being increased to 14,400 tonnes) and 900 tonnes of cobalt contained in carbonate.  H1 2012 production was 4,000 tonnes of copper cathode and 400 tonnes of cobalt.

 

 

Cobar (Glencore interest: 100%)

Copper concentrate production for H1 2012 was 15% lower than H1 2011 at 63,800 tonnes, primarily due to a temporary blockage of the fill lines that supply cement to back fill the mining stopes in H1 2012.

 

The main capital expenditure project currently underway is the shaft extension which is expected to reduce unit operating costs by allowing access to more ore and increasing levels of production. The project is expected to be completed in 2014.

 

Pasar (Glencore interest: 78.2%)

Copper cathode production in H1 2012 was significantly lower than in the same period in 2011 as a result of a fire at the plant in January which stopped production. Production restarted in July 2012.

 

Punitaqui (Glencore interest: 100%)

Copper concentrate for the period was 22,100 tonnes up 23% compared to H1 2011, reflecting higher rates of plant processing and a 9% increase in copper head grades.

 

Alumina/Aluminium

Sherwin Alumina (Glencore interest: 100%)

Production in H1 2012 was 634,200 tonnes, a decrease of 16% compared to H1 2011, primarily related to the overhaul of a calciner in Q1 2012.

 

Ferroalloys/Nickel/Cobalt

Murrin Murrin (Glencore interest: 100%)

Own sourced production for H1 2012 was 15,300 tonnes of nickel and 1,100 tonnes of cobalt, representing 10% and 19% increases respectively compared to the same period in 2011. Production during the first quarter was affected by some maintenance issues. However, the plant operated consistently throughout the second quarter, benefitting from throughput enhancements and other previous capital investments, to achieve a record quarterly nickel production of 9,600 tonnes. In response to the lower nickel price environment, Murrin Murrin has implemented a 'Margin Improvement Plan' designed to deliver cost and cash savings over the remainder of 2012.

 



 

Energy Products

 

 

US $million

Marketing activities

Industrial activities

H1 2012

Marketing activities

Industrial activities

H1 2011








Revenue

66 379

2 098

68 477

57 053

1 005

58 058

Adjusted EBITDA

372

528

900

568

305

873

Adjusted EBIT

350

345

695

552

211

763

Adjusted EBITDA margin (%)

0.6%

25.2%

-

1.0%

30.3%

-

 

 

 

Market conditions

 

Selected average commodity prices

 


H1 2012

H1 2011

Change





S&P GSCI Energy Index

338

341

-1%

API2 ($/t)

95

122

- 22%

API4 ($/t)

99

120

-18%

Prodeco realised price ($/t) 1

89

97

- 8%

South African Coal realised export price ($/t)

97

103

- 6%

South African Coal realised domestic price ($/t)

30

45

- 33%

Oil price - Brent ($/bbl)

114

111

3%


1 As of 30 June 2012, 26million tonnes had been sold forward at an average price of $91 per tonne.

 

 

Coal

Atlantic markets

Healthy production levels in the traditional exporting countries, compounded by a significant increase in US year-on-year thermal coal exports due to low domestic natural gas prices, precipitated Atlantic market price declines, notwithstanding record high levels of coal consumption in Europe. On an average basis, API 2 and API 4 were down 22% and 18% respectively compared to H1 2011.

 

Pacific markets

Prices were initially supported by strong demand across the region, especially China, where imports annualised at above 200 million tonnes in 2012 against some 175 million tonnes in 2011. However, strong Indonesian production together with higher Chinese hydro production and some displaced Atlantic market coal placed some downward pressure on prices, notably from Australia and Indonesia.

 

Metallurgical coal markets remain somewhat restrained due to the macroeconomic outlook and slowing steel demand growth in Europe, South America and China.

 

Oil

Brent front month prices started the year at $107 per barrel and fell to $95 per barrel at June 2012 with a range of $89 to $126 per barrel and average Brent price increasing slightly from $111 in H1 2011 to $114 per barrel in H2 2012.

 

During the first quarter 2012, price increases were driven by geo-political events, production delays and revised economic data from the US and China. The imposition of an EU embargo against Iranian oil exports further enhanced this trend. At the end of Q2 2012, prices eased following bearish economic growth forecasts, increased oil supply from Saudi Arabia and a lower price benchmark signalled by OPEC.

WTI continued its dislocation from other international grades in H1 2012, due to the domestic US crude benchmark's captive delivery location and continuing high stocks. The Brent-WTI differential started the year at $9 per barrel before widening to $13 per barrel by the end of June 2012.

 

 

Marketing

 

Highlights

H1 2012 saw a reduced performance from energy marketing compared to H1 2011. Lower volatility across the oil and coal markets and the continued weak freight environment provided fewer arbitrage opportunities than H1 2011.

 

Adjusted Marketing EBITDA and EBIT for H1 2012 were $372million and $350million respectively, compared to $568million and $552million in H1 2011, a decrease of 35% and 37% respectively. Oil, in particular, had a strong H1 2011, exacerbating the period-on-period headline decline. This is borne out by energy marketing's sequential improvement in results compared to H2 2011.

 

Financial information

 

US $million

H1 2012

H1 2011

Change





Revenue

66 379

57 053

16%

Adjusted EBITDA

372

568

- 35%

Adjusted EBIT

350

552

- 37%

 

 

 

Selected marketing volumes sold

 

million

H1 2012

H1 2011

Change





Thermal coal (MT)

38.3

44.6

- 14%

Metallurgical coal (MT)

2.7

1.8

50%

Coke (MT)

0.1

0.2

- 50%

Crude oil (bbls)

190.4

155.0

23%

Oil products (bbls)

366.2

273.5

34%

 

 

Coal

Volumes in H1 2012 were lower than those achieved in the comparable 2011 period, as a result of reduced volatility and lower freight rates, which limited geographical arbitrage opportunities. Furthermore, the market was focused on lower quality grades due to price advantages, which can have an impact on deliveries of higher quality coals and the premiums these coals can command.

 

The outlook for coal is more encouraging with a large portion of seaborne exports selling at below average global production cost. This should result in further production cuts and support prices. Demand for coal across most markets remains strong with the global 'burn rate' at record levels on a seasonally adjusted basis. Moreover, an overhang of off-specification coals should in time lead to a positive outcome for quality oriented exports and a return to favourable premiums for such products.

 

Oil

H1 2012 volumes, on an overall barrels per day basis, increased by 30% to 3.1 million barrels per day from 2.4 million barrels per day in H1 2011. This increase was largely due to the first time inclusion of Chemoil volumes, following Glencore increasing its stake to 89% earlier this year. Excluding Chemoil, volumes were similar.

 

The oil freight market continued to remain challenging during the first half of 2012 with high bunker fuel prices and lower back-haul optimisation opportunities.

 

Industrial activities

 

Highlights

The energy industrial segment delivered a substantially improved performance during H1 2012 off the back of the oil E&P operations with the first full half year of production from the Aseng oil field, following its commissioning in November 2011. At industrial coal EBITDA level, the lower contribution from Prodeco (mainly due to lower realised coal prices), was largely offset by an increased contribution from the South African coal portfolio over the last 12 months, following the Optimum and Umcebo acquisitions and the Shanduka Coal transactions.

 

Industrial revenues in H1 2012 were $2,098million versus $1,005million in H1 2011, an increase of 109%. Adjusted EBITDA for H1 2012 was $528million, up 73% compared to $305million in H1 2011.

 

Financial information

 

US $million

 H1 2012

 H1 2011

Change





Revenue




Prodeco

667

641

4%

South African Coal

562

151

272%

Coal

1 229

792

55%

Oil

869

213

308%

Total

2 098

1 005

109%





Adjusted EBITDA




Prodeco

130

232

- 44%

South African Coal

133

39

241%

Coal

263

271

- 3%

Oil

252

7

3 500%

Share of income from associates and dividends

13

27

- 52%

Total

528

305

73%

Adjusted EBITDA margin (%)

25.2%

30.3%






Adjusted EBIT




Prodeco

52

164

- 68%

South African Coal

68

22

209%

Coal

120

186

- 35%

Oil

212

- 2

n.m.

Share of income from associates and dividends

13

27

- 52%

Total

345

211

64%





Capex




Prodeco

159

274


South African Coal

120

6


Coal

279

280


Oil

191

162


Total

470

442


 

 

Production data

 

thousand MT 1

 

Own

Buy-in

Coal

H1 2012

Total

 

Own

Buy-in

Coal

H1 2011

Total

Own production change









Thermal Coal








Prodeco

7 944

107

8 051

7 093

94

7 187

12%

Shanduka (Export)

199

-

199

250

-

250

- 20%

Shanduka (Domestic)

2 980

539

3 519

2 500

257

2 757

19%

Umcebo (Export)

131

-

131

-

-

-

n.m.

Umcebo (Domestic)

3 620

18

3 638

-

-

-

n.m.

Optimum (Export)

3 769

-

3 769

-

-

-

n.m.

Optimum (Domestic)

3 155

358

3 513

-

-

-

n.m.

Total

21 798

1 022

22 820

9 843

351

10 194

121%


1 Controlled industrial assets only. Production is on a 100% basis.

 

 

thousand bbls





H1 2012

H1 2011

Change









Oil 1








Block I





11 022

-

n.m.

Total





11 022

-

n.m.


1 On a 100% basis. Glencore's ownership interest in the Aseng field is 23.75%

 

 

 

Operations

 

Prodeco (Glencore interest: 100%)

Own production was 7.9 million tonnes in H1 2012, a 12% increase compared to H1 2011. This increase is attributable to the broad expansion project currently underway which is expected to increase annualised production to 21 million tonnes by Q4 2014. All mine-based infrastructure and support projects to facilitate the expansion (including maintenance workshops and crushing and coal handling systems) have been completed on time and on budget and are in operation.

 

The construction of the new direct loading port, Puerto Nuevo, is on schedule and on budget and expected to be commissioned in H1 2013, following which, the current port (Puerto Prodeco) will be decommissioned. Puerto Nuevo is expected to provide higher annual throughput capacity and at a lower operating cost per tonne.

 

South African Coal (Glencore interest: Shanduka Coal: 49.99%, Umcebo Mining: 43.66% and Optimum Coal: 63%)

Glencore's South African coal operations comprise Shanduka Coal (including Kangra Coal), Umcebo Mining and Optimum Coal. The portfolio has continued to expand during H1 2012, following the increase in ownership of Optimum and the acquisition of Kangra by Shanduka.

 

In March 2012, Glencore closed the acquisition of Optimum following conclusion of the mandatory offer and associated delisting. As at 30 June 2012 Glencore had an effective 63% interest in Optimum, which exports approximately 6.8 million tonnes per annum of thermal coal through Richards Bay Coal Terminal.

