Glencore’s Profits Tumble Amid Lower Metal Prices
Glencore, the Swiss-based global commodities powerhouse, witnessed a significant 75% drop in profits last year, with earnings falling to $4.3 billion from a record $17.3 billion in 2022. This decline is attributed to the decrease in metal prices following the economic aftershocks of Russia's invasion of Ukraine. Despite the downturn, Glencore's adjusted earnings before interest, taxation, depreciation, and amortisation (EBITDA) stood at $17.1 billion, aligning with market predictions and down from $34.1 billion the previous year.
In a move reflecting confidence in its financial health, the FTSE 100 conglomerate announced a shareholder return of $1.6 billion, equating to a dividend of 13 cents per share. Gary Nagle, the company's Chief Executive, pointed out the absence of additional returns currently, which he attributed to the strategic acquisition of a major portion of Teck Resources' coal operations last year. Nagle emphasized the potential for the business to generate substantial cash flow at present commodity prices, suggesting the possibility of resuming extra returns to shareholders in the future.
Following the Teck Resources deal, Glencore has revised its net debt cap to $5 billion, a significant reduction from its previous target of $10 billion. At the year's end, net debt hovered around $4.9 billion, with plans to demerge the newly combined coal entity within two years post-acquisition.
Glencore operates as one of the largest mining and commodities trading firms globally, dealing in essential resources such as thermal coal, copper, and cobalt, pivotal for the transition to cleaner energy, and trading in commodities like oil and gas. Despite the overall profit dip, the mining division reported a 52% decrease in earnings to $13.2 billion, slightly above market expectations. Meanwhile, the company's trading segment saw profits decrease to $3.9 billion from a record $6.8 billion in 2022, amidst the energy market volatility triggered by geopolitical events.
The company's stock experienced a slight decline, closing down 1.1% at 386p, reflecting investor reaction to the financial outcomes and the broader economic uncertainties affecting commodity prices.
