Glencore Earnings: Sound Result but Materially Down on Lower Coal Prices, Reduced Marketing Revenue

Lower coal prices and less volatile commodity markets drove a large reduction in no-moat Glencore’s 2023 result. Net profit after tax, or NPAT, was down roughly two thirds compared with 2022 but was still a healthy USD 6.7 billion or USD 0.53 per share. This is the third highest NPAT over the past decade, trailing only the blockbuster profits earned in 2021 and 2022 driven by high commodity prices and elevated volatility in the wake of the covid pandemic and the war in Ukraine. Lower prices were the main driver of the 50% fall in adjusted EBITDA, to USD 17.1 billion, broadly in line with our estimate. Higher unit cash costs in its industrials business and decreased marketing earnings also contributed, with commodity markets continuing to normalize after the disruptions caused by Russia’s invasion and sanctions imposed on the country. Glencore’s balance sheet remains strong, with net debt of about USD 5 billion after netting out debt secured by highly liquid commodity marketing inventories.