Glencore boss says the firm “has never been so well positioned as it is today” after strong 2016 results
Miner and commodities trader Glencore said it has never been better positioned financially as core earnings increased 18 per cent and commodity prices rebound.
The figures
The Anglo-Swiss miner said adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) were up 18 per cent at $10.27bn (£8.24bn), while EBIT increased 81 per cent to $3.93bn – 14 per cent above previous guidance of $2.5bn to $2.7bn.
Earnings per share increased 40 per cent from 10 cents a share to 14 cents a share.
Glencore is guiding for marketing profits of $2.2bn to $2.5bn in 2017, saying the lower range reflects the sale of 50 per cent of Glencore Agriculture back in December 2016.
Shares in the FTSE 100 miner lifted 1.32 per cent to 330.05p in morning trading.
Why it's interesting
In 2015, the mining industry was hit by a commodities rout leading firms to take serious cost-cutting measures.
Glencore today said significant reductions in copper and zinc costs are expected to be sustained into 2017 along with expected higher coal margins.
Chief executive Ivan Glasenberg said: "Since our IPO in 2011 and subsequent acquisition and integration of Xstrata, Glencore has never been so well positioned as it is today." In a media call, Glasenberg told reporters the extra cash could be used for small aquisitions or a special dividend.
One fall-back Glencore reported was the decision to hedge a portion of coal production in a rising market, leading to what the firm called an "opportunity cost" of $980m.
Read more: Glencore’s copper output to suffer due to African production troubles
What Glencore said
Glasenberg said:
"Our swift and decisive actions to reposition and optimise our capital structure and industrial asset portfolio have reduced net funding by $14.7bn over the past eighteen months and generated more than $1.3bn in cost savings at our industrial assets in 2016.
"As we look forward, increasingly favourable fundamentals provide the potential to create significant long-term value for Glencore shareholders via our leading portfolio of well capitalised tier one assets and resilient marketing business, combined with significant low-cost copper and zinc growth options and disciplined approach to supply."
Read more: Glencore just finalised the "largest deal in the history of Russia"
What analysts said
Ken Odeluga, analyst at CityIndex, said:
"Like its global mining peers that reported earnings over the last couple of weeks, Glencore’s preliminary full-year report is replete with impressive improvements on costs, efficiencies, productivity and net debt reduction, as well as displaying conspicuously tighter discipline on capital expenditure."
However, he said ongoing industrial action in Chile is impacting all of the mining giants.
Odeluga added: "Glencore’s reputation as perhaps the least risk-averse mining giant accounts for the modest stock price rise so far in response to its comeback year earnings. After a triple-digit percentage recovery of its shares in just over a year, that reputation, as well as a wider mining and commodity price outlook that calls for caution, will play a large part in deciding the stock’s trajectory from here."