 

In June 2012, Glencore completed a transaction whereby it reduced its ownership in Shanduka Coal by 20% (from 70% to 49.99%), while maintaining control of the operation, in return for a cash consideration of ZAR 368 million and the transfer by Shanduka
Resources to Shanduka Coal of its 30% shareholding in Kangra Coal. Kangra is owner of the Savmore Colliery in the Ermelo fields, which exports approximately 1.7 million tonnes per annum of thermal coal.

 

Results at the Shanduka and Umcebo operations during the first half of 2012 exceeded expectations, while Optimum's results were lower than expected as production continued to ramp up following completion of the Kwagga North project.

 

Work is currently proceeding well on the Wonderfontein project, with the rail siding nearing completion and first coal expected to be railed before the end of 2012. Likewise, the Springboklaagte project studies are progressing well and it is expected that the definitive feasibility study will be completed by the end of the year. In March 2012, Shanduka Coal acquired the rights to the Argent coal deposit and a pre-feasibility study is currently in progress.

 

Oil Exploration & Production (Glencore interest: Block I: 23.8%/Block O: 25.0%)

The Aseng field (Block I) in Equatorial Guinea continued to perform well, reaching a single day gross production record of 70,000 barrels during Q2 2012. Field operations have run at nearly 100% capacity and produced at an average gross production rate of 61,000 barrels per day during H1 2012. In the eight months since start-up, Aseng has produced 13.8 million barrels of cumulative gross production and operated with less than one per cent downtime.

 

Development of the Alen field (Block O) in Equatorial Guinea remains on budget and scheduled for first production in Q3 2013. All of the development wells have been drilled and completed and construction of the production platform continues as planned.



 

Agricultural Products

 

 

US $million

Marketing activities

Industrial activities

H1 2012

Marketing activities

Industrial activities

H1 2011








Revenue

8 041

1 405

9 446

7 249

1 591

8 840

Adjusted EBITDA

125

21

146

92

13

105

Adjusted EBIT

114

- 11

103

92

- 17

75

Adjusted EBITDA margin (%)

1.6%

1.5.%

-

1.3%

0.8%

-

 

 

 

Market conditions

 

Selected average commodity prices

 


H1 2012

H1 2011

Change





S&P GSCI Agriculture Index

426

522

-18%

CBOT corn no.2 price (US¢/bu)

629

701

-10%

ICE cotton price (US¢/lb)

87

174

-50%

CBOT soya beans (US¢/bu)

1 350

1 370

- 1%

NYMEX sugar # 11 price (US¢/lb)

23

27

- 15%

CBOT wheat price (US¢/bu)

642

766

-16%

 

 

Grain prices were directionless and range bound in H1 2012 and, for most of the period, were below the price levels of H2 2011 and well below price levels of H1 2011. Oilseed prices, having reached a low early in the year, subsequently increased as Argentine production fell short of expectations due to an extended drought for the second year in the past three years. Cotton prices were also subdued, considerably below 2011 levels and gradually weakened over the period.

 

At the end of H1 2012, a drought in the US, FSU and Eastern/Southern Europe began to impact both grain and oilseed production forecasts and increase prices. Subsequently, with continuing dry and hot weather, particularly in the US, it has become apparent that production shortfalls will be severe and supply/demand will consequently be extremely tight. H2 2012 is therefore likely to be a considerably higher priced and more volatile environment than H1 2012.

 

 

Marketing

 

Highlights

Grain, oilseed and freight volumes maintained their growth trend in H1 2012, with oilseed volumes, in particular, up substantially versus H1 2011. With good wheat crops in both Russia and Ukraine, there were no export restrictions in place. Grain arbitrage opportunities were generally limited but performance was nevertheless satisfactory, particularly in wheat. Oilseeds experienced a more volatile environment due to the Argentinean soyabean production shortfall and a cold winter impacting the EU rapeseed crop. Softseed marketing and oil and oilseed arbitrage made a good contribution during H1 2012.

 

 

Financial information

 

US $million

H1 2012

H1 2011

Change





Revenue

8 041

7 249

11%

Adjusted EBITDA

125

92

36%

Adjusted EBIT

114

92

24%

 

 

Selected marketing volumes sold

 

million MT

H1 2012

H1 2011

Change





Grains

14.6

13.2

11%

Oil/oilseeds

6.8

5.1

33%

Cotton

0.3

0.2

50%

Sugar

0.2

0.2

0%

 

 

Industrial activities

 

Financial information

 

US $million

 H1 2012

 H1 2011

Change





Revenue

1 405

1 591

- 12%

Adjusted EBITDA 1

21

13

62%

Adjusted EBIT 1

- 11

- 17

n.m.

Adjusted EBITDA margin (%)

1.5%

0.8%


Capex

133

83


 

1
Includes share of income from associates and dividends of $7 million (H1 2011: $5million).

 

 

Production data

 

thousand MT

H1 2012

H1 2011

Change





Farming

327

191

71%

Oilseed crushing

1 106

911

21%

Oilseed crushing long term toll agreement

397

445

- 11%

Biodiesel

260

273

- 5%

Rice milling

126

113

12%

Wheat milling

534

506

6%

Sugarcane processing

251

320

- 22%

Total

3 001

2 759

9%

 

 

 

Operations

 

Viterra (pending completion)

Glencore announced it had concluded an agreement to acquire Viterra Inc. for CAD 16.25 per share on 19 March 2012, subject to regulatory and shareholder approvals. Viterra's shareholders voted to approve the acquisition on 29 May 2012. Substantially all regulatory approvals have now been received, including competition and foreign investment clearances in Canada and Australia. The only outstanding approval remaining is MOFCOM, China.

Rio Vermelho (Glencore interest: 100%)

During H1 2012, Rio Vermelho crushed a total of 251,200 tonnes of sugarcane (22% lower than H1 2011), producing 14,350 cubic metres of hydrous ethanol (compared to 24,500 tonnes in H1 2011) and 3,600 tonnes of Very High Pol ('VHP') sugar, the first sugar produced at Rio Vermelho following the construction of the VHP sugar plant. Crushing volumes and production were below expectations due to a delayed start of the harvest to allow for further maturation of the sugarcane following unseasonal levels of rainfall in May and June, impacting the broader Brazilian industry.

 

In the first half of 2012, Rio Vermelho farmed 72% (compared to 81% in H1 2011) of its sugarcane feedstock, with the balance supplied by independent farmers.

 

The first phase of Rio Vermelho's five year expansion plan, the construction of a VHP sugar plant, was completed on schedule in June 2012. During the current crop cycle, the sugar plant will run at a daily capacity of 750 tonnes, reaching an eventual capacity of 1,500 tonnes per day in line with the overall increase in crushing capacity from 1.3 million tonnes to 2.6 million tonnes. Furthermore, the expansion will add 80,000 cubic metres of anhydrous ethanol production capacity as well as a cogeneration plant capable of supplying 200,000 megawatt hours of surplus electricity to the power grid. The overall project is on schedule and total forecast capital expenditure remains at $322 million.

 

Other Agricultural Products

Oilseed crushing

Two softseed crushing plants were acquired at Usti, Czech Republic and Bodaczow, Poland late last year. After upgrades and safety improvements, both plants commenced operations under Glencore ownership early in 2012. In addition a sunseed crushing plant at Kharkov, Ukraine was acquired in February 2012. Our greenfield softseed plant at Fokto, Hungary was commissioned in May 2012 and is now in operation. Volumes and margins in the European crushing business have generally been below expectations due to poor rapeseed crops and reduced demand for oil as a result of weak biodiesel margins.

 

Commissioning of the joint venture greenfield soyabean crushing plant at Timbues, Argentina is slightly delayed with an updated target of September 2012. Margins have also been poor in Argentina due a reduced soyabean crop and excess crushing capacity.

 

Biodiesel

The EU biodiesel business continues to be very challenging with new capacity coming on stream in 2012 despite poor margins. Imports of soy based biodiesel from South America have eroded EU biodiesel demand as has an effective reduction of the EU biodiesel use mandate.

 

Farming

Overall farm production rose 71% compared to the same period in 2011. This increase reflects this year's earlier Russian harvest as well as an increase in our Argentinean activities.



 

Statement of directors' responsibilities

 

We confirm that to the best of our knowledge:

 

the condensed set of consolidated financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

the interim report includes a fair review of the information required by DTR 4.2.7 (being an indication of important events that have occurred during the first six months of the financial year, and their impact on the interim report and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

the interim report includes a fair review of the information required by DTR 4.2.8 (being disclosure of related party transactions and changes therein).

 

By order of the Board,

 

Steven Kalmin

Chief Financial Officer

 

21 August 2012



 

Independent Review report to Glencore International plc

 

We have been engaged by the company to review the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises the statements of financial position, income, comprehensive income, cash flows and changes in equity and related notes 1 to 20. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in note 2, the annual financial statements of the company are prepared in accordance with International Financial Reporting Standards as adopted by the European Union and International Financial Reporting Standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

 

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

 

21 August 2012



 

 

 

Condensed consolidated statement of income

for the six months ended 30 June

(Unaudited)

 

US $million

Notes

2012

2011





Revenue


107 957

92120

Cost of goods sold


- 105 819

-89411

Selling and administrative expenses


- 478

-457

Share of income from associates and jointly controlled entities


684

1040

(Loss)/gain on sale on investments - net

4

- 157

2

Other income/(expense) - net

5

447

-368

Dividend income


12

11

Interest income


202

160

Interest expense


- 653

-626

Income before income taxes


2 195

2471

Income tax credit

6

152

201

Income for the period


2 347

2672





Attributable to:




Non controlling interests


72

198

Equity holders


2 275

2474





Earnings per share




Basic (US $)

12

0.33

0.57

Diluted (US $)

12

0.32

0.53

 

 

 

Condensed Consolidated statement of comprehensive income

for the six months ended 30 June

(Unaudited)

 

US $million

Notes

2012

2011





Income for the period


2 347

2672





Exchange (loss)/gain on translation of foreign operations


- 63

20

Loss on cash flow hedges


- 35

-56

Loss on available for sale financial instruments

9

- 71

-224

Share of comprehensive income from associates and jointly controlled entities


115

11

Income tax relating to components of other comprehensive income


3

-24

Net loss recognised directly in equity


- 51

-273

Cash flow hedges transferred to the statement of income, net of tax


65

0

Other comprehensive income/(loss)


14

-273

Total comprehensive income


2 361

2399





Attributable to:




Non controlling interests


48

202

Equity holders


2 313

2197

 

