Glencore Earnings Plummet From Record Highs as Energy Prices Subside — 2nd Update

By Christian Moess Laursen

Glencore's earnings halved after coal prices retreated from the record highs that followed Russia's invasion of Ukraine, as it joins peers Rio Tinto and BHP in trimming shareholder returns on lower commodity prices.

The world's biggest miner by revenue said Wednesday that its adjusted earnings before interest, taxes, depreciation and amortization plummeted to $17.10 billion from $34.06 billion a year prior. Analysts had forecast $17.15 billion based on a consensus provided by the Switzerland-based company.

As usual, the lion's share of earnings came from its industrial activities, with adjusted Ebitda falling to $13.20 billion from $27.265 billion in 2022, when coal assets contributed $17.92 billion after Russia's war in Ukraine drove prices of the fossil fuel to historic highs. Last year, earnings from coal amounted to $7.97 billion.

The decline reflects lower average energy prices, with prices of coal and liquefied natural gas--and to a lesser extent oil--materially declining from the unprecedented levels witnessed in 2022, the commodity mining-and-trading heavyweight said.

Adjusted earnings from copper fell to $3.95 billion from $5.73 billion, while zinc earnings declined to $995 million from $1.48 billion.

Adjusted Ebitda from marketing activities--Glencore's trading arm--dropped to $3.90 billion from $6.795 billion, likewise, due to normalized energy markets.

Analysts had forecast adjusted earnings for the industrial and marketing segments at $13.13 billion and $4.02 billion, respectively.

Net profit dropped 75% to $4.28 billion, dragged by significant items of $2.48 billion, mainly comprising impairments from lower cobalt price assumptions and revision at zinc assets. Analysts had expected $7.09 billion, based on a FactSet survey.

Revenue came in at $217.83 billion, beating analysts forecasts, but significantly lower than the record highs of $255.98 billion a year earlier.

"As the world moves towards a low-carbon economy, we remain focused on supporting the energy needs of today whilst investing in our transition commodities portfolio," Chief Executive Officer Gary Nagle said.

Glencore now plans to hand back significantly less cash to shareholders than it did a year earlier, proposing a base cash distribution of $0.13 a share, or around $1.6 billion, with no immediate plans of buybacks.

A year ago, the Anglo-Swiss company declared a base distribution of $5.1 billion, or $0.40 a share, including $500 million in top-ups and $1.5 billion in buybacks.

Citing the $6.93 billion acquisition of Teck Resources' coal unit Elk Valley Resources announced in November, the company said Wednesday that it was now "managing the balance sheet."

"Although there are no top-up returns at this point, the business is expected to be highly cash generative at current spot commodity prices, which augurs well for top-up returns to recommence in the future," it said.

The cut to shareholder distributions follows peer Rio Tinto earlier Wednesday flagging a pared payout after the Australian giant posted a 19% drop in net profit, also dragged by lower commodity prices. A day earlier, BHP similarly dialed back its dividend to an interim payout of 72 cents a share, down from 90 cents, citing volatility in global commodity prices and softer-than-expected demand.

For the current year, Glencore reaffirmed the production targets set earlier this month, while expecting lower unit cash costs for copper, zinc, nickel, and coal.

At 1107 GMT, shares in Glencore were down 3.9% at 375.35 pence.

Write to Christian Moess Laursen at christian.moess@wsj.com

(END) Dow Jones Newswires

February 21, 2024 06:32 ET (11:32 GMT)

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