Glencore EBITDA jumped on 53.8% and Revenue surged on 34.3%

21/02/2018 • About Glencore ($805) • By InTwits

Glencore reported 2017 financial results today. Overall the company's long term financial model is characterised by the following facts:

• Glencore has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.1%. At the same time it's a lot of higher than industry average of 0.5%.
• CAPEX is quite volatile: 3,586 in 2017, 3,048 in 2016, 5,372 in 2015, 8,815 in 2014, 9,559 in 2013
• The company has business model with low profitability: ROIC is at 7.6%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Glencore ($805) key annual financial indicators

mln. $	2013	2014	2015	2016	2017	2017/2016
P&L
Revenue	232,694	221,073	147,351	152,948	205,476	34.3%
Gross Profit	5,549	6,729	2,818	3,185	7,781	144.3%
SG&A	1,185	1,279	1,073	1,082	1,291	19.3%
EBITDA	8,392	10,873	7,557	7,715	11,869	53.8%
Net Income	-8,046	2,308	-4,964	1,379	5,777	318.9%
Balance Sheet
Cash	2,849	2,824	2,707	2,508	2,124	-15.3%
Short Term Debt	16,461	12,005	11,117	10,030	9,402	-6.3%
Long Term Debt	38,712	40,688	32,932	23,188	24,532	5.8%
Cash flow
Capex	9,559	8,815	5,372	3,048	3,586	17.7%
Ratios
Revenue growth	8.5%	-5.0%	-33.3%	3.8%	34.3%
EBITDA growth	87.4%	29.6%	-30.5%	2.1%	53.8%
Gross Margin	2.4%	3.0%	1.9%	2.1%	3.8%	1.7%
EBITDA Margin	3.6%	4.9%	5.1%	5.0%	5.8%	0.7%
Net Income Margin	-3.5%	1.0%	-3.4%	0.9%	2.8%	1.9%
SG&A, % of revenue	0.5%	0.6%	0.7%	0.7%	0.6%	-0.1%
CAPEX, % of revenue	4.1%	4.0%	3.6%	2.0%	1.7%	-0.2%
ROIC	4.7%	4.9%	1.7%	2.4%	7.6%	5.2%
ROE	-20.0%	4.7%	-11.1%	3.2%	12.3%	9.1%
Net Debt/EBITDA	6.2x	4.6x	5.5x	4.0x	2.7x	-1.3x

Revenue and profitability

The company's Revenue jumped on 34.3%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.62 pp from 20.4% to 21.0% in 2017.

Gross Margin increased slightly on 1.7 pp from 2.1% to 3.8% in 2017. SG&A as a % of Revenue showed almost no change in 2017.

Net Income marign increased slightly on 1.9 pp from 0.90% to 2.8% in 2017.

Capital expenditures (CAPEX) and working capital investments

In 2017 the company had CAPEX/Revenue of 1.7%. Glencore's CAPEX/Revenue decreased on 2.2 pp from 4.0% in 2014 to 1.7% in 2017. For the last three years the average CAPEX/Revenue was 2.5%.

Return on investment

The company operates at good ROE (12.29%) while ROIC is low (7.63%). ROIC increased on 5.2 pp from 2.4% to 7.6% in 2017. ROE increased on 9.1 pp from 3.2% to 12.3% in 2017.

Leverage (Debt)

Company's Net Debt / EBITDA is 2.7x and Debt / EBITDA is 2.9x. Net Debt / EBITDA dropped on 1.3x from 4.0x to 2.7x in 2017. Debt increased on 2.2% while cash dropped on 15.3%.

Appendix 1: Peers in Mining

Below we provide Glencore benchmarking against other companies in Mining industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
China Dynamics Holdings Ltd ($476)	81.4%	-73.9%	-72.2%	1,640.2%
Mongolia Energy Corp Ltd ($276)	89.7%	-95.8%	2,361.6%	1,178.3%
China Kingstone Mining Holdings Ltd ($1380)	-55.6%	155.2%	-79.8%	234.0%
Hengxing Gold Holding Co Ltd ($2303)		3,467.3%	78.0%	157.6%
China Silver Group Ltd ($815)	-2.1%	1.0%	12.1%	139.5%
Median (28 companies)	-1.2%	-5.3%	-17.4%	6.1%
Glencore ($805)		-5.0%	-33.3%	3.8%	34.3%

Top companies by Gross margin, %

Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Sino Prosper Group Holdings Ltd ($766)	5.1%	39.6%	93.0%	87.4%
REX Global Entertainment Holdings Ltd ($164)	-7.8%	-0.8%	88.6%	87.3%
Grand T G Gold Holdings Ltd ($8299)			57.3%	59.0%
Sun International Resources Ltd ($8029)	73.1%	64.8%	69.4%	58.8%
Kaz Minerals ($847)	41.1%	46.1%	35.5%	46.1%
Median (22 companies)	14.4%	15.5%	16.7%	26.1%
Glencore ($805)	2.4%	3.0%	1.9%	2.1%	3.8%

Top companies by EBITDA margin, %

Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Grand T G Gold Holdings Ltd ($8299)			53.7%	58.9%
Kaz Minerals ($847)	51.5%	29.1%	21.4%	39.4%
MMG Ltd ($1208)	29.9%	31.4%	24.5%	37.7%
Hengshi Mining Investments Ltd ($1370)	52.0%	45.4%	35.3%	36.6%
Midas Holdings Ltd ($1021)	22.2%	23.7%	22.0%	29.6%
Median (22 companies)	8.3%	5.5%	4.4%	13.4%
Glencore ($805)	3.6%	4.9%	5.1%	5.0%	5.8%

Top companies by CAPEX/Revenue, %

Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
China Polymetallic Mining Ltd ($2133)	43.3%	54.7%	35.1%	387.1%
Kaz Minerals ($847)	136.5%	168.8%	168.7%	41.9%
MMG Ltd ($1208)	22.6%	41.9%	100.4%	31.0%
Mongolia Energy Corp Ltd ($276)	1,061.7%	30,555.4%	1,973.0%	20.9%
Midas Holdings Ltd ($1021)	75.1%	47.3%	31.3%	19.8%
Median (15 companies)	17.6%	15.8%	12.3%	7.1%
Glencore ($805)	4.1%	4.0%	3.6%	2.0%	1.7%

Top companies by ROIC, %

Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
China Silver Group Ltd ($815)	31.6%	35.8%	-0.2%	21.7%
United Co RUSAL PLC ($486)	-9.0%	6.3%	12.3%	9.0%
Hengshi Mining Investments Ltd ($1370)	60.1%	20.7%	7.9%	7.9%
Zijin Mining Group Co Ltd ($2899)	9.2%	6.5%	2.6%	7.1%
Grand T G Gold Holdings Ltd ($8299)		-4.6%	5.3%	6.4%
Median (30 companies)	2.4%	0.0%	-1.1%	1.9%
Glencore ($805)	4.7%	4.9%	1.7%	2.4%	7.6%

Top companies by Net Debt / EBITDA

Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
MMG Ltd ($1208)	2.0x	10.2x	20.2x	10.4x
Kaz Minerals ($847)	2.9x	5.5x	18.7x	8.8x
Grand T G Gold Holdings Ltd ($8299)			9.6x	8.2x
Midas Holdings Ltd ($1021)	6.5x	8.7x	8.0x	8.1x
Zhaojin Mining Industry Co Ltd ($1818)	4.3x	4.7x	6.5x	6.5x
Median (14 companies)	1.9x	3.8x	3.4x	5.0x
Glencore ($805)	6.2x	4.6x	5.5x	4.0x	2.7x

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