Global commodity trader and mining titan Glencore saw its core profit halved in the six months to end-June as underlying prices came off the boil.
Adjusted earnings before interest, taxes, depreciation, and amortisation (ebitda) fell 50% to $9.4bn as average coal prices and Brent crude, among other commodities, retreated from historic highs in the comparable period a year ago when Russia invaded Ukraine, sparking supply concerns.
The uneven and uncertain global economic recovery from Covid-19 has also weighed on commodity markets. The US economy continues to be more resilient than initially thought despite a series of the interest rate increases since March 2022, but the post-Covid recovery in China — the biggest consumer of minerals — appears to have lost momentum.
Net income plunged 61% to $4.6bn year on year, while shareholders will receive a combined special cash dividend of $1bn, or $0.08 a share. The company also announced a new $1.2bn buyback programme intended to run until release of its full-year results in February 2024.
The buyback amount and shareholder payout are sharply lower than a year earlier, in part because the company is holding back $2bn in cash for its bid to buy Teck Resources’ coal business.
The special cash distribution will be paid along with the $0.22 per share second tranche of the cash distribution announced in February.
“Following 2022, a year characterised by extreme global geopolitical and economic turbulence, generating extraordinary energy market dislocation, volatility, supply disruption and record prices for many coal and gas benchmarks, 2023 has, for the most part, seen energy trade flows rebalance and normalise,” CEO Gary Nagle said in a statement.
“The strength of our diversified business model across industrial and marketing, focusing on metals and energy, has again proved itself adept in a range of market conditions.
“Against the backdrop of a normalisation of commodity market imbalances and volatility, primarily across the energy spectrum, our marketing and industrial segments posted a healthy earnings performance.”
The company’s stock was down 3.83% to R104.64 in mid-afternoon trade on the JSE, the most since early May.
Glencore and Teck spent much of this year in a bruising fight after Teck repeatedly rejected a takeover offer from its bigger rival, which said it wanted to create two new, more specialised company from the pair’s combined coal and metals businesses.
The latest twist in the saga came in June, when Glencore proposed buying Teck’s steelmaking and coal business for about $8bn as an alternative to its full takeover bid.
With Bloomberg
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