Glencore PLC

The stable outlook reflects the company's objective to prioritize deleveraging over returns to shareholders and growth in the near term. Nevertheless, commodity prices will continue to drive credit metrics in 2020 and 2021, and we expect these to be at our minimum and midcycle thresholds for the current rating over the next 24 months. Under our price assumptions, we project an adjusted EBITDA of $10.0 billion-$10.5 billion in 2020 (equivalent to an underlying statutory EBITDA of $8.4 billion-$8.9 billion), which translates to adjusted funds from operations (FFO) to debt of about 30%, improving to about 40% in 2021, compared with our minimum multiyear threshold of 42.5% and a temporary drop to 32.5% in low-cycle conditions for the 'BBB+' rating. We

...Weak copper prices and reduced production strain Glencore PLC's credit metrics. Earlier this year, S&P Global Ratings projected that, after weaker-than-expected results in 2019 that included an underlying EBITDA of $11.4 billion, the company's EBITDA in 2020 would remain at the same level with a potential upside ($11 billion-$12 billion). However, the global slowdown amid the COVID-19 pandemic has resulted in a revision of Glencore's projected EBITDA for the year, to only $10.0 billion-$10.5 billion with very modest recovery to $11.5 billion-$12.5 billion in 2021, underpinned by very weak copper prices ($5,700 per ton in 2020 and $6,100 per ton in 2021) and lower production. As a result, the company's credit metrics in 2020 are likely to remain below the minimum threshold for the '###+' rating (32.5% at the bottom of the cycle). Still, Glencore's supportive financial policy and the ability to restore its adjusted FFO to debt to 42.5% or better in 2021, together with further reduction in...

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