Glencore has reported document full-year earnings pushed by excessive vitality costs and the Ukraine warfare, highlighting how buying and selling homes have been among the many largest beneficiaries of the vitality disaster.
The Switzerland-based miner and commodity dealer’s adjusted earnings earlier than curiosity, tax, depreciation and amortisation rose 60 per cent to $34bn final yr, the corporate stated on Wednesday, triggering a document $7.1bn return to shareholders.
Greater than half of these earnings got here from its coal-mining enterprise, the place ebitda greater than tripled to $17.9bn.
One of many world’s largest buying and selling homes, Glencore has profited from surging costs for the commodities it produces and from excessive volatility in commodities markets, which propelled its buying and selling division’s income to a document excessive.
Nevertheless, coal costs have dropped lately as a light European winter and excessive stockpiles result in diminished demand.
Chief government Gary Nagle acknowledged weak spot within the coal market however stated the present costs had been nonetheless excessive relative to historic norms.
“Now we have seen a yr the place folks had been determined for vitality, and we helped provide them, and have given them consolation that they might have the vitality sources,” he stated.
“A number of the tightness available in the market [last year] was due to panic available in the market, and Europe shopping for coal going into winter,” which had now eased, he added.
The highly effective commodity buying and selling homes that transfer uncooked supplies all over the world have reaped enormous income from the risky vitality costs triggered by Russia’s invasion of Ukraine virtually a yr in the past.
Glencore’s rival Trafigura additionally generated a record $7.1bn in internet revenue final yr.
Final week, Trafigura reported a writedown of greater than half a billion {dollars} regarding an alleged nickel buying and selling fraud.
Nagle stated on Wednesday that Glencore had no publicity to the businesses allegedly concerned, and that he was assured an identical incident couldn’t occur at Glencore due to the corporate’s checks and controls.
Whereas conventional vitality corporations comparable to oil and gasoline producers have been subjected to windfall taxes in a number of European nations including the UK, the buying and selling homes have largely prevented related therapy.
Nagle stated Glencore had been hit with “materials” windfall taxes on its coal manufacturing in Australia and Colombia, and that greater coal costs meant greater royalty funds to governments.
Nevertheless, earnings from Glencore’s intensive buying and selling operations, which generated $6.4bn in earnings earlier than curiosity and tax final yr, have been largely unaffected.
The corporate stated its 2023 earnings can be considerably decrease than final yr’s, largely due to decrease coal costs.
“Clearly, the money returns going ahead will diminish if the facility disaster in Europe is over, and coal costs are structurally decrease,” stated Myles Allsop, analyst at UBS.
“Clearly, 2022 was peak for coal costs, a peak for Glencore’s earnings and now the controversy is, how shortly will earnings and money movement normalise,” he added.
Glencore’s coal enterprise has additionally been the topic of questions from a few of its shareholders, who filed a decision final month asking for extra readability on how its manufacturing lined up with its local weather targets.
The group stated on Wednesday that it deliberate to return $5.6bn in money dividends to shareholders, together with a $1.5bn share buyback.
Glencore shares, which have climbed about 20 per cent over the previous 12 months, rose 2 per cent in early London buying and selling on Wednesday.
Final yr, Glencore paid more than $1.6bn in penalties and pleaded responsible to costs of bribery and market manipulation, following a co-ordinated investigation by authorities within the US, UK and Brazil. Comparable investigations are below means in Switzerland and the Netherlands.
