By Temitayo Ayetoto…
Huge earning results of giant players in the mining industry have begun reviving dwindling confidence of shareholders as three of the big four London-listed miners released their earnings this February.
In apparent move to placate dividend-thirsty shareholders, Glencore Plc., which traditionally favoured stuffing its war chest over rewarding shareholders, surprised the market with a $2.9 billion payout Wednesday.
This is ditto for Rio Tinto Group, which pledged $5.2 billion in dividends with an additional $1 billion stock buyback.
BHP Billiton Ltd., whose financial year ends in June, also made a generous interim payment.
With metals from zinc to copper trading near multiyear highs, the four producers generated combined free cash flow last year of about $87 million a day.
A few years back, they might have been tempted to blow the money on deals, but with the dark days of 2015 still fresh in the minds of investors; they are instead adjusting the focus on dividends.
The cash boom, according to Bloomberg, has also helped them drastically cut debt.
Glencore said it had lowered borrowing by almost $5 billion in the past year and by almost two-thirds since 2014.
Anglo American Plc. is equally reported to be raking in cash from assets such as coal and iron ore mines that it only recently wanted to ditch.
Analysts expect it will channel the mass income into reinstating its full-year dividend, which it suspended in 2015, and continue to pay down debt.
So far, the windfalls in the industry will basically function to address pay down debt and reward investors.
Glencore’s results Wednesday indicate a record performance as net income increased by 319 percent to $5.77 billion, with earnings per share (EPS) up 310 percent to $0.41.
The company benefitted from a buoyant commodity market, with the prices of various commodities delivering growth during the year. Its marketing and industrial asset businesses performed well, with the former’s adjusted earnings before interest and taxes (EBIT) exceeding $3 billion for the first time since 2008, while latter’s adjusted earnings before interest, taxes, and amortization (EBITDA) increased by 60 percent to $11.5 billion.
Glencore was able to benefit not only from higher commodity prices but also from a continued strong unit cost performance. This boosted mining margins within its metals and energy operations.
This may have provided the company the confidence to pay a 2018 distribution of $2.9 billion, which works out as $0.20 per share to be paid in two equal payments.
In the past year, Glencore share price has risen 19 percent, which is a better performance than sector peer Rio Tinto Plc. but behind the performances of Anglo American Plc. and KAZ Minerals Plc.
Rio Tinto has gained 8 percent, Anglo American is up 29 percent and KAZ Minerals has surged 41 percent higher in the same one year time period.
Frontpage January 2, 2020