Glencore PLC

The stable outlook reflects our assessment that Glencore's rebased balance-sheet debt level and prudent financial policies, including a reported net debt in the $10 billion-$16 billion range should sustain credit metrics comfortably in excess of our minimum and mid-cycle thresholds for the current rating over the next 24 months. Under our price assumptions, we project an adjusted EBITDA of $14.5 billion-$15.5 billion in 2019, which translates into adjusted funds from operations (FFO) to debt at or above 60% in 2019 and 2020, compared with our minimum multiyear threshold of 42.5% for the 'BBB+' rating. This reflects prevailing supportive market conditions. In addition, we project sustained positive cash flow generation after capex and dividends. In low-cycle conditions, the rating could accommodate

...Despite the capping, coal will remain a corner stone in Glencore's portfolio. We see Glencore's announcement it will cap its coal production capacity at current levels of about 150 million tons (Mt) as an important first step in its long-term strategy of addressing climate change. That said, the company continues to see coal as a core commodity. The coal division contributed $5.2 billion to Glencore's EBITDA (about one-third of EBITDA), driven by higher prices and the contribution from the recent Hail Creek (coking coal) acquisition. We anticipate a structural decline in thermal coal demand over the long term. However, in the meantime, healthy demand from emerging markets of about 8% in 2018 supports the current good prices in the range of $80-$90 per ton, which is in line with our working assumption for the coming two years. Ongoing investigations with unknown outcomes could translate into more conservative financial policy over the short-term. We understand that Glencore is subject to...

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