 



 

 

Condensed Consolidated statement of financial position

as at 30 June 2012 and 31 December 2011

 

US $million

Notes

2012

(unaudited)

2011

(audited)





Assets




Non current assets




Property, plant and equipment

7

20 250

14639

Intangible assets

8

1 221

210

Investments in associates and jointly controlled entities

9

18 725

18858

Other investments

9

1 517

1547

Advances and loans


3 910

4141

Deferred tax assets


1 361

1 039



46 984

40434

Current assets




Inventories

10

16 045

17129

Accounts receivable

11

23 459

21895

Other financial assets


5 286

5065

Prepaid expenses and other assets


354

297

Marketable securities


45

40

Cash and cash equivalents


1 492

1305



46 681

45731

Total assets


93 665

86165





Equity and liabilities




Capital and reserves - attributable to equity holders




Share capital


69

69

Reserves and retained earnings


30 919

29196



30 988

29265

Non controlling interests


3 860

3070

Total equity


34 848

32335

Non current liabilities




Borrowings

14

20 490

19844

Deferred income

15

712

158

Deferred tax liabilities


2 639

1399

Other financial liabilities

16

419

0

Provisions


1 296

953



25 556

22354

Current liabilities




Borrowings

14

8 822

8185

Commodities sold with agreements to repurchase


0

39

Accounts payable


18 660

18136

Deferred income

15

126

24

Provisions


90

98

Other financial liabilities


5 375

4804

Income tax payable


188

190



33 261

31476

Total equity and liabilities


93 665

86165

 

 

Condensed Consolidated statement of cash flows

for the six months ended 30 June

(Unaudited)

 

US $million

Notes

2012

2011





Operating activities




Income before income taxes


2 195

2471

Adjustments for:




Depreciation and amortisation


691

542

Share of income from associates and jointly controlled entities


- 684

-1040

(Decrease)/increase in non current provisions


- 33

20

Loss/(gain) on sale of investments - net


157

- 2

Unrealised mark to market movements on other investments


- 9

- 6

Impairments and other non cash items - net


- 394

21

Interest expense - net


451

466

Cash generated by operating activities before working capital changes


2 374

2472

Working capital changes




(Increase)/decrease in accounts receivable 1


- 1 264

793

Decrease/(increase) in inventories


1 376

-448

Increase/(decrease) in accounts payable 2


598

-1 329

Total working capital changes


710

-984

Income tax paid


- 188

-311

Interest received


48

63

Interest paid


- 609

-606

Net cash generated by operating activities


2 335

634

Investing activities




Payments of non current advances and loans


- 227

-64

Acquisition of subsidiaries, net of cash acquired

16

- 1 058

0

Purchase of investments


- 199

-417

Proceeds from sale of investments


7

8

Purchase of property, plant and equipment


- 1 489

-1113

Proceeds from sale of property, plant and equipment


125

74

Dividends received from associates


305

230

Net cash (used by) investing activities


- 2 536

-1282

Financing activities




Share issuance, net of issue costs


0

7674

Repurchase of Perpetual bonds


0

-292

Proceeds from Xstrata secured bank loans


0

384

Proceeds from issuance of Sterling, Swiss Franc and Euro bonds


2 149

237

Proceeds from other non current borrowings


84

26

Margin (payments)/receipts in respect of financing related hedging activities


- 292

477

Repayment of current borrowings


- 443

-7235

Acquisition of additional interest in subsidiaries


- 172

-25

Disposal of interest in subsidiary


45

0

Payment of profit participation certificates


- 291

-468

Dividend paid to equity holders of the parent

13

- 692

0

Dividend paid to non controlling interests


0

-17

Net cash generated by financing activities


388

761

Increase in cash and cash equivalents


187

113

Cash and cash equivalents, beginning of period


1 305

1463

Cash and cash equivalents, end of period


1 492

1576


1 Includes movements in other financial assets and prepaid expenses, other assets and other non cash current assets.

Includes movements in other financial liabilities and current provisions.

 

 

Condensed Consolidated statement of changes in equity

for the six months ended

(Unaudited)

 

US $million

Retained

earnings

Share premium

Other reserves

Total

reserves

 and

retained

earnings

Share

 capital

Total

 equity

attributable to equity holders

Non

 controlling interests

Total

 equity










At 1 January 2011

5659

0

-272

5387

37

5424

2894

8318

Income for the period

2474

0

0

2474

0

2474

198

2672

Other comprehensive loss

11

0

-288

-277

0

-277

4

-273

Total comprehensive income

2 485

0

- 288

2 197

0

2 197

202

2 399

Conversion of HPPS and PPS profit -participation plans

 

0

 

13821

 

0

 

13821

 

16

 

13837

 

0

 

13837

Conversion of LTS and LTPPS profit -participation plans

 

-5701

 

5694

 

0

 

-7

 

7

 

0

 

0

 

0

Issue of share capital

0

7607

0

7607

9

7616

0

7616

Change in ownership interest in subsidiaries

0

0

-25

-25

0

-25

0

-25

Equity settled share-based payments

7

0

0

7

0

7

0

7

Dividends paid

0

0

0

0

0

0

-17

-17

At 30 June 2011

2450

27122

-585

28987

69

29056

3079

32135

Income for the period

1 574

0

0

1 574

0

1 574

22

1 596

Other comprehensive loss

-36

0

-982

-1018

0

-1018

-10

-1028

Total comprehensive income

1 538

0

- 982

556

0

556

12

568

Tax on Listing related expenses

0

21

0

21

0

21

0

21

Equity settled share-based payments

51

0

0

51

0

51

0

51

Change in ownership interest in subsidiaries

0

0

-73

-73

0

-73

-235

-308

Acquisition of subsidiaries

0

0

0

0

0

0

215

215

Dividends paid 1

0

-346

0

-346

0

-346

-1

-347

At 31 December 2011

4039

26 797

-1 640

29196

69

29265

3070

32335










At 1 January 2012

4039

26 797

-1 640

29196

69

29265

3070

32335

Income for the period

2 275

0

0

2 275

0

2 275

72

2 347

Other comprehensive income

115

0

- 77

38

0

38

- 24

14

Total comprehensive income

2 390

0

- 77

2 313

0

2 313

48

2 361

Equity settled share-based payments

23

0

0

23

0

23

0

23

Change in ownership interest in subsidiaries

0

0

79

79

0

79

- 102

- 23

Put option relating to additional interest

in subsidiary 2

 

0

 

0

 

0

 

0

 

0

 

0

 

- 419

 

- 419

Acquisition of subsidiaries 2

0

0

0

0

0

0

1 263

1 263

Dividends paid 1

0

- 692

0

- 692

0

- 692

0

- 692

At 30 June 2012

6 452

26 105

- 1 638

30 919

69

30 988

3 860

34 848


¹ See note 13.

2 See note 16.

 



 

Notes to the unaudited condensed

interim consolidated financial statements

 

 

1. General information

 

The Glencore Group (Glencore) is a leading integrated marketer and producer of natural resources, with worldwide activities in the marketing of metals and minerals, energy products and agricultural products and the production, refinement, processing, storage and transport of these products. Glencore operates on a global scale, marketing and distributing physical commodities sourced from third party producers and own production to industrial consumers, such as those in the automotive, steel, power generation, oil and food processing industries. Glencore also provides financing, logistics and other services to producers and consumers of commodities. Glencore's long experience as a commodity merchant has allowed it to develop and build upon its expertise in the commodities which it markets and cultivate long-term relationships with a broad supplier and customer base across diverse industries and in multiple geographic regions. Glencore's marketing activities are supported by investments in industrial assets operating in Glencore's core commodities.

 

The ultimate parent entity of Glencore, Glencore International plc (the "Company"), is a publicly traded limited company incorporated in Jersey and domiciled in Switzerland. Its ordinary shares are traded on the London and Hong Kong stock exchanges.

 

These unaudited condensed interim consolidated financial statements for the six months ended 30 June 2012 were authorised for issue in accordance with a resolution of the directors on 21 August 2012.

 

 

2. Accounting policies

 

Basis of preparation

These unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' issued by the International Financial Reporting Standards Board (IASB) and interpretations of the IFRS Interpretations Committee (IFRIC), IAS 34 'Interim Financial Reporting' as adopted by the European Union ('EU'), and the Disclosure and Transparency Rules of the Financial Services Authority effective for Glencore's reporting for the period ended 30 June 2012. These unaudited condensed interim consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the audited 2011 Annual Report of Glencore International plc and subsidiaries ("2011 Annual Report") available at www.glencore.com. These financial statements for the six months ended 30 June 2012 and 2011, and -financial information for the year ended 31 December 2011 do not constitute statutory accounts. Certain financial information that is included in the audited annual financial statements but is not required for interim reporting purposes has been condensed or omitted. The interim financial report for the six months ended 30 June 2012 has been prepared on a going concern basis as the directors believe there are no material uncertainties that lead to significant doubt that the Group can continue as a going concern in the foreseeable future, a period not less than 12 months from the date of this report. Further information is included on pages 7 and 14 of the Financial Review.

 

The impact of seasonality or cyclicality on operations is not regarded as significant to the unaudited condensed interim consolidated financial statements.

 

Significant accounting policies

These unaudited condensed interim consolidated financial statements are prepared using the same accounting policies as applied in the audited 2011 Annual Report, except for the adoption of the following amendments to existing standards and interpretations as of 1 January 2012:

• Amendments to IFRS 7 - Financial Instruments: Disclosures

• Amendments to IAS 12 - Deferred Tax: Recovery of Underlying Assets

 

The adoption of these amendments had no material impact on Glencore's unaudited condensed interim consolidated financial statements.

 

3. Segment information

 

Glencore is organised and operates on a worldwide basis in three core business segments - metals and minerals, energy products and agricultural products, with each business segment responsible for the marketing, sourcing, hedging, logistics and industrial investment activities of their respective products and reflecting the structure used by Glencore's management to assess the performance of Glencore.

 

The business segments' contributions to Glencore are primarily derived from the net margin or premium earned from physical -marketing activities (net sale and purchase of physical commodities), provision of marketing and related value-add services and the margin earned from industrial asset activities (net resulting from the sale of physical commodities over the cost of production and/or cost of sales) and comprise the following underlying key commodities:

 

• Metals and minerals: Zinc, copper, lead, alumina, aluminium, ferro alloys, nickel, cobalt and iron ore, including mining, smelting,
refining, processing and storage related operations of the relevant commodities;

 

Energy products: Crude oil, oil products, steam coal and metallurgical coal supported by investments in coal mining and oil -pro-duction operations, ports, vessels and storage facilities;

 

• Agriculture products: Wheat, corn, barley, rice, oilseeds, meals, edible oils, biofuels, cotton and sugar supported by investments in farming, storage, handling, processing and port facilities.

