Glencore Plc · LSE:GLEN
Glencore — Investor Presentation (November 2011)
24 slides from Glencore's investor presentation, Nov 3, 2011
Slide 1: Glencore presentation
Glencore presentation London, 3rd November 2011
Slide 2: Glencore investment proposition
Glencore investment proposition p p Unique q market p position in integrated g trading g High growth and return, diversification Significant barriers to entry Best in class equity value creation track record From $1.2 bn in 1996 to $45 bn equity currently Unique M&A approach focused on R
Slide 3: Glencore at a glance
Glencore at a glance g Integrated commodity producer and marketer Key highlights Integrated business segments Integrated commodity producer and marketer, active in every step of the supply chain One of the world’s largest physical marketers for the majority j it off it its core commodities diti
Slide 4: Glencore overview
Glencore overview Unique Global Infrastructure Various Rusal Century Recylex Xstrata Xstrata Biopetrol Companies Rusal Xstrata Various Russneft Xstrata Companies Kazzinc / Century Altyntau Portovesme Sherwin Xstrata Pasar Xstrata Perkoa Chemoil Prodeco Rusal Xstrata Mutanda Los Quenuales Rio Vermelh
Slide 5: Full integration through the value chain
Full integration g through g the value chain Position throughout the value chain allows Glencore to capture value at each stage Producers typically more focused on sale of own products than third-party marketing while other marketing peers do not have Glencore Glencore’ss scale and access to own
Slide 6: Significant barriers to entry
Significant g barriers to entryy Scale and global • Insight into market flows and access to real-time information across the globe reach • Distinctive ability to seize price differentials and arbitrage opportunities Access to financing • Large scale and global sourcing and distribution of commoditie
Slide 7: Best in class value creation track record
Best in class value creation track record 2008 1974 1987 / 1988 1990 1997 2004 2011 Establishment of Merger of Katanga and Nikanor Transition into an Acquisition of a Acquisition of First public bond IPO of Glencore focused resulting in a 8.5% holding in the integrated producer with st
Slide 8: Proven history of class-leading returns
Track record of value creation achieved by world class management team Proven history of class-leading returns Last 10 years RoE range (1) % 61% 58% 50% 51% 45% 38% 36% 34% 21% 21% 19% 18% 15% 15% 15% 15% 11% 13% 5% 6% 4% Averages Note: ( ) Net Income / average (1) g equity q y excl. minorityy inter
Slide 9: Performance is less correlated to commodity prices than peers
Performance is less correlated to commodity prices than peers Marketing has made a profit every year since completion of the management buyout – Resilient model throughout the cycle Marketing income is less correlated to commodity prices than that of diversified miners, with key profit drivers b
Slide 10: Best in class alignment management and shareholder interests
Best in class alignment management and shareholder interests Glencore management has considerably more “skin in the game” compared to peers CEO and CFO holdings in peers 18% 16.82% 16% 14% 12% 10% % O/S 8% 6% 4% 2% 0.02% 0.02% 0.11% 0.01% 0.25% 0% BHP Billiton Billit Ri Tinto Rio Ti t X t t Xstrata
Slide 11: Control of high quality industrial assets
Control of high g qqualityy industrial assets Prodeco Kazzinc Katanga Thermal coal project in Colombia, 100% Major fully integrated zinc, copper and gold Large-scale copper-cobalt project in the Glencore ownership producer in Kazakhstan, 50.7% owned by Glencore Democratic Republic of Congo, 74
Slide 12: Control of high quality industrial assets
Control of high g qqualityy industrial assets Mutanda West African Oil Assets Mopani Two fields under development offshore Equatorial Guinea Aseng: first oil expected Q4 2011 at an estimated rate of 50,000 barrels per day; Glencore stake 23.8% Alen: first oil expected Q4 2013 at an estimated r
Slide 13: Industrial production growth
Industrial p production g growth Cu equivalent 2'000'000 2 000 000 1'800'000 Additional potential growth from Kansuki and 1'600'000 agricultural production 1'400'000 Approved i expansion 1'200'000 projects 1'000'000 800'000 600'000 400'000 200'000 0 2008 2009 2010 2011E 2012E 2013E 2014E Mopani E&P
Slide 14: Key Financial Highlights
Keyy Financial Highlights g g US$ m H1 2011 H1 2010 % Change Revenue 92'120 70'007 32% Adjusted EBITDA (1) 3'845 2'635 47% Adjusted EBIT (2) 3'303 2'197 50% Glencore income (3) 2'450 1'558 57% Operating cash flow before working capital changes 2'472 1'809 37% Funds from operations (FFO) (4) 2'145 1'
Slide 15: Robust Balance Sheet
Robust Balance Sheet(1) Investment g grade credit rating g has strengthened g further: H1 2011 FY 2010 – Moody’s LT: Baa2 ST: P-2 Outlook: Stable Gross Debt $24.1bn $30.6bn – S&P LT: BBB ST: A-2 Outlook: Stable Net Funding $22.5bn $29.1bn Strong credit metrics going into H2 Net Debt $8.3bn $14.8
Slide 16: Working capital flows enhance resilience
Working g capital p flows enhance resilience In a scenario of declining commodity prices, the release in working capital compensates for drop in earnings The cash inflows preserve liquidity and position Glencore to capitalise on investment opportunities arising for example through a market downt
Slide 17: Appendix
Appendix
Slide 18: Key statistics
Keyy statistics Glencore operates significant industrial and marketing activities across the various business segments Glencore Marketing activities Industrial activities Operational p Controlled and non- A leading integrated Sourcing, distribution controlled investments in Main activity producer an
Slide 19: Marketing illustration – arbitrage opportunities
Marketing g illustration – arbitrage g opportunities pp Glencore has the ability to implement and execute any combination of the following arbitrage opportunities 1 Geographical 2 Product 3 Timing Gasoline Energy Ethanol distributor Biodiesel Corn Gasoil Vegoil g Triangulation of freight Diverse
Slide 20: Marketing illustration – geographical arbitrage
Marketing g illustration – ggeographical g p arbitrage g Vanilla transaction executed by various … premium profit margins achieved by Glencore due to its extensive and industry participants… global alumina book with insight into freight movements 1 Purchase contract 2 Sales contract 3 Swap agreement
Slide 21: Marketing illustration – product arbitrage
Marketing g illustration – pproduct arbitrage g Glencore’s diverse commodity range and processing ability enables it to exploit price differentials across various products, for example – Using U i diff differences iin grade, d e.g. bl blending di diff differentt grades d ttogether th tto meett con
Slide 22: Marketing illustration – time arbitrage
Marketing g illustration – time arbitrage g Glencore is able to benefit from inefficiencies in the shape of the forward price curves – In a contango market, Glencore can book “carry trades”, benefiting from its comparatively lower fi financing i and d storage t costs t than th that th t implied i
Slide 23: Marketing illustration – freight & logistics
Marketing g illustration – freight g & logistics g Glencore’s freight and logistics operations are key to supporting marketing strategies, understanding trade flows and adding additional value, for example – By B being b i able bl tto physically h i ll ttransportt and d store t products d t tto tt
Slide 24: World class management and Board
World class management g and Board Highly experienced Board of Directors and management team • Aged 71 Simon Murray • Executive Chairman of GEMS p Independent Non Executive Chairman • Board member of Richemont and Essar Energy Executive Directors Independent Non Executive Directors CEO SID INED INED