Glencore EBITDA surged on 18.0% and Revenue increased on 6.9%
20 Feb 2019 • About Glencore (
$GLEN) • By InTwits
Glencore reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is relatively stable: 6.4% in 2018 vs. 5.8% in 2017 vs. 4.9% in 2014
- Glencore has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.7%. At the same time it's a lot of higher than industry average of 10.6%.
- CAPEX is quite volatile: $4,687m in 2018, $3,586m in 2017, $3,048m in 2016, $5,372m in 2015, $8,815m in 2014
- The company has business model with low profitability: ROIC is 8.7%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.4x while industry average is 2.3x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 6.9%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 0.72 pp from 27.3% to 26.6% in 2018. EBITDA Margin grew at 0.36 pp per annum in 2014-2018.
Gross Margin showed almost no change in 2018. During 2014-2018 Gross Margin bottomed in 2015 at 1.9% and was growing since that time. SG&A as a % of Revenue showed almost no change in 2018. During 2014-2018 SG&A as a % of Revenue topped in 2015 at 0.73% and was declining since that time.
Net Income margin decreased slightly on 1.3 pp from 2.8% to 1.6% in 2018.
Investments (CAPEX, working capital and M&A)
Glencore's CAPEX/Revenue was 2.1% in 2018. CAPEX/Revenue decreased slightly on 1.5 pp from 3.6% in 2015 to 2.1% in 2018. Average CAPEX/Revenue for the last three years was 2.0%. During 2014-2018 CAPEX as a % of Revenue bottomed in 2017 at 1.7%.
Return on investment
The company operates at low ROIC (8.7%) and ROE (7.1%). ROIC increased slightly on 1.1 pp from 7.6% to 8.7% in 2018. ROE decreased on 5.2 pp from 12.3% to 7.1% in 2018. During the last 5 years ROIC bottomed in 2015 at 1.7% and was growing since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.4x and Debt / EBITDA is 2.5x. Net Debt / EBITDA dropped on 0.3x from 2.7x to 2.4x in 2018. Debt increased on 3.1% while cash decreased on 3.7%. Net Debt/EBITDA stuck to a declining trend at -0.7x per annum in 2014-2018.
Glencore has short term refinancing risk: cash is only 23.9% of short term debt.
Valuation and dividends
The company's trades at EV/EBITDA 5.2x and P/E 11.9x.
Management team
Ivan Glasenberg is a Glencore's CEO. Ivan Glasenberg is a founder and has spent 5 years with the company. Steven Kalmin "Steve" is a Glencore's CFO. Steven Kalmin "Steve" has spent 6 years at the company.
Financial and operational results
FY ended 31 Dec 2018
Glencore ($GLEN) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 221,073 | 147,351 | 152,948 | 205,476 | 219,754 | 6.9% |
| Gross Profit | 6,729 | 2,818 | 3,185 | 7,781 | 9,056 | 16.4% |
| SG&A | 1,279 | 1,073 | 1,082 | 1,291 | 1,362 | 5.5% |
| EBITDA | 10,873 | 7,557 | 7,715 | 11,869 | 14,000 | 18.0% |
| EBIT | | | 2,083 | | | |
| Tax | | | 638 | | | |
| Net Income | 2,308 | -4,964 | 1,379 | 5,777 | 3,408 | -41.0% |
Balance Sheet
|
|---|
| Cash | 2,824 | 2,707 | 2,508 | 2,124 | 2,046 | -3.7% |
| Inventory | | | 18,347 | | | |
| Short Term Debt | 12,005 | 11,117 | 10,030 | 9,402 | 8,570 | -8.8% |
| Long Term Debt | 40,688 | 32,932 | 23,188 | 24,532 | 26,424 | 7.7% |
Cash flow
|
|---|
| Capex | 8,815 | 5,372 | 3,048 | 3,586 | 4,687 | 30.7% |
Ratios
|
|---|
| Revenue growth | -5.0% | -33.3% | 3.8% | 34.3% | 6.9% | |
| EBITDA growth | 29.6% | -30.5% | 2.1% | 53.8% | 18.0% | |
|
|---|
| Gross Margin | 3.0% | 1.9% | 2.1% | 3.8% | 4.1% | 0.3% |