 

Corporate and other: statement of income amounts represent Glencore's share of income related to Xstrata and other unallocated Group related expenses (mainly variable pool bonus accrual). Balance sheet amounts represent Group related balances.

 

The financial performance of the segments is principally evaluated with reference to Adjusted EBIT/EBITDA which is the net result of revenue less cost of goods sold and selling and administrative expenses plus share of income from associates and jointly controlled entities and dividends as disclosed on the face of the consolidated statement of income. Furthermore, given that funding costs in -relation to working capital employed in the marketing activities are sought to be "recovered" via transactional terms, the performance of marketing activities is also assessed at a net income level.

 

The accounting policies of the operating segments are the same as those described in the summary of significant accounting -policies. Glencore accounts for inter-segment sales and transfers where applicable as if the sales or transfers were to third parties, i.e. at -current market prices.

 

 

 

Six months ended 30 June 2012

US $million

Metals and

minerals

Energy

products

Agricultural

products

Corporate
and other

Total







Revenue from third parties

30 034

68 477

9 446

0

107 957







Marketing activities






Adjusted EBIT

688

350

114

- 37

1 115

Depreciation and amortisation

10

22

11

0

43

Adjusted EBITDA

698

372

125

- 37

1 158







Industrial activities






Adjusted EBIT

399

345

- 11

660

1 393

Depreciation and amortisation

433

183

32

0

648

Adjusted EBITDA

832

528

21

660

2 041







Total adjusted EBITDA

1 530

900

146

623

3 199

Depreciation and amortisation

- 443

- 205

- 43

0

- 691

Total adjusted EBIT

1 087

695

103

623

2 508







Significant items ¹






  Other income - net ²





447

  Share of Associates' exceptional items 3





- 87

  Mark to market loss on certain natural gas contracts 4





- 65

Loss on sale of investments





- 157

Interest expense - net





- 451

Income tax credit





152

Income for the period





2 347







Total assets (30 June 2012) 5

36 847

30 095

7 265

19 458

93 665


¹ Significant items of income and expense which, due to their financial impacts, nature or the expected infrequency of the events giving rise to them, have been separated for internal reporting and analysis of Glencore's results.

² See note 5.

3 Share of Associates' exceptional items comprise Glencore's share of exceptional charges booked directly by Xstrata.

4 Represents movements in fair value of certain fixed price forward natural gas purchase contracts entered into to hedge the price risk of this cost exposure in our alumina production activities. As at period end, approximately 10,580,500 btus of natural gas remains sold forward at a fixed price in respect of monthly periods to the end of 2012. These contracts were initially concluded in 2008 with mark to market movements accounted for in equity (cash flow hedge reserves). There are no such contracts covering periods beyond 2012.

5 During the period ended 30 June 2012, the Metals and Minerals and Agricultural products segments recognised impairments of $55 million  and $45 million respectively (see note 5).

 

 

 

 

Six months ended 30 June 2011

US $million

Metals and

minerals

Energy

products

Agricultural

products

Corporate
and other

Total







Revenue from third parties

25222

58058

8840

0

92120







Marketing activities






Adjusted EBIT

633

552

92

-26

1251

Depreciation and amortisation

2

16

0

5

23

Adjusted EBITDA

635

568

92

-21

1274







Industrial activities






Adjusted EBIT

950

211

-17

908

2052

Depreciation and amortisation

395

94

30

0

519

Adjusted EBITDA

1345

305

13

908

2571







Total adjusted EBITDA

1980

873

105

887

3845

Depreciation and amortisation

-397

-110

-30

-5

-542

Total adjusted EBIT

1583

763

75

882

3303







Significant items ¹






  Other (expense)/income - net ²





-368

Gain on sale of investments





2

Interest expense - net





-466

Income tax credit





201

Income for the period





2672







Total assets (30 June 2011)

33 751

19 956

5 837

21 819

81 363







Total assets (31 December 2011)

32 272

25 627

6 528

21 738

86 165


¹ Significant items of income and expense which, due to their financial impacts, nature or the expected infrequency of the events giving rise to them, have been separated for internal reporting and analysis of Glencore's results.

² See note 5.

 

 

 

4. (Loss)/Gain on sale of investments - net

 

US $million


H12012

H12011





Loss on sale of investments in associates


- 121

0

Other


- 36

2

Total


- 157

2

 

 

The net loss on sale of investments in 2012 comprised primarily an accounting dilution loss of $121 million following Xstrata's share issuance in March 2012, which saw Glencore's effective ownership reduce from 34.5% to 34.2%.

 

5. Other income/(expense) - net

 

US $million

Notes

H12012

H12011





Changes in mark to market valuations on investments held for trading - net 


9

6

Changes in mark to market valuation of certain coal forward contracts ¹


169

-161

Changes in mark to market valuation of certain foreign currency forward contracts


- 29

0

Revaluation of previously held interests in newly acquired businesses

16

497

0

(Impairment)/impairment reversal


- 100

16

(Loss)/gain on disposal of property, plant and equipment


- 10

1

Phantom equity awards granted on listing


- 33

-7

Foreign exchange (loss)/gain


- 18

26

Listing related expenses 


0

-251

Other


- 38

2

Total


 447

-368

 

¹ This other expense item, if classified by function of expense would be recognised in cost of goods sold. All other amounts in Other income/(expense)- net are classified by function.

 

In addition to foreign exchange gains/(losses) and mark to market movements on investments held for trading, other income/(expense) - net includes other significant items of income and expense which due to their non operational nature or expected infrequency of the events giving rise to them are reported separately from operating segment results. Other income/(expense) - net includes, but is not limited to, impairment charges/reversals, revaluation of previously held interests in business combinations and restructuring and closure costs.

 

Changes in mark to market valuations on investments held for trading - net

Primarily relates to movements on interests in other investments classified as held for trading and carried at fair value, with -Glencore's interest in Century Aluminum Company cash settled equity swaps, Blackthorn Resources Ltd, Volcan Compania Minera S.A.A. and Nyrstar N.V. accounting for the majority of the movement in 2012 and 2011.

 

Changes in mark to market valuation of certain coal forward contracts

Represents movements in fair value of certain fixed price forward coal sales contracts relating to Prodeco Group's (Prodeco) future production, into which it plans to physically deliver. Following the legal reacquisition of Prodeco in March 2010, from an accounting perspective, these forward sales contracts could not technically be classified as "own use" or as cashflow hedges, which would have deferred the income statement effect until performance of the underlying future sale transactions. As at period end, approximately 4.1 million tonnes (2011: 14.1million tonnes) of such coal had been sold forward at a fixed price in respect of quarterly periods to the end of 2013.

 

Changes in mark to market valuation of certain foreign currency forward contracts

Represents movements in fair value of CAD 2.7 billion fixed price forward foreign currency purchase contracts entered into to hedge the acquisition price foreign currency risk associated with the announced Viterra transaction.

 

Revaluation of previously held interests in newly acquired businesses

In March 2012, Glencore purchased an additional 31.8% interest in Optimum Coal Holdings Limited (Optimum) and in April 2012, acquired an additional 20% interest in Mutanda Group (Mutanda) (see note 16). At the date of the acquisitions, the previously owned interests were revalued to their fair value and as a result, a $20 million loss and $517 million gain, respectively, were recognised.

 

Impairment

During the regular assessment of whether there is an indication of an asset impairment or whether a previously recorded impairment may no longer be required, the continuing challenging European biodiesel margin environment was the largest contributor towards an aggregate impairment charge of $100 million being recognised. The recoverable amounts of the underlying assets were determined using discounted cash flow techniques less estimated selling costs.

 

6. Income Taxes

 

Income taxes consist of the following:

 

US $million

H12012

H12011




Current income tax expense

- 248

-302

Deferred income tax credit 1

400

503

Total credit

152

201

 

 

The effective Group tax rate is different from the statutory Swiss income tax rate applicable to the Company for the following reasons:

 

US $million

H12012

H12011




Income before income taxes and attribution

2 195

2471

Less: share of income from Associates

- 684

 -1040

Parent company's and subsidiaries' income before income tax and attribution

1 511

1431

Income tax expense calculated at the Swiss income tax rate

- 227

- 227

Effect of different tax rates from the standard Swiss income tax rate

- 47

- 107

Tax exempt income, net of non-deductible expenses and other permanent differences

123

39

Tax implications of restructurings, including deductions/losses triggered 1

425

427

Effect of available tax losses not recognised, and other changes in the valuation of deferred tax assets

- 122

69

Total credit

152

 201


1 In 2012, Glencore restructured its ownership interest in Xstrata which crystallised income tax deductions/losses that can be carried forward and applied against future taxable income. In conjunction with the listing of the Company in 2011, the potential amounts owing to the shareholder employees under the various active profit participation plans at the time were settled and Swiss and other country income tax deductions/losses that can be carried forward and applied against future taxable income were crystallised.

 

 

 

7. Property, plant and equipment

 

US $million

Notes

Land and buildings

Plant and equipment

Mineral and petroleum rights

Deferred
mining costs

Total








Cross carrying amount:







1 January 2012


1 521

12 045

4 617

675

18 858

Business combination

16

205

1 359

3 730

0

5 294

Additions


65

988

310

43

1 406

Disposals


- 9

- 260

0

0

- 269

Effect of foreign currency exchange difference


- 8

- 47

- 21

0

- 76

Other movements


18

- 70

98

- 69

- 23

30 June 2012


1 792

14 015

8 734

649

25 190








Accumulated amortisation and impairment:







1 January 2012


323

2 997

770

129

4 219

Depreciation


33

436

190

23

682

Disposals


- 7

- 11

0

- 20

- 38

Impairments


0

45

35

0

80

Effect of foreign currency exchange difference


- 1

- 3

- 1

0

- 5

Other movements


6

- 4

7

- 7

2

30 June 2012


354

3 460

1 001

125

4 940

Net carrying amount


1 438

10 555

7 733

524

20 250

 

 

During the period ended 30 June 2011, Glencore added property, plant and equipment with a cost of $1,113 million and disposed of property, plant and equipment with a net book value of $72 million.

