Cautious Glencore shelves payout
Glencore, a global miner and trader headed by SA-born billionaire Ivan Glasenberg, has deferred its dividend for the year as it works to shore up its finances ahead of possible disruptions caused by the Covid-19 pandemic.
The JSE-listed firm said on Tuesday its board has deferred a decision on the proposed cash distribution of $0.20 (R3.57) a share in 2020 “to strengthen the group’s overall financial position and reflecting that, although none to date, there exists the risk of material production disruption due to Covid-19”.
Countries across the globe are implementing drastic measures to arrest the spread of coronavirus. This includes SA, which embarked on a 21-day lockdown on Friday.
On Thursday last week, Glencore said its larger operations have not been affected materially, but some of its smaller assets had to restrict or stop operations. In SA, said the company, it will continue to supply Eskom with coal during the nationwide lockdown, but it has transitioned two coal operations and its SA ferro alloys operations to care and maintenance.
Thishan Govender, equity analyst at Truffle Asset Management, said Glencore is likely to survive the crisis, but is most at risk of a prolonged downturn in commodity markets, given its exposure to an underperforming commodity basket coupled with higher-cost operations.
“The balance sheet, while in much better shape than [it was] in 2015, still has more debt then its peers, especially if one takes the funding used for their trading business into account in the net debt calculation,” Govender said.
Glencore said it will determine the appropriate level of distribution to shareholders for the 2020 financial year when the board is better placed to consider Covid-19’s updated effects, the economic outlook and the company’s prospects.
Glencore chair Tony Hayward said the group is taking a cautious approach to protect its capital structure amid extreme uncertainty.
$0.20 The proposed cash distribution per share for 2020 that has been deferred by the Glencore board