Glencore’s profit suffer as commodity prices slump

Miner Glencore (LSE: GLEN) reported a steep drop in first-half profit and slashed returns to its shareholders as the surge in commodity prices that followed the invasion of Ukraine eases.

The Anglo-Swiss commodity mining and trading company on Tuesday reported first-half core earnings of $9.4bn (£7.4bn), after posting a record $12.09bn a year earlier.

Profits suffer as commodity prices fall back to normal

The mining giant saw profits soar last year as Russia’s invasion of Ukraine sent energy prices soaring.

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Gary Nagle, CEO, described the performance as “healthy”, saying it came “against the backdrop of a normalisation of commodity market imbalances and volatility, primarily across the energy spectrum”.

Glencore said it would increase its dividend by $1bn and buy back another $1.2bn of shares in a move that takes the amount it has returned this year to $9.3bn.

It added that its divestment of agricultural business Viterra and subsequent merger with US giant Bunge is expected to close in the middle of 2024.

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) decreased 50% on year to $9.40bn in the first six months of the year, driven in part by coal prices coming off their highs. The price of coal has plunged by 69% since September last year.

Net debt stood at $1.54bn at the end of June from $75m at the end of last year. Earnings per share plummeted 61% to $0.36 from $0.92, with revenues steeply falling 20% from $134.4bn to $107.4bn.

Copper production is guided to drop to 1.04 million tonnes this year from 1.05 million tonnes in 2022. Coal output is expected to remain steady at 110 million tonnes.

On cobalt, production is estimated at 30,000 tonnes from 43,800 tonnes, and zinc is projected at 950,00 tonnes, compared to 939,000 tonnes.

Nickel production is predicted to increase to 112,000 tonnes from 108,000 tonnes.

The FTSE-100 company is holding back $2bn in cash while it bids to buy Teck Resources’ coal business.

Glencore has made three merger bids for Canadian metals and mining group Teck Resources this year, which have all been rejected.

In June, Glencore proposed buying Teck’s steelmaking coal business for about $8 billion as an alternative to its full takeover bid. 

Looking ahead, the company said that moderating inflation and supportive government policy in China across end-user sectors are bringing a more positive macroeconomic backdrop in the second half.