| EBITDA Margin | 4.9% | 5.1% | 5.0% | 5.8% | 6.4% | 0.6% |
| EBIT Margin | | | 1.4% | | |
| SG&A, % of revenue | 0.6% | 0.7% | 0.7% | 0.6% | 0.6% | -0.0% |
| Net Income Margin | 1.0% | -3.4% | 0.9% | 2.8% | 1.6% | -1.3% |
| CAPEX, % of revenue | 4.0% | 3.6% | 2.0% | 1.7% | 2.1% | 0.4% |
|
|---|
| ROIC | 4.9% | 1.7% | 2.4% | 7.6% | 8.7% | 1.1% |
| ROE | 4.7% | -11.1% | 3.2% | 12.3% | 7.1% | -5.2% |
| Net Debt/EBITDA | 4.6x | 5.5x | 4.0x | 2.7x | 2.4x | -0.3x |
Peers in Mining
Below you can find Glencore benchmarking vs. other companies in Mining industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Regency Mines ($RGM) | | -97.6% | -16.0% | 355.0% | |
| Wolf Minerals Ltd ($WLFE) | | | | 188.2% | |
| Griffin Mining ($GFM) | -35.9% | 31.2% | 10.9% | 91.1% | |
| Bisichi Mining ($BISI) | -24.5% | -3.2% | -11.1% | 64.2% | |
| Coalfield Resources ($CRES) | -5.0% | 803.4% | 155.8% | 59.3% | |
| |
|---|
| Median (23 companies) | -3.9% | -7.9% | 5.5% | 18.0% | 6.8% |
|---|
| Glencore ($GLEN) | | -33.3% | 3.8% | 34.3% | 6.9% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Griffin Mining ($GFM) | 44.4% | 28.2% | 42.9% | 65.0% | |
| Antofagasta ($ANTO) | 44.2% | 27.0% | 42.4% | 50.4% | |
| Patagonia Gold ($PGD) | 27.2% | -13.8% | 50.5% | 47.6% | |
| Randgold Resources ($RRS) | 34.4% | 27.4% | 40.9% | 44.7% | |
| Caledonia Mining Corp ($CMCL) | 34.7% | 26.9% | 37.9% | 37.7% | |
| |
|---|
| Median (21 companies) | 22.7% | 20.9% | 28.6% | 24.8% | 11.6% |
|---|
| Glencore ($GLEN) | 3.0% | 1.9% | 2.1% | 3.8% | 4.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Zccm Investments Hldgs ($ZCC) | 88.7% | -891.4% | -417.8% | 944.0% | |
| Coalfield Resources ($CRES) | 0.1% | 259.6% | 134.0% | 74.7% | |
| Griffin Mining ($GFM) | 28.4% | 18.6% | 35.8% | 58.1% | |
| Antofagasta ($ANTO) | 42.6% | 25.9% | 28.9% | 51.0% | |
| Randgold Resources ($RRS) | 39.4% | 33.8% | 46.8% | 50.7% | |
| |
|---|
| Median (23 companies) | 18.9% | 18.3% | 24.6% | 28.5% | 10.0% |
|---|
| Glencore ($GLEN) | 4.9% | 5.1% | 5.0% | 5.8% | 6.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Wolf Minerals Ltd ($WLFE) | | | 356.9% | 72.6% | |
| Rambler Metals & Mining ($RMM) | 13.9% | 20.7% | 22.9% | 36.7% | |
| Trans-Siberian Gold ($TSG) | 7.7% | 9.0% | 20.8% | 32.7% | |
| Caledonia Mining Corp ($CMCL) | 11.5% | 33.8% | 32.1% | 31.0% | |
| Orosur Mining Inc ($OMI) | 14.1% | 19.7% | 15.1% | 29.9% | 40.1% |
| |
|---|
| Median (23 companies) | 11.0% | 14.5% | 16.0% | 13.1% | 8.9% |
|---|
| Glencore ($GLEN) | 4.0% | 3.6% | 2.0% | 1.7% | 2.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Griffin Mining ($GFM) | 3.1% | 2.0% | 7.4% | 32.2% | |
| Caledonia Mining Corp ($CMCL) | 18.1% | 8.4% | 32.0% | 24.7% | |
| Antofagasta ($ANTO) | 14.3% | 2.6% | 3.8% | 14.6% | |
| Bisichi Mining ($BISI) | 5.7% | 1.6% | 0.7% | 14.3% | |
| Nord Gold Nv ($NORD) | 13.8% | 16.1% | 12.1% | 13.4% | |
| |
|---|
| Median (28 companies) | 1.2% | -2.0% | 5.0% | 7.0% | -9.3% |
|---|
| Glencore ($GLEN) | 4.9% | 1.7% | 2.4% | 7.6% | 8.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Goldbridges Global Resources ($GBGR) | 1.3x | 10.9x | | 3.3x | |
| Patagonia Gold ($PGD) | | | 4.2x | 2.7x | |
| Shanta Gold ($SHG) | 1.1x | 1.2x | 1.0x | 1.6x | |
| Nord Gold Nv ($NORD) | 1.3x | 1.1x | 1.3x | 1.3x | |
| Trans-Siberian Gold ($TSG) | 1.2x | 0.5x | 0.2x | 1.0x | |
| |
|---|
| Median (18 companies) | 0.6x | 1.1x | 1.3x | 0.5x | -0.1x |
|---|
| Glencore ($GLEN) | 4.6x | 5.5x | 4.0x | 2.7x | 2.4x |
