Strong numbers from Glencore (GLEN) and BHP (BHP) lifted their shares 3.1% to 435p and 0.2% to £25.23 respectively as both announced big payouts to shareholders.
Glencore unveiled $4 billion in dividends and share buybacks after reporting a jump in profitability led by rising commodity prices and a strong performance in its marketing business.
For the year ended 31 December, the company reported preliminary results showing adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) had increased by 84% to $21.3 billion year-on-year as revenue grew 43% to £203.75 billion.
BHP, which now has its primary listing in Sydney following a corporate restructuring, announced a record first half dividend of $7.6 billion, ahead of analysts expectations.
Underlying attributable profit of $9.7 billion was up 57% on revenue from continuing operations of $30.5 billion and was comfortably ahead of market expectations of $8.96 billion.
HINTS AT M&A
BHP chief executive Mike Henry also hinted at possible M&A activity. ‘We have been clear M&A is a lever available to us, one amongst a number, but we are only wanting to pursue the right opportunities at the right time and at the right price,’ he said.
Commenting on Glencore, Jefferies analyst Christopher LaFemina said: ‘Reported net debt of $6 billion is below the target range of $10-$16 billion. The announced capital return of $4 billion (base dividend of $3.4 billion + buyback of $550 million) pushes net debt back to the bottom of that range.
‘Further capital returns are likely to be announced at the interim results as first half free cash flow should be strong, driving net debt much lower once again.
‘The Glencore deleveraging story is over. It is now a capital returns story, and we expect rising prices for some of its key commodities and continued outperformance of its marketing segment to lead to growing free cash flow and capital returns.’
