* Glencore scraps $2.6 bln dividend due to uncertainty
* First-half operating profit down 13% to $4.8 billion
* Trading division benefits from oil market volatility
* Glencore posts net loss of $2.6 billion
(Adds detail on dividends, succession, comment)
By Zandi Shabalala and Julia Payne
LONDON, Aug 6 (Reuters) - Glencore became the first
major mining company to scrap its dividend, saying on Thursday
the economic outlook was too uncertain because of the
coronavirus pandemic and that it would prioritise cutting debt
instead.
The mining and commodities trading company said its net debt
jumped 12% in the first six months of the year to $19.7 billion
and that it was booking a $3.2 billion charge, mainly due to the
broader economic fallout on its businesses from the pandemic.
While its trading division's record $2 billion first-half
operating profit helped boost overall adjusted earnings, the
hefty charges meant Glencore ended up posting a net loss of $2.6
billion - the same amount it had been due to pay in dividends.
The record trading performance, mainly thanks to oil
markets, came at the expense of higher net debt as Glencore used
more working capital as a one-off in the exceptional COVID-19
circumstances to buy and store large amounts of cheap crude.
Glencore shares listed in London had slumped nearly 7% by
1130 GMT, underperforming the 3% drop in the broader index that
includes its rivals.
"The board has concluded that it would be inappropriate to
make a distribution to shareholders in 2020, instead
prioritising the acceleration of net debt reduction to within
our target range," Chief Executive Ivan Glasenberg said.
He said the company would wait to see how the pandemic
evolves and then review whether to resume dividend payments next
year.
Rivals Rio Tinto and Anglo American have
already gone ahead with their payouts and BHP
is expected to follow suit.
"We believe Glencore has missed an opportunity to send a
strong message to the market about its dividend policy being
robust through the cycle," said analysts at Jefferies, which
reiterated its "hold" recommendation for Glencore shares.
The $3.2 billion in charges were mainly related to its
oilfields in Chad, which shut down during the pandemic, its
Colombian coal operations, Mopani copper mine in Zambia and zinc
mining in Peru.
OLD GUARD ON WAY OUT
Glencore's adjusted earnings before interest, taxes,
depreciation and amortisation (EBITDA) fell 13% to $4.8 billion
in the six months to June from a year earlier, beating the $4.3
billion expected by 14 analysts in a survey compiled by Vuma.
Thanks to the record first-half trading performance, the
company said it expected the division to post operating profit
at the top end of the $2.2 billion to $3.2 billion range by the
end of the year.
Glencore's trading divisions set it apart from other mining
companies and it has proved more resilient during commodity
downturns.
The trading arms of oil majors such as Royal Dutch Shell
, Total and Eni have all also
reported bumper profits by storing oil when prices plunged
earlier this year and then selling later at higher prices.
Glasenberg told a conference call that cash flow would help
it lower debt below its cap of $16 billion by the end of 2020.
"Glencore's value is attractive, its balance sheet robust
and commodity mix well positioned for recovery," analysts at UBS
said. "We expect it to outperform as visibility improves on
management change, deleveraging, regulatory investigations and
the turnaround of African Copper."
Glasenberg said planning for a new generation of managers to
take over had not been affected by the COVID-19 crisis and that
he would leave once the Glencore old guard was gone.
He said long-time executive and head of coal marketing Tor
Peterson was still due to leave the company and another veteran,
Daniel Mate, who led its zinc business, left last month.
The change in senior managers that has been taking place
over the last two years has been spurred in part by multiple
investigations into the company for bribery and corruption,
particularly by the U.S. Department of Justice.
(Reporting by Zandi Shabalala and Julia Payne; Editing by
Edmund Blair and David Clarke)
