15th Feb 2023 11:36
(Alliance News) - Glencore PLC on Wednesday missed revenue estimates, but nonetheless showed it was well positioned to capitalise on a "messy" energy market.
The Anglo-Swiss commodity trading and mining company said annual revenue rose by 26% to USD255.98 billion from USD203.75 billion.
This came in below consensus expectations of USD266.75, however, as cited by Seeking Alpha.
Net income soared to USD17.32 billion from USD4.97 billion, thanks to significant items reflected in various impairments and a gain on the acquisition of the Cerrejon coal mine joint venture in Colombia.
Basic earnings per share multiplied to USD1.33 from USD0.38.
"The top line may have missed market expectations, but Glencore's taking full advantage of a messy energy market to line its coffers," said Matt Britzman, equity analyst at Hargreaves Lansdown.
The "unprecedented developments" in global energy markets were material drivers for both its marketing and industrial businesses, lifting adjusted earnings before interest, tax, depreciation and amortisation to USD34.10 billion, up 60% from USD21.32 billion. In 2020, Ebitda was USD11.6 billion.
Marketing adjusted earnings before interest and tax rose 73% to USD6.38 billion.
"Glencore's marketing business is perfectly poised for a scenario like this, fragmented energy markets due to the war in Ukraine meant there's been an abundance of price discrepancies across multiple world markets – that's exactly the scenario that makes this business unit tick," Britzman explained.
Industrials also saw a strong increase, with adjusted Ebitda up 59% to USD27.3 billion.
This was due to an increase from energy products, the contribution from the Cerrejon partner buyout, as well as "record prices" for its key coal benchmarks.
The firm said some of its shareholders looked to accelerate its emissions reduction pathway, with a current target of 50% reduction by 2035. However, the "overwhelming majority" were in favour of what it termed its "current responsibly managed coal decline strategy".
"Glencore's reluctance to follow in the footsteps of its peers, who've cut ties with their less than ESG friendly coal portfolios, is proving a highly profitable decision - albeit one that may not win the group any favours with more ESG conscious investors," Britzman said.
The firm's contention is that a "slow wind down" of coal is the most responsible way to ensure the provision of a vital energy source, while economies transition to other energy sources, Britzman explained.
"Whether you agree or not from a moral standpoint, it's likely to be a choice that continues to plump up profits over the medium term...there's good news for shareholders as they get to share in the spoils," he added.
Glencore declared a dividend of USD0.40, up 54% from USD0.26 following strong earnings. This was ahead of UBS estimates of USD0.38. The firm also launched a USD1.5 billion share buyback programme.
Shares in Glencore were down 0.3% to 514.20 pence each in London on Wednesday morning.
By Elizabeth Winter, Alliance News senior markets reporter, and Artwell Dlamini, Alliance News reporter.
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