Glencore Plc · LSE:GLEN
Glencore — Non-Deal Roadshow (June 2012)
24 slides from Glencore's roadshow presentation, June 2012
Slide 1: Update for Glencore employee shareholders on the proposed MoE with Xstrata
Update forand Glencore employee shareholders the proposed MoE with Xstrata May 2012 June 2012 I
Slide 2: March roadshow addressed Glencore's key investment highlights
March roadshow addressed Glencore’s key investment highlights 1. Highly capital efficient business model Mining capex efficiency best in sector Marketing is a capital efficient business that has a strong track record of delivering high ROE 2. Opportunity to co-invest alongside management with strong
Slide 3: Additional Glencore topics addressed today
Additional Glencore topics addressed today 1. Gearing and cash flow Strong track record of free cash flow generation to equity holders… …Reflected in consistently solid credit profile across the cycle Conservative funding structure 2. Capital allocation Glencore has a strong track-record of returnin
Slide 4: 1. Gearing and cash flow generation
1. Gearing and cash flow generation I 3
Slide 5: Consistently solid credit profile across the cycle
Consistently solid credit profile across the cycle Ratings evolution versus key peers S&P rating AA- 9.0 A+ 8.0 • Xstrata $5.9bn rights issue in March 2009 A7.0 • Rio Tinto’s $14.8bn rights issues in June A- 6.0 and July 2009 BBB+ 5.0 BBB 4.0 3.0 BBB- BB+ 2.0 • Xstrata $18.8bn • Rio Tinto’s $38bn •
Slide 6: Conservative funding structure
Conservative funding structure… Asset and debt evolution – last ten years $ bn 100 Debt figure as of Dec 2011 1.4x Total gross debt(1): $25.7bn: 1.7x 86.2 – Bank debt: $18.5bn (72%) 79.8 – Bonds(1)(3): $7.2bn (28%) 2.5x Net funding(1)(4) $24.4bn 75 1.7x – Industrial(1) $10.2bn (42%) 2.3x 66.3 61.3 –
Slide 7: Underpinned by strong operating cash flows
… Underpinned by strong operating cash flows Glencore historical funds from operations(1) $ bn 5 4.37 4.19 3.63 4 3.52 3.33 3 2.33 1.80 1.71 2 0.82 1 0.37 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Company information Note: (1) FFO defined as cash generated from operating activities
Slide 8: Debt repayment supported by declining capex profile
Debt repayment supported by declining capex profile Glencore expansionary capex Gross debt maturity profile (1) $ bn $ bn 2.5 Best-in-class capex profile (2) 16.0 15.3 2.3 2012E-2014E capex as percentage of aggregate value 0.1 New RCF of $12.8bn in April 2012: 50% 36% – Existing $3.5bn RCF due in 20
Slide 9: Industrial net funding: continued deleveraging underpinned by strong organic growth
Industrial net funding ($10.2 bn)(1): continued deleveraging underpinned by strong organic growth profile Industrial net debt(1)/EBITDA evolution 2011A to 2015E copper equivalent volume growth x % CAGR 6.0 15% Strong bank relationships with (2) over 100 lenders 12.9% 10.3% 4.0 3.8x 3.9x % 10% 3.6x 7
Slide 10: Marketing net funding: Optimises flexibility, cost and risk
Marketing net funding ($14.2 bn): Optimises flexibility, cost and risk 36 days cash conversion cycle from supplier to customer Gearing funds working capital – Compared to average peers net conversion cycle of 56 days (1) Retention of title in intervening period Borrowing is effectively backed by fas
Slide 11: Duration of Marketing financing is multiple of WC net cycle
Duration of Marketing financing is multiple of WC net cycle Working capital summary $ bn $18.9 bn c. 2 year duration of funding 20x longer than Days on hand duration of working capital net cycle Net conversion cycle: 16.3 28 days 100 76 13.8 37 days 60 Average: 55.5 4.8 36 35 (29) (16.0) days 6 36 d
Slide 12: Marketing: Countercyclical cash flow profile
Marketing: Countercyclical cash flow profile Marketing profitability less geared to flat price movements In a scenario of declining commodity prices, the release in working capital more than compensates for drop in earnings The cash inflows preserve liquidity and position Glencore to capitalise on i
Slide 13: 2. Capital allocation
2. Capital allocation GLENCORE | 12
Slide 14: Capital allocation analysis: FTSE mining vs diversified miners, 2002-2011
Capital allocation analysis: FTSE 350 mining vs diversified miners, 2002-2011 The FTSE mining index has returned 21% of its capital spend in the past decade to shareholders, Glencore 26% 100% 90% 80% 51% 49% 53% 51% 70% 61% % of Total Spending * 60% 79% 50% 15% 40% 21% 7% 30% 38% 51% 20% 34% 32% 26%
Slide 15: 3. Growth
3. Growth GLENCORE | 14
Slide 16: Growth – Industrial Assets
Growth – Industrial Assets Substantial organic growth from low risk and low cost brownfield operations Achieved at approximately $5,000 per Cu Cu equivalent production volume (1) equivalent tonne (2) (in tonnes, 100% basis) (vs. average of $12,600 at peer projects) 2,000,000 1,800,000 2011A – 2015E
Slide 17: Growth – Marketing
Growth – Marketing Strong track record of growth GDP growth, especially in emerging markets Industrial asset growth Market share gains Growth has a low capex intensity Xstrata and Viterra expected to deliver step change in marketing scale and profitability Working capital assets have increased but R
Slide 18: Emerging markets dominate global reserves of key commodities
Emerging markets dominate global reserves of key commodities OECD vs. Non-OECD Share of Global Reserves Ukraine Russia Copper Supply 1996 2011 (iron ore, thermal (copper, iron ore, Bauxite 50% 74% Europe 3% 2% coal, coking coal) thermal coal, Cobalt 30% 70% Asia and Middle East 11% 20% coking coal,
Slide 19: 4. Merger update
4. Merger update GLENCORE | 18
Slide 20: Rationale for merger widely appreciated
Rationale for merger widely appreciated $500 million pre-tax EBITDA synergies (primarily marketing related) Diversification Portfolio optimisation with focus on brownfield Substantial management ownership Capital efficient M&A Best in class SRI I 19
Slide 21: What has changed?
What has changed? Glencore lock-ups have partially expired Xstrata retention package is public Investors have recognised merger benefits Increased investor focus on capital efficiency Increased investor scepticism on greenfield Xstrata + Glencore shareholder registers have evolved I 20
Slide 22: Valuation ratios – current trading
Valuation ratios – current trading Since 1st February 2012 (last close before start of offer period) Share exchange ratio development since announcement x 3.0 2nd Feb 5th March 10th April 1st May 9th May 31st May Merger Talks Glencore FY11 Prelims Glencore FY11 Annual Xstrata IMS - 2.77x Glencore IM
Slide 23: Valuation ratios – historical trading
Valuation ratios – historical trading Since Glencore IPO on the 19th May 2011 Share exchange ratio development since Glencore IPO x 3.0 Offer terms: 2.80x 2.8 Average since Announcement: 2.75x 2.65x 2.5 Pre-merger talk confirmation average: 2.52x 7th Feb 2.7 Announcement & Xstrata FY11 Prelims- 2.3
Slide 24: Disclaimer
Disclaimer This document comprises written materials for a presentation concerning the merger of Glencore International plc (“Glencore”) with Xstrata plc (“Xstrata”) in which Glencore will acquire the entire issued ordinary share capital of Xstrata (not already held by Glencore) in exchange for new