BAAR, SWITZERLAND — Glencore reported on March 1 that its Agricultural products business segment’s adjusted EBITDA for the year ending Dec. 31, 2015, was $734 million, down 39% compared to $1.2 billion in the same period of last year, the latter benefiting from an exceptionally strong Canadian harvest.
Glencore’s overall adjusted EBITDA for 2015 was $8.69 billion, down 32% from $12.76 billion in the same period of last year. The decrease was due to substantially weaker commodities process, partially offset by cost efficiencies and favorable producer country currencies, the company said.
Marketing EBITDA was down 11% to $2.7 billion, reflecting the high 2014 agricultural base and challenging metals’ marketing conditions in in the first half of 2015, offset by a robust performance from oil marketing.
The Agricultural products business segment was adversely impacted in 2015 by the immediate imposition of a punitive wheat export tax in Russia in the first half of 2015. Notwithstanding these external factors, the overall business performance was solid, given the reduced trading opportunities, constrained by low market prices and volatility, the company said. Glencore selectively added to its crushing capacity in 2015, with two acquisitions in Canada (oil seed crushing plant) and Germany (rapeseed crushing facility), the company said.
The grain origination and marketing environment was challenging due to lower prices, lack of volatility and limited arbitrage opportunities, the company said. Oilseeds, cotton, sugar and freight marketing all performed well, despite their relatively quiet markets. Viterra’s Canadian operations contributed solidly in 2015, but were unable to match the strong 2014 results, mainly due to a smaller crop, Glencore said. Viterra Australia’s results were in line with expectations, although in both Canada and Australia the weaker local currencies reduced U.S. dollar returns.
In total, Agricultural Products produced/processed 11.5 million tonnes, compared with 10.9 million tonnes in 2014. Oilseed crush volumes of 6.1 million tonnes increased by 405,000 tonnes, reflecting the acquisitions of the Magdeburg plant in Germany and the Becancour (TRT) plant in Canada, the company said. Currency devaluation and relaxation of export taxes later in the year were supportive of the Argentinian oilseed processing and export business. The Timbues soybean crushing joint venture in Argentina continues to perform well.
Biodiesel production was 556,000 tonnes, down 27% compared to 2014, reflecting reduced demand due to regulatory changes and lower competing diesel prices, although it recovered somewhat in the second half of the year. The biodiesel environment combined with a lower E.U. rapeseed crop and lack of farmer selling reduced E.U. softseed crushing margins.
The company announced in September 2015 it was selling its agricultural stake in an effort to reduce its debt. Glencore does expect to reach an agreement on the sale of its minority stake in the Agricultural Products business in the second half of 2016.
Glencore said that it wanted to reduce its $30 billion debt by $10 billion. Glencore said it is on track with its new debt reduction target of $13 billion by the end of 2016, leaving its net debt at $18-$19 billion.
“Our rigorous focus on debt reduction, supply discipline and cost efficiencies enabled Glencore to record a robust performance in difficult market conditions,” said Ivan Glasenberg, Glencore’s chief executive officer, “Our diversified portfolio, based around a core of Tier 1 assets, combined with our highly resilient marketing business, underpins our ability to continue to be comfortably cash generative at current and even lower commodity prices.”
Switzerland-based Glencore is one of the world’s two biggest wheat traders, handling 18% of the world’s seaborne trade, and is one of the top three agricultural exporters in Russia, Canada, Australia, and the E.U. The group is vying for a position among the world’s biggest ‘ABCD’ commodity traders – Archer Daniels Midland Co., Bunge Ltd, Cargill Inc., and Louis Dreyfus Commodities BV.