 

 

8. Intangible assets

 

US $million

Notes

Port allocation rights

 

Goodwill

Future warehousing fees

Other

Total








Cost:







1 January 2012


0

169

32

13

214

Business combination

16

988

0

0

0

988

Additions


21

0

0

30

51

Disposal


0

- 5

0

- 1

- 6

Effect of foreign exchange differences


- 13

0

0

0

- 13

30 June 2012


996

164

32

42

1 234








Accumulated amortisation and impairment:







1 January 2012


0

0

3

1

4

Amortisation expense


3

0

4

2

9

30 June 2012


3

0

7

3

13

Net carrying amount


993

164

25

39

1 221

 

 

 

The port allocation rights have been recognised as part of the acquisitions of the South African coal operations, see note 16. The rights are being amortised on a straight line basis over the estimated economic life of the port.

 

During the period ended 30 June 2011 goodwill of $133 million and future warehousing fees of $32 million were recognised as part of the finalised acquisition accounting of the Pacorini metals warehousing business.

 

9. Investments in associates and other investments

 

US $million


as at

 30.06.2012

as at

 31.12.2011





Xstrata plc


16 556

16 187

Other listed Associates ¹


906

1 337

Listed Associates


17 462

17 524

Non listed Associates


1 263

1 334

Investments in Associates


18 725

18 858


¹ The decrease in the carrying value of other listed Associates is primarily related to the acquisition of a controlling interest in Optimum (see note 16).

 

 

US $million


as at

 30.06.2012

as at

 31.12.2011





Available for sale




United Company Rusal


771

842



771

842

Fair value through profit and loss




Volcan Compania Minera S.A.A.


415

359

Nyrstar N.V.


75

105

Century Aluminum Company cash settled equity swaps


67

78

Jurong Aromatics Corporation Pte Ltd


55

55

Blackthorn Resources Ltd


24

8

Other


110

100



746

705

Other investments


1 517

1 547

 

 

 

10. Inventories

 

US $million


as at

 30.06.2012

as at

 31.12.2011





Production inventories


2 616

3 150

Marketing inventories


13 429

13 979

Total


16 045

17 129

 

 

Production inventories consist of materials, spare parts and work in process. Marketing inventories are saleable commodities held primarily by the marketing entities. Marketing inventories of $13,309 million (2011: $13,785 million) are carried at fair value less costs to sell.

 

Glencore has a number of dedicated financing facilities, which finance a portion of its marketing inventories. In each case, the inventory has not been derecognised as the Group retains the principal risks and rewards of ownership. The proceeds received are recognised as either current borrowings or commodities sold with agreements to repurchase, depending upon their funding nature. As at 30 June 2012, the total amount of inventory securitised under such facilities was $2,097million (2011: $1,834million). The -proceeds received and recognised as current borrowings (see note 14) were $1,560million (2011: $1,631million) and as commodities sold with agreements to repurchase $nilmillion (2011: $39million).

 

 

11. Accounts receivable

 

US $million


as at

 30.06.2012

as at

 31.12.2011





Trade receivables


16 620

15 903

Trade advances and deposits 


3 368

3 022

Associated companies 


956

643

Other receivables


2 515

2 327

Total


23 459

21 895

 

 

Glencore has a number of dedicated financing facilities, which finance a portion of its receivables. In each case, the receivables have not been derecognised, as the Group retains the principal risks and rewards of ownership. The proceeds received are recognised
as current borrowings (see note 14). As at 30 June 2012, the total amount of trade receivables secured was $2,929million
(2011: $2,934million) and proceeds received and classified as current borrowings amounted to $2,338million (2011: $2,265million).

 

 

12. Earnings per share

 

US $million


H12012

H12011





Profit attributable to equity holders for basic earnings per share


2 275

2474

Interest in respect of Convertible bonds


67

67

Profit attributable to equity holders for diluted earnings per share


2 342

2541





Weighted average number of shares for the purposes of basic earnings per share (thousand)


6 922 714

4375 551

Effect of dilution:




Equity settled share-based payments


21 980

24025

Convertible bonds


413 609

403435

Weighted average number of shares for the purposes of diluted earnings per share (thousand)


7 358 303

4803 011





Basic earnings per share (US $)


0.33

0.57

Diluted earnings per share (US $)


0.32

0.53

 

 

In May 2011, the Company issued shares to employee shareholders as settlement of amounts due under various profit participation plans as well as new shares in conjunction with its listing on the London and Hong Kong stock exchanges. The issuance of such shares towards the end of the prior year period is the primary driver of the calculated period over period earnings per share reduction.

 

 

13. Dividends

 

An interim 2012 dividend of $0.054 per share was declared by the board of directors on 21 August 2012 (2011: $0.05 per share) and is payable on 13 September2012, based on a record date of 31 August 2012. This interim dividend, amounting to $374 million (2011: $346 million), has not been recognised as a liability in this interim financial information. It will be recognised in shareholders' equity in the year to 31 December 2012. The 2011 final dividend of $0.10 per share, amounting to $692 million was paid on 1 June 2012.



 

14. Borrowings

 

US $million

Notes

as at

30.06.2012

as at

31.12.2011





Non current borrowings




144A Notes


948

947

Xstrata secured bank loans


2 692

2 688

Convertible bonds


2 162

2 152

Eurobonds


5 121

3 612

Swiss Franc bonds 


871

882

Sterling bonds


1 472

996

Perpetual notes 


347

347

Ordinary profit participation certificates


522

750

Committed syndicated revolving credit facility


4 803

5 907

Finance lease obligations


264

278

Other bank loans


1 288

1 285

Total non current borrowings


20 490

19 844





Current borrowings




Committed secured inventory/receivables facility

10/11

1 700

1 700

Committed secured receivables facilities

11

1 210

1 181

Bilateral uncommitted secured inventory facilities

10

988

1 015

U.S. commercial paper


540

512

Ordinary profit participation certificates


480

533

Finance lease obligations


40

39

Other bank loans ¹


3 864

3 205

Total current borrowings


8 822

8 185


¹ Comprises various uncommitted bilateral bank credit facilities and other financings.

 

 

Xstrata secured bank loans

As at 30 June 2012, $5,541 million (2011: $5,343 million) of the value of Glencore's investment in Xstrata was pledged as security.

 

Eurobonds

In April 2012, Glencore issued EUR 1,250million ($1,670million) 4.125% interest bearing bonds due April 2018.

 

Sterling bonds

In April 2012, Glencore issued GBP 300 million ($480 million) 5.5% interest bearing bonds due April 2022.

 

Committed syndicated revolving credit facility

In April Glencore signed new committed revolving credit facilities, which renewed existing revolving credit facilities. Funding terms are essentially unchanged in comparison to the previous facilities. The facilities comprise a $4,435 million 14month revolving credit facility with a borrower's 10 month term-out option and a 10 month extension option, that refinanced Glencore's existing $3,535million 364-day revolving credit facility. The facility has two tranches of $3,725 million and $710million respectively. In addition, the maturity of $8,030 million of the existing $8,370 million 3-year revolving credit facility has been extended for a further year to May 2015.

 

15. Deferred income

 

US $million


Unfavourable

contract

Prepayment

Total






1 January 2012


0

182

182

Assumed in business combination


691

0

691

Utilised in the period


- 23

- 12

- 35

30 June 2012 ¹


668

170

838

 

 


¹ Includes the current portion of $102 million in respect of the unfavourable contract and $24 million in respect of the prepayment.

 

Unfavourable contract

Upon acquisition of Optimum in March 2012 (see note 16), Glencore recognised a liability of $691 million related to an existing contractual agreement to deliver a certain quantity of coal over a period ending 31 December 2018 at fixed prices lower than the prevailing market price for coal of equivalent quality. This amount will be released to revenue as the underlying tonnes of coal are delivered to the buyer over the life of the contract at the rate consistent with the implied forward price curve at the time of the acquisition.

 

Prepayment

In 2006, Glencore entered into an agreement to deliver a fixed quantity of silver concentrate, a by-product from its mining operations, for a period of 15 years at a fixed price for which Glencore received an up front payment of $285 million. The outstanding balance represents the remaining non current portion of the up front payment. The up front payment is released to revenue at a rate consistent with the implied forward price curve at the time of the transaction and the actual quantities delivered.

 

 

 

16. Acquisition of subsidiaries

 

2012

Acquisitions

Over the first half of 2012, Glencore acquired controlling interests in various businesses, the most significant being Mutanda, Optimum and Rosh Pinah Zinc Corporation (Pty) Ltd (Rosh Pinah). The net cash used in the acquisition of subsidiaries and the fair value of the assets acquired and liabilities assumed at the date of acquisition are detailed below:

 

US $million

Mutanda ¹

Optimum ¹

Rosh Pinah ¹

Other ¹

Total







Property, plant and equipment

3 496

1 491

265

214

5 466

Intangible assets

0

914

0

0

914

Loans and advances ²

11

174

0

0

185

Inventories

223

50

13

6

292

Accounts receivable ²

99

57

8

15

179

Cash and cash equivalents

38

25

8

11

82

Non controlling interest

- 807

- 460

- 28

- 29

- 1 324

Non current borrowings

- 11

- 108

- 3

- 19

-141

Non current deferred income

0

- 589

0

0

- 589

Deferred tax liabilities

- 882

- 342

- 87

- 17

- 1 328

Non current provisions

- 7

- 235

- 11

- 3

- 256

Accounts payable

- 152

- 87

- 16

- 15

-270

Current deferred income

0

- 102

0

0

- 102

Current borrowings

0

- 6

0

- 2

- 8

Total fair value of net assets acquired

2 008

782

149

161

3 100

Less: amounts previous recognised through investments and loans

 

1 528

 

381

 

0

 

51

 

1 960

Less: cash and cash equivalents acquired

38

25

8

11

82

Net cash used in acquisition of subsidiaries

442

376

141

99

1 058


1
The fair values are provisional due to the complexity of the valuation process. The finalisation of the fair value of the assets and liabilities -acquired will be completed within 12 months of the acquisition.

² There is no material difference between the gross contractual amounts for loans and advances and accounts receivable and their fair value.

 

Mutanda

In April 2012, Glencore concluded its agreement to acquire an additional 20% interest in Mutanda, a copper and cobalt mining company located in the Democratic Republic of the Congo, for a total cash consideration of $480 million (equity of $420 million and shareholder debt of $60 million) thereby increasing its ultimate ownership in Mutanda from 40% to 60% and enhancing its attributable copper production base. Prior to acquisition, Glencore owned a 40% interest in Mutanda which, in accordance with IFRS 3, at the date of acquisition was revalued to its fair value of $960 million and as a result, a gain of $517 million was recognised in other income (see note 5). The acquisition has been accounted for as a business combination with the non controlling interest being measured at its percentage of net assets acquired.

 

If the acquisition had taken place effective 1 January 2012, the operation would have contributed additional revenue of $236 million and additional attributable income of $9 million. From the date of acquisition the operation contributed $nilmillion and $114 million to Glencore's income and revenue, respectively.

