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Glencore Debt dropped on 24.6% in 2016 while EBITDA increased on 2.1%

23 Feb 2017 • About Glencore ($GLEN) • By InTwits

Glencore reported 2016 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 3.0%. At the same time it's a lot of higher than industry average of 19.8%.
  • CAPEX is quite volatile: 3,048 in 2016, 5,372 in 2015, 8,815 in 2014, 9,559 in 2013, 2,970 in 2012
  • The company has potentially unprofitable business model: ROIC is at 2.4%
  • It operates with high leverage: Net Debt/EBITDA is 4.0x while industry average is 2.1x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Glencore ($GLEN) key annual financial indicators

mln. $201220132014201520162016/2015
P&L
Revenue214,436232,694221,073147,351152,9483.8%
Gross Profit4,0015,5496,7292,8183,18513.0%
SG&A9801,1851,2791,0731,0820.8%
EBITDA4,4778,39210,8737,5577,7152.1%
Net Income1,004-8,0462,308-4,9641,379-127.8%
Balance Sheet
Cash2,7822,8492,8242,7072,508-7.4%
Short Term Debt16,49816,46112,00511,11710,030-9.8%
Long Term Debt19,02838,71240,68832,93223,188-29.6%
Cash flow
Capex2,9709,5598,8155,3723,048-43.3%
Ratios
Revenue growth15.2%8.5%-5.0%-33.3%3.8%
EBITDA growth1.2%87.4%29.6%-30.5%2.1%
Gross Margin1.9%2.4%3.0%1.9%2.1%0.2%
EBITDA Margin2.1%3.6%4.9%5.1%5.0%-0.1%
Net Income Margin0.5%-3.5%1.0%-3.4%0.9%4.3%
SG&A, % of revenue0.5%0.5%0.6%0.7%0.7%-0.0%
CAPEX, % of revenue1.4%4.1%4.0%3.6%2.0%-1.7%
ROIC4.6%4.7%4.9%1.7%2.4%0.7%
ROE3.3%-20.0%4.7%-11.1%3.2%14.3%
Net Debt/EBITDA7.3x6.2x4.6x5.5x4.0x-1.5x

Revenue and profitability


Glencore's Revenue increased on 3.8% in 2016. EBITDA Margin showed almost no change in 2016.

Gross Margin showed almost no change in 2016. SG&A as a % of Revenue showed almost no change in 2016.

Net Income marign increased on 4.3 pp from -3.4% to 0.90% in 2016.

Capital expenditures (CAPEX) and working capital investments


In 2016 the company had CAPEX/Revenue of 2.0%. The company's CAPEX/Revenue decreased on 2.1 pp from 4.1% in 2013 to 2.0% in 2016. It's average level of CAPEX/Revenue for the last three years was 3.2%.

Return on investment


The company operates at low ROIC (2.45%) and ROE (3.23%). ROIC increased slightly on 0.71 pp from 1.7% to 2.4% in 2016. ROE jumped on 14.3 pp from -11.1% to 3.2% in 2016.

Leverage (Debt)


Debt level is 4.0x Net Debt / EBITDA and 4.3x Debt / EBITDA. Net Debt / EBITDA dropped on 1.5x from 5.5x to 4.0x in 2016. Debt dropped on 24.6% in 2016 while cash decreased on 7.4% in 2016.

Management team


The company's CEO Ivan Glasenberg is a founder and has spent 16 years at the company. The company's CFO Steven Kalmin "Steve" has spent 13 years at the company.

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 FY2012 FY2013 FY2014 FY2015 FY2016
Coalfield Resources ($CRES)19,087.5%-5.0%803.4%
Serabi Gold ($SRB)177.8%
Anglo Pacific Group ($APF)-56.3%-2.8%-76.4%149.4%
Griffin Mining ($GFM)-2.8%-7.5%-35.9%31.2%
Kirkland Lake Gold Inc ($KGI)54.7%-5.1%14.2%26.9%
 
Median (30 companies)-2.8%-3.2%-4.7%-7.4%9.5%
Glencore ($GLEN)8.5%-5.0%-33.3%3.8%


Top companies by Gross margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Polyus Gold Intl Ltd ($PGIL)51.1%40.2%46.1%58.8%62.6%
Coalfield Resources ($CRES)54.4%
Zccm Investments Hldgs ($ZCC)51.8%71.4%85.6%45.9%26.8%
Mwana Africa ($MWA)42.9%45.9%46.6%38.6%29.1%
Kaz Minerals ($KAZ)39.7%41.1%46.1%35.5%46.1%
 
Median (29 companies)39.1%19.8%22.7%22.8%28.9%
Glencore ($GLEN)1.9%2.4%3.0%1.9%2.1%


Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Coalfield Resources ($CRES)1,693,625.0%28.4%0.1%259.6%
Polyus Gold Intl Ltd ($PGIL)51.1%18.7%45.9%58.0%61.4%
Anglo Pacific Group ($APF)76.2%77.9%-58.0%53.7%
Nord Gold Nv ($NORD)33.0%0.8%40.2%44.9%
Trans-Siberian Gold ($TSG)24.7%8.0%32.7%38.1%
 
Median (31 companies)27.2%18.0%18.9%18.6%24.6%
Glencore ($GLEN)2.1%3.6%4.9%5.1%5.0%


Top companies by CAPEX/Revenue, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Kaz Minerals ($KAZ)36.6%136.5%168.8%168.7%41.9%
Weatherly International ($WTI)8.6%161.8%10.2%
Hwange Colliery Co ($HWA)3.5%0.5%45.6%
Goldbridges Global Resources ($GBGR)26.9%17.6%73.9%40.1%
Caledonia Mining Corp ($CMCL)10.5%18.0%11.5%33.8%
 
Median (30 companies)21.5%17.8%11.0%14.5%15.5%
Glencore ($GLEN)1.4%4.1%4.0%3.6%2.0%


Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Polyus Gold Intl Ltd ($PGIL)27.0%4.3%19.2%29.7%30.9%
Nord Gold Nv ($NORD)6.6%-9.0%13.8%16.1%
Coalfield Resources ($CRES)0.1%0.8%0.0%15.8%
Kirkland Lake Gold Inc ($KGI)19.7%1.5%-0.7%9.2%
Trans-Siberian Gold ($TSG)-1.1%-6.8%5.0%9.2%
 
Median (31 companies)4.4%2.0%1.2%1.2%5.0%
Glencore ($GLEN)4.6%4.7%4.9%1.7%2.4%


Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Kaz Minerals ($KAZ)2.4x2.9x5.5x18.7x8.8x
Goldbridges Global Resources ($GBGR)2.2x1.3x10.9x
Griffin Mining ($GFM)0.8x1.4x4.0x4.4x
Bisichi Mining ($BISI)0.9x1.7x1.3x4.0x
Anglo Asian Mining ($AAZ)0.7x2.6x5.2x2.6x
 
Median (22 companies)0.4x1.4x0.6x0.8x2.1x
Glencore ($GLEN)7.3x6.2x4.6x5.5x4.0x


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