Glencore reports 'record profitability' amid volatile markets

Multinational mining giant Glencore reported a strong 2022 financial performance in its preliminary results on Wednesday, with adjusted EBITDA standing at $34.1 billion, up 60% year-on-year.

The FTSE 100 company said that was underpinned by robust marketing and industrial results, with Glencore also reporting a net income of $18.9bn, up 107% compared to the prior year.

After significant items, its net income attributable to equity holders stood at $17.3bn, up 248%.

The board said the significant items reflected various impairments recorded, and a gain on the acquisition of Cerrejón.

Its net cash, purchase and sale of property, plant, and equipment was $4.5bn, up 19%.

Glencore announced shareholder returns of $7.1bn, consisting of a proposed 40 US cents per share, or $5.1bn, base distribution for 2022 cash flows, alongside an additional 'top-up' of $0.5b, or four cents per share share, cash distribution and a new $1.5bn, or 12 cents per share, share buyback programme.

The company's industrial assets adjusted EBITDA was $27.3bn, up 59%, reflecting a $13bn increase from energy products in line with significantly higher coal prices.

Metals adjusted EBITDA was $9.3bn, down $2.7bn, which the board put down to higher costs and lower volumes.

Energy adjusted EBITDA was $18.6bn, up by $13bn, or 232%).

The company’s unit cost results were 80 cents per pound for copper, up 13 cents year-on-year; 38 cents per pound for zinc, up 42 cents; 631 cents per pound for nickel, up 177 cents; and $79.00 per tonne for coal.

Glencore's marketing adjusted EBIT was $6.4bn, up 73% year-on-year, while energy adjusted EBIT was $5.2b, up 273%, mainly due to already tight post-pandemic energy markets that were jolted by significant dislocation, generating extreme volatility in oil, refining margins, freight, gas, and coal.

Metals adjusted EBIT slid 34% to $1.6bn, which the board said mainly reflected “challenging conditions” arising from China's prolonged Covid-19 lockdowns, as well as higher overall inflation, triggering tighter monetary conditions and demand uncertainty.

The company described its balance sheet as “strong”, with net debt being managed around a $10bn cap, and sustainable deleveraging after base distribution below that cap periodically returned to shareholders via top-up cash distributions and buybacks, as appropriate.

Glencore said its year-end net debt of $0.1bn allowed for $2bn of additional shareholder returns under their ‘top-up’ framework, taking into account the base distribution of $5.1bn and $2.9bn of pro-forma debt-like other cash commitments at year-end.

The firm said it had available committed liquidity of $13bn, with bond maturities capped at $3bn in any given year.

“The global pandemic, recovery from it and years of underinvestment, followed by conflict in Europe, exposed pre-existing vulnerabilities in energy security and supply chains, underpinning the generally high and volatile 2022 commodity price environment, which enabled the group to generate record profitability for the year,” said chief executive officer Gary Nagle.

“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 shorter-term challenges that may arise, as well as meet the resource needs of the future.”

At 0807 GMT, shares in Glencore were down 1.86% at 506.3p.

Reporting by Josh White for Sharecast.com.