 

In addition to the acquisition of the 20% interest in Mutanda noted above, Glencore concurrently entered into a put and call option arrangement, whereby Glencore has the right to acquire and the seller has the ability to force Glencore to acquire an additional 20% interest in Mutanda for a total cash consideration of $430 million. The put and call options are exercisable in the period between 15 December 2013 and 31 December 2013. The present value of the put option ($419 million) has been accounted for as a non current other financial liability with the corresponding amount recognised against non controlling interest.

 

 

Optimum

In March 2012, Glencore acquired an additional 31.8% interest in Optimum, a South African coal mining company, for a total consideration of $401 million thereby increasing its ultimate ownership in Optimum from 31.2% to 63.0% and enhancing its existing South African coal market presence. Prior to acquisition, Glencore owned a 31.2% interest in Optimum which, in accordance with IFRS 3, at the date of acquisition was revalued to its fair value of $381 million and as a result, a loss of $20 million was recognised in other income (see note 5). The acquisition has been accounted for as a business combination with the non controlling interest being measured at its percentage of net assets acquired.

 

If the acquisition had taken place effective 1 January 2012, the operation would have contributed additional revenue of $196 million and additional attributable income of $8 million. From the date of acquisition the operation contributed $12million and $195 million to Glencore's income and revenue, respectively.

 

Rosh Pinah

In June 2012, Glencore completed the acquisition of an 80.1% interest in Rosh Pinah, a Namibian zinc and lead mining operation, for cash consideration of $149 million increasing our zinc and lead production footprint. The acquisition has been accounted for as a business combination with the non controlling interest being measured at its percentage of net assets acquired.

 

If the acquisition had taken place effective 1 January 2012, the operation would have contributed additional revenue of $27 million and a decrease in attributable income of $3 million. From the date of acquisition the operation contributed $nilmillion and
$nil million to Glencore's income and revenue, respectively, due to the fact that the acquisition was completed in late June 2012.

 

Other

Other comprises primarily an acquisition of a 100% interest in a sunseed crushing plant in Ukraine for cash consideration of $80 million. If the acquisitions had taken place effective 1 January 2012, the operations would have contributed additional revenue of $2 million and a decrease in attributable income of $1 million. From the date of acquisition the operation contributed $1 million and $16 million to Glencore's income and revenue, respectively.

 

Acquisition related costs (included within selling and administrative expenses) related to all the acquisitions incurred during the periods ended 30 June 2012 and 2011 are insignificant.

 

 

2011

Acquisitions

During 2011, Glencore acquired interests in various businesses, the most significant being Umcebo Mining (Pty) Ltd ("Umcebo").The net cash used in the acquisition and preliminary assessment of the fair value of the assets acquired and liabilities assumed at the date of acquisition are detailed below:

 

US $million


Umcebo ¹

Other

Total






Property, plant and equipment


383

220

603

Intangible assets


74

13

87

Investments in Associates


10

0

10

Loans and advances


30

6

36

Inventories


10

13

23

Accounts receivable


34

19

53

Cash and cash equivalents


4

14

18

Non controlling interest


- 145

- 7

- 152

Non current borrowings


- 57

-12

-69

Deferred tax liabilities


- 83

- 3

- 86

Provisions


- 53

- 4

- 57

Accounts payable


- 84

- 28

-112

Current borrowings


0

- 7

-7

Total fair value of net assets acquired


123

224

347

Goodwill arising on acquisition


0

36

36

Less: cash and cash equivalents acquired


4

14

18

Less: contingent consideration


0

15

15

Net cash used in acquisition of subsidiaries


119

231

350


¹ During the period ended 30 June 2012 the fair values of the assets acquired and liabilities assumed reported at 31 December 2011 have been updated as follows: Property, plant and equipment (- $172million), Intangible assets (+ $74 million), Non controlling interest (+ $63 million) and Deferred tax liabilities (+ $35 million). The fair values are still provisional due to the complexity of the valuation process. The finalisation of the fair value of the assets and liabilities acquired will be completed within 12 months of the acquisition.

 

Umcebo

In December 2011, in order to increase its South African coal market presence, Glencore completed the acquisition of a 43.7% stake in Umcebo, an unlisted South African coal mining company, for $123 million cash consideration. Although Glencore holds less than 50% of the voting rights, it has the ability to exercise control over Umcebo as the shareholder agreements allow Glencore to control the Board of Directors through the ability to appoint half of the Directors and the CEO, who has the casting vote in respect of the financial and operating policies of Umcebo. The acquisition was accounted for as a business combination with the non controlling interest being measured at its percentage of net assets acquired.

 

If the acquisition had taken place effective 1 January 2011, the operation would have contributed additional revenue of $309 million and a decrease in attributable income of $3 million. From the date of acquisition the operation contributed $nil million and
$nil million to Glencore's income and revenue, respectively, due to the fact that the acquisition was completed in late December 2011.

 

Details on other acquisitions completed in 2011 were disclosed in note 22 of the 2011 Annual Report. There have been no changes subsequent to the issuance of the 2011 Annual report.

 

Disposals

In 2012 and 2011, there were no material disposals of subsidiaries.

 

 

17. Future commitments

 

Capital expenditure for the acquisition of property, plant and equipment is generally funded through the cash flow generated by the respective industrial entities. As at 30 June 2012, $701million (2011: $884million), of which 93% (2011: 92%) relates to expenditure to be incurred over the next year, was contractually committed for the acquisition of property, plant and equipment.

 

Certain of Glencore's exploration tenements and licenses require it to spend a minimum amount per year on development activities, a significant portion of which would have been incurred in the ordinary course of operations. As at 30 June 2012, $428million (2011: $549 million) of such development expenditures are to be incurred, of which 29% (2011: 57%) are for commitments to be settled over the next year.

 

Glencore procures seagoing vessels/chartering services to meet its overall marketing objectives and commitments. As at
30 June 2012, Glencore has committed to future hire costs to meet future physical delivery and sale obligations and expectations
of $1,700million (2011: $2,171million), 44% (2011: 50%) of which are for services to be received over the next 2 years.

 

As part of Glencore's ordinary sourcing and procurement of physical commodities and other ordinary marketing obligations, the selling party may request that a financial institution act as either a) the paying party upon the delivery of product and qualifying documents through the issuance of a letter of credit or b) the guarantor by way of issuing a bank guarantee accepting responsibility for Glencore's contractual obligations. As at 30 June 2012, $10,335 million (2011: $8,642 million) of such commitments have been issued on behalf of Glencore, which will generally be settled simultaneously with the payment for such commodity.

 

Future development and related commitments

Kazzinc

In April 2011, Glencore agreed to acquire additional stakes in Kazzinc. Upon closing, these purchases will increase Glencore's ownership from 50.7% to 93.0% for a total transaction consideration of $2.2 billion in cash and $1 billion in equity based on the listing price (116.8 million shares). Glencore is currently targeting a H2 2012 completion date, subject to government's first right of purchase.

 

Xstrata

On 7 February 2012, the Glencore Directors and the Independent Xstrata Directors announced that they had reached an agreement on the terms of a recommended all-share merger (the "Merger") of equals of Glencore and Xstrata to create a unique $90billion natural resources group. The terms of the Merger provide Xstrata shareholders with 2.8 newly issued shares in Glencore for each Xstrata share held. The Merger is to be effected by way of a court sanctioned scheme of arrangement of Xstrata under Part 26 of the UK Companies Act, pursuant to which Glencore will acquire the entire issued and to be issued ordinary share capital of Xstrata not already owned by the Glencore Group. The Merger is subject to shareholder, anti-trust and regulatory approvals. Glencore anticipates incurring costs of $69 million and will be required to repay the Xstrata secured bank loan (see note 14) in the event the Merger proceeds as planned. Costs of $1 million (included within selling and administrative expenses) have been expensed to date.

 

Viterra

In March 2012, Glencore agreed to acquire all of the issued and outstanding shares of Viterra Inc., a leading global agricultural business, for CAD 16.25 per share (an approximate equity value of CAD 6.1 billion). Separately, Glencore has agreed with Agrium and Richardson International to sell the majority of Viterra's Canadian assets and certain other assets for approximately CAD 2.6 billion. The transaction has received shareholder approval but is still subject to certain regulatory approvals expected to be received in H2 2012.

 

 

Prodeco

Prodeco currently exports the majority of its coal through Puerto Prodeco which operates under a private concession awarded by the Colombian government. This concession expired in March 2009, however the Colombian government has continued to grant Prodeco the right to use the port under annual lease agreements, currently expiring around the time of the expected commissioning of Puerto Nuevo in the first half of 2013 as discussed below. To comply with new government regulations on loading methods, which became effective from July 2010 and to alleviate itself from the uncertainty of the annual concession renewal process associated with Puerto Prodeco, Prodeco has commenced construction of a new, wholly owned, port facility (Puerto Nuevo) which is estimated to cost $560 million and be commissioned over the first half of 2013. As at 30 June 2012, $376 million of the estimated initial investment has been incurred and $72 million has been contractually committed and is included in the capital expenditure commitments disclosure above.

 

Kansuki

In August 2010, Glencore acquired an ultimate 37.5% interest in the Kansuki concession (Kansuki), a 185 square kilometre copper and cobalt pre-development project which borders Glencore's partly owned Mutanda concession in the DRC. In exchange, Glencore has a) an obligation to finance the first $400 million of development related expenditures, if any, as and when such expenditure is incurred, b) the right to operate the operations and c) a life of mine off-take agreement for all copper and cobalt produced by Kansuki. In addition, one of the partners in Kansuki has the right to sell an additional 18.75% ultimate interest to Glencore at the then calculated equity value of the operation, at the earlier of the date the operation produces a minimum annual 70,000 tonnes of copper and August 2013. A total of $238 million of capital expenditure for mine and plant development has been committed of which $193 million has been spent. Exploration of the Kansuki concession is ongoing. Discussions with respect to a potential combination of the Mutanda and Kansuki operations are ongoing, with a view to ultimately obtaining a majority stake in the merged entity.

 

 

18. Contingent liabilities

 

The amount of corporate guarantees in favour of associated and third parties as at 30 June 2012 was $48million (2011: $53 million).

 

Litigation

Certain legal actions, other claims and unresolved disputes are pending against Glencore. Whilst Glencore cannot predict the results of any litigation, it believes that it has meritorious defences against those actions or claims. Glencore believes the likelihood of any liability arising from these claims to be remote and that the liability, if any, resulting from any litigation will not have a material adverse effect on its consolidated income, financial position or cashflows.

