Soaring fossil fuel prices allow Glencore to reap massive profits

Glencore, the Swiss commodities trading giant, is to return another $4.5 billion to its shareholders after seeing its profits explode in the first half of the year in the face of soaring oil, gas and coal prices. For the first half of the year, its net profit attributable to shareholders increased ninefold, jumping to nearly $12.1 billion, it said in a statement Thursday.

Operating profit from its brokerage business more than doubled, to $3.7 billion, on strong price profitability. Its mining activities, for their part, saw their gross operating surplus increase by 127% to 15 billion dollars due to record coal prices. To this was also added the contribution of the Cerrejón coal mine in Colombia, of which Glencore bought the parts it did not yet own, specifies the group.

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“Exceptional” performance

The explosion in commodity prices since the start of the war in Ukraine has enabled it to sharply reduce its debt, bringing it down to 2.3 billion dollars, against 6 billion at the close of the annual accounts at the end of December. The group based in Baar, in the Swiss canton of Zug, known for its advantageous taxation for companies, will increase the sums reversed to its shareholders, both in the form of dividends and share buybacks.

It will carry out a special redistribution of 1.45 billion dollars at the level of the dividend and pay them 3 billion in share buybacks. These additional payments bring the sums reversed to its shareholders for 2022 to $8.5 billion. said its managing director, South African Gary Nagle, quoted in the press release.

“Complex” prospects for metals

For the second half of the year, the boss of the group active in many raw materials, such as coal, copper and cobalt, notes “the tightening of conditions” at a time when central banks are operating with their interest rates. ‘ ‘interest in fighting inflation but also ‘the deterioration’ of the economic outlook, creating uncertainty for the sector.

“Nevertheless, with few near-term options for rebalancing global energy markets, coal and liquefied natural gas prices look set to remain elevated, particularly in the face of the challenge to secure sufficient energy and reliable for the coming winter in the northern hemisphere,” he added.

“For metals, the prospects are more complex”, on the other hand suffered the boss of Glencore, between the “risks on the offer”, the “shortages of personnel, water and energy” as well as “disturbances on supply chains” and “sovereign risks” and the “probable weakening” of demand in certain markets. He does, however, see “recent signs” suggesting China is recovering from the second-quarter low point, “which could help offset weaker conditions in other key markets.”

Around 9:30 GMT, the action rose 1.77% to 453.95 pence on the London Stock Exchange, where the title is listed, while the FTSE100, its benchmark index, fell by 0.18%. Glencore is the latest player in the industry to deliver big returns to its shareholders, noted Russ Mould, chief investment officer at AJ Bell. “Nevertheless, with downside risks simmering, investors may not see such levels of gain generated in the future,” he said.

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