Glencore, the largest natural resources company in the world, reported on Tuesday that its earnings dropped by 60% owing to commodity market imbalances and volatility.
In its half-year report for the six months to June, the group said headline earnings decreased by almost 60% to about $4.28 billion (R80.4bn), and revenue fell by 20% to $107.4bn.
The group said this followed extreme global geopolitical and economic turbulence in 2022, which pushed prices for many coal and gas benchmarks to record levels.
Despite this, the group announced a “top-up” return to shareholders of $2.2bn, which includes $1bn in a special dividend and $1.2bn in share buybacks.
Glencore’s CEO, Gary Nagle, said: “Against the backdrop of a normalisation of commodity market imbalances and volatility, primarily across the energy spectrum, our Marketing and Industrial segments posted a healthy earnings performance, delivering group Adjusted Ebitda of $9.4 billion, cash generated by operating activities of $8.4 billion and net income attributable to equity holders of $4.6 billion.
“Reflecting these solid headline earnings, together with a $3.7 billion release of net working capital, including $1.4 billion of readily marketable inventories, net funding remained static over the period, after disbursing $5.2 billion of shareholder returns, $2.5 billion of net capital expenditure and $2.7 billion of final 2022 tax payments in Australia and Colombia. Net debt finished the period at $1.5 billion,” he said.
Nagle said as the world moved towards a low-carbon economy, Glencore remained focused on supporting the energy needs of today while investing in their transition metals portfolio.
“Over the year to date, we committed $1.25 billion, mainly on purchasing the balance of the large, long-life MARA copper project, not already held by Glencore, and acquiring a minority stake in Alunorte, a world-class alumina refinery, thereby providing Glencore with long-term exposure to lower-quartile carbon alumina.
“We look to the future confident that we have the right pathway to succeed in a Net-zero economy and create sustainable long-term value for all stakeholders, while operating in a responsible and ethical manner across all aspects of our business,” Nagle said.
Looking ahead, Nagle said moderating inflation and supportive government policy in China across key end-user sectors, were bringing a more positive macro-economic backdrop in the second half of 2023.
“Low metal inventories, higher production costs, geopolitical uncertainty, and energy transition demand are all supportive of above-average real-term prices through the cycle and into the longer term.
“The strength of our diversified business model across industrial and marketing, focusing on metals and energy, has proved itself adept in a range of market conditions, giving us a solid foundation to successfully navigate the near-term macro-economic uncertainty, as well as meet the resource needs of the future,” he said.
BUSINESS REPORT