 

Environmental contingencies

Glencore's operations, predominantly those arising from the ownership in industrial investments, are subject to various environmental laws and regulations. Glencore is in material compliance with those laws and regulations. Glencore accrues for environmental contingencies when such contingencies are probable and reasonably estimable. Such accruals are adjusted as new information develops or circumstances change. Recoveries of environmental remediation costs from insurance companies and other parties are recorded as assets when the recoveries are virtually certain. At this time, Glencore is unaware of any material environmental incidents at its locations.

 

Bolivian constitution

In 2009 the Government of Bolivia enacted a new constitution. One of the principles of the constitution requires mining entities to form joint ventures with the government. Glencore, through its subsidiary Sinchi Wayra, has, in good faith, entered into negotiations with the Bolivian government regarding this requirement. Whilst some progress has been made, in June 2012 the government of Bolivia nationalised Sinchi Wayra's Colquiri mine. Sinchi Wayra continues to negotiate joint venture arrangements for its other mines along with restitution in respect of its nationalised mine, the final outcome and the timing thereof cannot be determined at this stage.

 

 

 

19. Related party transactions

 

In the normal course of business, Glencore enters into various arm's length transactions with related parties, including fixed price commitments to sell and to purchase commodities, forward sale and purchase contracts, agency agreements and management service agreements. Outstanding balances at period end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

 

All transactions between Glencore and its subsidiaries are eliminated on consolidation along with any unrealised profits and losses between its subsidiaries and Associates. Glencore entered into the following transactions with its Associates:

 

US $million


H12012

H12011





Sales


876

862

Purchases


- 5 075

-5055

Interest income


13

15

Agency income


48

38

Accounts receivable (30 June 2012)


955

644

Accounts payable (30 June 2012)


1 832

1512

 

 

 

20. SUBSEQUENT EVENTS

 

• On 3 July 2012, Glencore issued CHF 450 million ($473 million) 2.625% interest bearing bonds due December 2018.

• On 11 July 2012, Glencore entered into a share purchase agreement to acquire Vale's European manganese ferroalloys operations for a cash consideration of $160 million. The transaction is still subject to certain regulatory approvals expected to be received in Q4 2012.



 

Appendix

 

 

Adjusted EBIT

 

US $million

Marketing activities

Industrial activities

H1 2012

 Adjusted
EBIT


Marketing  activities

Industrial activities

H2 2011

 Adjusted
EBIT











Metals and minerals

688

399

1 087

43%

609

407

1 016

48%

Energy products

350

345

695

28%

145

164

309

15%

Agricultural products

114

- 11

103

4%

- 100

- 22

- 122

- 6%

Corporate and other ¹

- 37

660

623

25%

6

886

892

43%

Total

1 115

1 393

2 508

100%

660

1 435

2 095

100%


¹ Corporate industrial activities include $721 million (H2 2011: $916 million) of Glencore's equity accounted share of Xstrata's income.

 

 

 

Metals and Minerals

 

US $million

Marketing activities

Industrial activities

H1 2012

Marketing activities

Industrial activities

H2 2011








Revenue

26 439

3 595

30 034

22 651

4 111

26 762

Adjusted EBITDA

698

832

1 530

612

777

1 389

Adjusted EBIT

688

399

1 087

609

407

1 016

Adjusted EBITDA margin (%)

2.6%

23.1%

-

2.7%

18.9%

-

 

 

 

Market conditions

 

Selected average commodity prices

 


H1 2012

H2 2011

Change





S&P GSCI Industrial Metals Index

390

410

- 5%

LME (cash) zinc price ($/t)

1 980

2 066

- 4%

LME (cash) copper price ($/t)

8 107

8 254

- 2%

LME (cash) lead price ($/t)

2 036

2 225

- 8%

Gold price ($/toz)

1 651

1 695

- 3%

Metal Bulletin alumina price ($/t)

317

351

 - 10%

LME (cash) aluminium price ($/t)

2 084

2 249

- 7%

LME (cash) nickel price ($/t)

18 432

20 219

- 9%

Metal Bulletin cobalt price 99.3% ($/lb)

14

15

- 7%

Iron ore (Platts 62% CFR North China) price ($/DMT)

142

160

- 11%

 

 

 

Currency table

 


Average

H1 2012

Spot

30.06.2012

Average

H2 2011

Spot

31.12.2011

Change in
average prices







AUD : USD

1.03

1.02

1.03

1.02

0%

USD : COP

1 792

1 784

1 859

1 939

- 4%

EUR : USD

1.30

1.27

1.38

1.30

- 6%

GBP : USD

1.58

1.57

1.59

1.55

- 1%

USD : CHF

0.93

0.95

0.87

0.94

7%

USD : KZT

148

149

147

148

1%

USD : ZAR

7.94

8.16

7.63

8.09

4%

 

 

 

MARKETING

 

Financial information

 

US $million

H1 2012

H2 2011

Change





Revenue

26 439

22 651

17%

Adjusted EBITDA

698

612

14%

Adjusted EBIT

688

609

13%

 

 

 

Selected marketing volumes sold

 



H1 2012

H2 2011

Change






Zinc metal and concentrates 1

million MT

1.3

1.4

- 7%

Copper metal and concentrates 1

million MT

1.3

1.0

30%

Lead metal and concentrates

million MT

0.3

0.4

- 25%

Gold

thousand toz

352

342

3%

Silver

million toz

11.8

6.2

90%

Alumina/aluminium

million MT

5.9

5.2

13%

Ferroalloys (incl. agency)

million MT

1.6

1.5

7%

Nickel

thousand MT

102.8

93.6

10%

Cobalt

thousand MT

8.4

10.6

- 21%

Iron ore

million MT

8.3

7.4

12%


1 Estimated metal unit contained.

 

 

 

Financial information

 

US $million

 H1 2012

 H2 2011

Change





Revenue




Kazzinc

1 384

1 101

26%

Other Zinc

505

527

- 4%

Zinc

1 889

1 628

16%

Katanga

207

206

0%

Mutanda

108

-

n.m.

Mopani

422

558

- 24%

Other Copper

467

1 193

- 61%

Copper

1 204

1 957

- 38%

Alumina/Aluminium

201

239

- 16%

Ferroalloys/Nickel/Cobalt/Iron ore

301

287

5%

Total

3 595

4 111

- 13%





Adjusted EBITDA




Kazzinc

463

338

37%

Other Zinc

116

143

- 19%

Zinc

579

481

20%

Katanga

37

57

- 35%

Mutanda

26

-

n.m.

Mopani

79

120

- 34%

Other Copper

112

105

7%

Copper

254

282

- 10%

Alumina/Aluminium

4

8

- 50%

Ferroalloys/Nickel/Cobalt/Iron ore

- 1

- 27

n.m.

Share of income from associates and dividends

- 4

33

n.m.

Total

832

777

7%

Adjusted EBITDA margin (%)

23.1%

18.9%






Adjusted EBIT




Kazzinc

294

189

56%

Other Zinc

53

93

- 43%

Zinc

347

282

23%

Katanga

- 9

35

n.m.

Mutanda

18

-

n.m.

Mopani

26

63

- 59%

Other Copper

81

68

19%

Copper

116

166

- 30%

Alumina/Aluminium

- 2

3

n.m.

Ferroalloys/Nickel/Cobalt/Iron ore

- 58

- 77

n.m.

Share of income from associates and dividends

- 4

33

n.m.

Total

399

407

- 2%





Capex




Kazzinc

168

221


Other Zinc

134

74


Zinc

302

295


Katanga

208

188


Mutanda

39

-


Mopani

75

107


Other Copper

89

75


Copper

411

370


Alumina/Aluminium

14

17


Ferroalloys/Nickel/Cobalt/Iron ore

25

40


Total

752

722


 

 

Production data

 

thousand ¹


Using feed from own sources

Using feed from third party
sources

H1

 2012

Total

Using feed from own sources

Using feed from third party
sources

H2

 2011

Total

Own feed change










Kazzinc









Zinc metal

MT

113.7

35.8

149.5

120.0

31.5

151.5

- 5%

Lead metal ²

MT

13.9

29.7

43.6

16.8

32.0

48.8

- 17%

Copper metal ³

MT

24.5

1.4

25.9

25.4

1.1

26.5

- 4%

Gold

toz

233

43

276

183

22

205

27%

Silver

toz

2 636

7 330

9 966

2 003

3 831

5 834

32%

Katanga









Copper metal ³

MT

43.1

-

43.1

47.9

-

47.9

- 10%

Cobalt 4

MT

1.07

-

1.07

1.13

-

1.13

- 5%

Mutanda









Copper metal ³

MT

38.3

-

38.3

37.9

-

37.9

1%

Cobalt 4

MT

3.63

-

3.63

4.28

-

4.28

- 15%

Mopani









Copper metal ³

MT

39.4

45.9

85.3

51.8

50.2

102.0

- 24%

Cobalt 4

MT

0.04

0.14

0.18

0.15

0.20

0.35

- 73%

Other Zinc (Los Quenuales, Sinchi Wayra, AR Zinc, Portovesme, Rosh Pinah)



Zinc metal

MT

26.6

43.0

69.6

29.7

47.1

76.8

- 10%

Zinc oxide

DMT

22.9

-

22.9

17.7

-

17.7

29%

Zinc concentrates

DMT

201.0

-

201.0

214.0

-

214.0

- 37%

Lead metal

MT

5.8

-

5.8

6.0

-

6.0

- 3%

Lead concentrates

DMT

29.6

-

29.6

30.3

-

30.3

- 2%

Tin concentrates

DMT

2.35

-

2.35

2.55

-

2.55

- 8%

Silver metal

toz

389

-

389

386

-

386

1%

Silver in concentrates

toz

3 421

-

3 421

3 840

-

3 840

- 11%

Other Copper (Cobar, Pasar, Punitaqui, Sable)







Copper metal

MT

-

17.8

17.8

-

83.5

83.5

n.m.

Copper concentrates

DMT

90.4

0.1

90.5

111.1

-

111.1

- 19%

Cobalt

MT

-

0.35

0.35

-

0.16

0.16

n.m.

Silver in concentrates

toz

596

-

596

651

-

651

- 8%

Alumina/Aluminium (Sherwin)









Alumina

MT

-

634

634

-

709

709

n.m.

Nickel/Cobalt (Murrin Murrin)








Nickel metal

MT

15.33

0.72

16.05

14.55

0.82

15.37

5%

Cobalt

MT

1.08

0.03

1.11

1.11

0.04

1.15

- 3%










Total Zinc contained

MT

258.3

78.7

337.0

270.5

78.6

349.1

- 5%

Total Copper contained

MT

169.5

65.1

234.6

192.9

134.8

327.7

- 12%

Total Lead contained

MT

37.0

29.7

66.7

40.7

32.0

72.7

- 9%

Total Tin contained

MT

1.15

-

1.15

1.24

-

1.24

- 7%

Gold (incl. Gold equivalents) 5

toz

365

181

546

327

102

429

12%

Total Alumina

MT

-

634

634

-

709

709

n.m.

