In a Feb. 18 research note, BMO Capital Markets analyst Edward Sterck reported that Glencore International Plc's (GLEN:LSE) H2/19 results were "better than expected" and its dividend was "significantly higher than our forecast."
Sterck reviewed the operational and financial results from full-year 2019.
The highlight was the 15% EBITDA beat. EBITDA came in at US$11.6 billion versus BMO's US$10.8 billion estimate and exceeded consensus' expectation as well, though to a lesser degree. The EBITDA beat "was led by a much stronger-than-expected performance from the copper division on lower unit costs," noted Sterck.
The best performing divisions in 2019 were copper and coal, Sterck pointed out. Copper and coal EBITDA were US$3 billion and US$3.6 billion, 17% and 16% higher than BMO's forecasts, respectively. Marketing EBITDA was US$2.6 billion, and zinc EBITDA was US$1.8 billion, both in line.
The year's underperformers were nickel and ferroalloys, indicated Sterck, which missed BMO's projections by 6% and 39%, respectively.
At year-end, Glencore's net debt was US$17.6 billion, around the amount BMO expected.
Sterck pointed out that another of Glencore's 2019 achievements was increasing its 2020 dividend based on its solid financial performance. This year's dividend is US$0.20 per share, more than double BMO's estimate of US$0.08 per share "but in line with the 2019 payout."
Also in 2020, production guidance remains unchanged, however, the company expects lower unit costs in copper and coal. As for debt, Glencore estimated it to be US$14–15 billion at year-end.
BMO has a Market Perform rating and a £2.50 per share on Glencore. The company's stock is currently trading at around £1.97 per share.
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Disclosures from BMO Capital Markets, Glencore, February 18, 2020
IMPORTANT DISCLOSURES
Analyst's Certification
I, Edward Sterck, hereby certify that the views expressed in this report accurately reflect our personal views about the subject securities or issuers. I also certify that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to Glencore within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Glencore within the past 12 months.
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Glencore.
Disclosure 6A: Glencore is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services
Disclosure 6C: Glencore is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 9C: BMO Capital Markets makes a market in Glencore in Europe.
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