Glencore (LSE:GLEN, Financial), headquartered in Switzerland and one of the world’s largest mining firms and commodities traders, was the largest contributor for the quarter, returning 38%. The company’s first-quarter production was lower than a year earlier, specifically for copper, cobalt, coal and ferrochrome, though its zinc, nickel and oil output increased. Management reduced full-year production guidance across commodities due to operational disruption from the coronavirus and also postponed some investment work. However, in our assessment, the disruptive effects should not have a material impact on the company’s value. Furthermore, we were pleasantly surprised that overall cost guidance for 2020 fell while we had expected an increase. The combination of the company’s cost-cutting efforts, lower input prices (particularly diesel fuel) and beneficial currency exchange rates helped reduce the cost position across a number of Glencore’s operations. In addition, management decreased full-year capital expenditure guidance by $1-1.5 billion, which will support free cash flow generation in the current year. Finally, the company noted that its marketing segment has performed in line with the annual earnings guidance of $2.2-3.2 billion, despite significant volatility in commodities markets, particularly oil. Despite the share price increase during the quarter, we believe that Glencore remains an attractive investment.
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