Driving profit

12 December 2017 By Clara Ferreira Marques Follow @ClaraMarquesRTR

The $70 bln commodities group sold assets and made a modest $3.4 bln of purchases in 2017. Partnerships are in vogue. Add in a portfolio geared – partly by accident – to electric vehicles, and it supports a fairly shiny valuation. Now Glencore needs to focus on meeting targets.

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In a briefing for investors on Dec. 12, commodities trader and miner Glencore said it expects 2018 free cash flow of around $7.4 billion from full-year 2018 EBITDA of $16.2 billion. That compares with a consensus analyst estimate for 2017 EBITDA of around $14.5 billion.

Glencore expects stable earnings from its key trading division, which it calls marketing. It expects earnings before interest and tax for this unit at $2.8 billion for 2017, at the top end of its previous guidance. Current conditions suggest 2018 at similar levels, it said. The company provided a longer-term guidance range for earnings before interest and tax for marketing of $2.2 billion to $3.2 billion.

Its dividend policy will include a fixed $1 billion base from the marketing business, and at least 25 percent of free cash flow from the industrial division, which includes its mines. It said the minimum 2018 distribution is likely to be more than $2 billion, more than double the 2017 payout.

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