June 28, 2021 1:00 PM
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2
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Glencore & The Rise in Metal Prices

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Glencore is benefiting from the rise in metal prices, which helps the company to partly offset the difficulties in the coal segment. Despite the pandemic and the global lockdown at the end of 2020, the company earned adjusted EBITDA of $ 11.6 billion, which is in line with last year. Weaker results in the coal and energy sectors were offset by trading income as high volatility boosted commodity trading in global markets. Last year, Glencore's net debt fell to $ 15.8 billion, and the ratio of net debt to EBITDA fell to 1.4x, which is quite a comfortable level.


Faced with uncertainty last year, the company successfully cut its net debt to the midpoint of its intracorporate target range of $ 10 billion to $ 16 billion. At the beginning of the year, Glencore management predicted an increase in annual free cash flow at spot prices at the end of January to $ 7.2 billion. Since commodity prices have risen significantly, we believe that the company will be able to generate free cash flow of $ 8.5-9 billion, which will allow Glencore to continue to reduce its debt burden. The issuer's dollar Eurobonds maturing in 2026 (USU37786AE74) offer a yield of 1.6%.


Glencore (formerly Glencore Xstrata) trades in the stuff of which stuff is made. The commodities trader (metals and minerals, agricultural products, and energy) and a diversified natural resources conglomerate has interests in companies involved in mining, smelting, refining, and agriculture. In the energy sector, it markets such products as coal, crude oil, jet fuel, and gasoline. Glencore's holdings include minority interests in Century Aluminum and French base metals refiner  Recylex, and majority control of Australian nickel miner Minara Resources. It also owns Canada-based grain giant  Viterra. In 2013 the company bought the 66% of Swiss-based mineral miner  Xstrata it did not already own for $41 billion.

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