Glencore cuts dividend as Swiss firm's earnings fall 50% due to collapse in global coal prices

By Louis Goss

Glencore on Wednesday said its adjusted earnings had halved over 2023, following a sharp slump in global coal prices and it outlined plans to cut its dividend in order to pay down debts accrued from its $9 billion takeover of Teck Resources steelmaking coal assets in November last year.

The Swiss firm saw its adjusted earnings drop 50% to $17.1 billion over 2023 as it suffered a $13.1 billion hit from plunging global commodity prices which retreated from the record highs seen in the immediate aftermath of Russia's invasion of Ukraine.

Glencore's (UK:GLEN) London listed shares fell 3% on Wednesday having lost 25% of their value over the previous 12 months.

The bulk of this impact related to a $9.9 billion drop in Glencore's earnings from its coal business, following a 52% slump in the price in the Australia's Newcastle Thermal Coal benchmark and a 50% drop in South Africa's API4 benchmark.

"Commodity prices trended lower in 2023, feeling the impact of higher interest rates on consumer and industrial demand and more normalization of energy markets from 2022's extreme disruption," Glencore CEO Gary Nagle said.

Glencore also announced plans to cut its shareholder payouts to $1.6 billion for 2023 compared to $7.1 billion in 2022, with a view to using the cash to pay off debts related to its acquisition of a 77% stake in Teck's Elk Valley Resources (EVR) business last year.

The Swiss commodities giant said the debt reductions are aimed at facilitating plans to eventually spin out its combined coal businesses - including its stake in Teck's EVR assets - into an independent company.

The Baar headquartered company, which is currently aiming to become a leading producer of metals used to produce renewable energy, said a 27% drop in zinc prices, a 28% fall in nickel prices, and a 50% slump in cobalt prices hit its earnings in 2023.

Glencore CEO Nagle blamed a 26% uptick in Indonesia's nickel production, and a slowdown in the market for electric vehicles, for the wider drop in nickel prices.

The Swiss firm said a $1.3 billion uptick in its costs, as well as a $500 million hit from foreign exchange rates, and a $27 million negative impact from a slowdown in production of cobalt, copper, and nickel also hits full-year earnings..

Looking ahead, Glencore said interest rate cuts and a corresponding upturn in the economy are now paving the way for a strong recovery going into 2024.

-Louis Goss

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02-21-24 0751ET

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