Total Nickel

MT

15.33

0.72

16.05

14.55

0.82

15.37

5%

Total Cobalt

MT

5.82

0.52

6.34

6.67

0.40

7.07

- 13%


1 Controlled industrial assets only (with the exception in 2011 of Mutanda (40% owned) where Glencore had operational control). Production is on a 100% basis.

2 Lead metal includes lead contained in lead concentrates.

3 Copper metal includes copper contained in copper concentrates and blister copper.

4 Cobalt contained in concentrates and hydroxide.

5 Gold/Silver conversion ratio of 1/53.16 and 1/47.90 for H1 2012 and H2 2011 respectively based on average prices.

 

 



 

Energy Products

 

US $million

Marketing activities

Industrial activities

H1 2012

Marketing activities

Industrial activities

H2 2011








Revenue

66 379

2 098

68 477

57 703

1 304

59 007

Adjusted EBITDA

372

528

900

156

266

422

Adjusted EBIT

350

345

695

145

164

309

Adjusted EBITDA margin (%)

0.6%

25.2%

-

0.3%

20.4%

-

 

 

 

Market conditions

 

Selected average commodity prices

 


H1 2012

H2 2011

Change





S&P GSCI Energy Index

338

325

4%

API2 ($/t)

95

119

- 20%

API4 ($/t)

99

111

- 11%

Prodeco realised price ($/t)

89

93

- 4%

South African Coal realised export price ($/t)

97

109

- 11%

South African Coal realised domestic price ($/t)

30

40

- 25%

Oil price - Brent ($/bbl)

114

111

3%

 

 

 

Marketing

 

Financial information

 

US $million

H1 2012

H2 2011

Change





Revenue

66 379

57 703

15%

Adjusted EBITDA

372

156

138%

Adjusted EBIT

350

145

141%

 

 

 

Selected marketing volumes sold

 


H1 2012

H2 2011

Change





Thermal coal (MT)

38.3

46.4

- 17%

Metallurgical coal (MT)

2.7

2.3

17%

Coke (MT)

0.1

0.1

0%

Crude oil (bbls)

190.4

116.4

64%

Oil products (bbls)

366.2

304.3

20%

 

 

Financial information

 

US $million

 H1 2012

H2 2011

Change





Revenue




Prodeco

667

703

- 5%

South African Coal

562

172

227%

Coal

1 229

875

40%

Oil

869

429

103%

Total

2 098

1 304

61%





Adjusted EBITDA




Prodeco

130

186

- 30%

South African Coal

133

36

269%

Coal

263

222

18%

Oil

252

16

1 475%

Share of income from associates and dividends

13

28

- 54%

Total

528

266

98%

Adjusted EBITDA margin (%)

25.2%

20.4%






Adjusted EBIT




Prodeco

52

117

- 56%

South African Coal

68

27

152%

Coal

120

144

- 17%

Oil

212

- 8

n.m.

Share of income from associates and dividends

13

28

- 54%

Total

345

164

110%





Capex




Prodeco

159

236


South African Coal

120

23


Coal

279

259


Oil

191

544


Total

470

803


 

 

Production data

 

thousand MT 1

 

Own

Buy-in

Coal

H1 2012

Total

 

Own

Buy-in

Coal

H2 2011

Total

Own production change









Thermal Coal








Prodeco

7 944

107

8 051

7 493

101

7 594

6%

Shanduka (Export)

199

-

199

248

-

248

- 20%

Shanduka (Domestic)

2 980

539

3 519

2 922

545

3 467

2%

Umcebo (Export)

131

-

131

-

-

-

n.m.

Umcebo (Domestic)

3 620

18

3 638

-

-

-

n.m.

Optimum (Export)

3 769

-

3 769

-

-

-

n.m.

Optimum (Domestic)

3 155

358

3 513

-

-

-

n.m.

Total

21 798

1 022

22 820

10 663

646

11 309

104%


1 Controlled industrial assets only. Production is on a 100% basis.

 

 

 

thousand bbls





H1 2012

H2 2011

Change









Oil 1








Block I





11 022

2 785

296%

Total





11 022

2 785

296%


1 On a 100% basis. Glencore's ownership interest in the Aseng field is 23.75%

 

 

 

Agricultural Products

 

US $million

Marketing activities

Industrial activities

H1 2012

Marketing activities

Industrial activities

H2 2011








Revenue

8 041

1 405

9 446

6 495

1 768

8 263

Adjusted EBITDA

125

21

146

- 100

10

- 90

Adjusted EBIT

114

- 11

103

- 100

- 22

- 122

Adjusted EBITDA margin (%)

1.6%

1.5%

-

n.m.

0.6%

-

 

 

 

Market conditions

 

Selected average commodity prices

 


H1 2012

H2 2011

Change





S&P GSCI Agriculture Index

426

458

- 7%

CBOT corn no.2 price (US¢/bu)

629

659

- 5%

ICE cotton price (US¢/lb)

87

101

- 14%

CBOT soya beans (US¢/bu)

1 350

1 266

7%

NYMEX sugar # 11 price (US¢/lb)

23

27

- 15%

CBOT wheat price (US¢/bu)

642

653

- 2%

 

 

 

Marketing

 

Financial information

 

US $million

H1 2012

H2 2011

Change





Revenue

8 041

6 495

24%

Adjusted EBITDA

125

- 100

n.m.

Adjusted EBIT

114

- 100

n.m.

 

 

Selected marketing volumes sold

 

million MT

H1 2012

H2 2011

Change





Grains

14.6

12.1

21%

Oil/oilseeds

6.8

5.6

21%

Cotton

0.3

0.3

0%

Sugar

0.2

0.5

- 60%

 

 

 

Industrial activities

 

Financial information

 

US $million

H1 2012

H2 2011

Change





Revenue

1 405

1 768

- 21%

Adjusted EBITDA 1

21

10

110%

Adjusted EBIT 1

- 11

- 22

n.m.

Adjusted EBITDA margin (%)

1.5%

0.6%


Capex

133

138


 

1 Includes share of income from associates and dividends of $7million (H2 2011: $13million).

 

 

Production data

 

thousand MT

H1 2012

H2 2011

Change





Farming

327

636

- 49%

Oilseed crushing

1 106

1 097

1%

Oilseed crushing long term toll agreement

397

503

- 21%

Biodiesel

260

296

- 12%

Rice milling

126

191

- 34%

Wheat milling

534

495

8%

Sugarcane processing

251

586

- 57%

Total

3 001

3 804

- 21%

 

 



 

Glossary

 

 

Available committed liquidity

 

US $million

30.06.2012

31.12.2011




Cash and cash equivalents and marketable securities

1 537

1345

Headline committed syndicated revolving credit facilities

12 805

11 905

Amount drawn under syndicated revolving credit facilities

- 4 803

-5907

Amount drawn under U.S. commercial paper program

- 540

-512

Total

8 999

6831

 

 

 

ADJUSTED CURRENT RATIO

 

Current assets over current liabilities, both adjusted to exclude current other financial liabilities.

 

 

ADJUSTED EBIT/EBITDA

 

US $million

H1 2012

H1 2011




Revenue

107 957

92120

Cost of goods sold

- 105 819

-89411

Selling and administrative expenses

- 478

-457

Share of income from associates and jointly controlled entities

684

1040

Share of Associates' exceptional items

87

0

Dividend income

12

11

Mark to market valuation of certain natural gas forward contracts

65

0

Adjusted EBIT

2 508

3303

Depreciation and amortisation

691

542

Adjusted EBITDA

3 199

3845

 

 

 

CURRENT CAPITAL EMPLOYED

 

Current capital employed is current assets less accounts payable, current deferred income, current provisions, current other financial -liabilities and income tax payable.

 

 

COPPER EQUIVALENT

Glencore has adopted a copper equivalent measure to assist in analysing and evaluating across its varied commodity portfolio. The copper equivalent measure is determined by multiplying the volumes of the respective commodity produced or marketed by the ratio of the respective commodity's average price over the average copper price in the prevailing period.

 

Readily marketable inventories

 

Readily marketable inventories are readily convertible into cash due to their very liquid nature, widely available markets and the fact that the price risk is covered either by a physical sale transaction or hedge transaction.

 

 

Rolling 12 months adjusted EBITDA and Ffo

 

US $million


Total




Adjusted EBITDA - year ended 31 December 2011 


6 464

Less: Adjusted EBITDA - 6 months period ended 30 June 2011 


3 845

Adjusted EBITDA - 6 months period ended 31 December 2011


2619

Adjusted EBITDA - 6 months period ended 30 June 2012 


3199

Adjusted EBITDA - rolling last 12 months


5 818 




FFO - year ended 31 December 2011 


3 522

Less: FFO - 6 months period ended 30 June 2011 


2 145

FFO - 6 months period ended 31 December 2011


1 377

FFO - 6 months period ended 30 June 2012 


1 930

FFO - rolling last 12 months


3 307

 

 

 

 

 

 

 



 

Forward looking statements

 

This document contains statements that are, or may be deemed to be, "forward looking statements". These forward looking statements may be identified by the use of forward looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "will", "could", or "should" or in each case, their negative or other variations thereon or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts and include, but are not limited to, statements regarding Glencore's beliefs, opinions or current expectations concerning, among other things, the business, financial condition, results of operations, prospects, strategies and plans of Glencore.

 

By their nature, forward looking statements involve known and unknown risks and uncertainties, many of which are beyond Glencore's control. Forward looking statements are not guarantees of future performance and may and often do differ materially from actual results. Important factors that could cause these uncertainties include, but are not limited to, those discussed under "Risk Factors" in this document.

 

No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing Glencore. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward looking statements.

 

Forward looking statements speak only as of the date of this document. Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure and Transparency Rules of the Financial Services Authority and the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited), Glencore is not under any obligation and Glencore and its affiliates expressly disclaim any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

 

No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per Glencore share for the current or future financial years would necessarily match or exceed the historical published earnings per Glencore share.

 

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities. The making of this document does not constitute a recommendation regarding any securities.

 

GLENCORE INTERNATIONAL PLC

Baarermattstrasse 3

P.O. Box 777

CH-6341 Baar

Switzerland

 

Registered office:

Queensway House

Hilgrove Street

St Helier, Jersey, JE1 1ES

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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IR LLFSTTAIIFIF