Glencore Reports Profit Slide as Key Earner Coal Slumps

(Bloomberg) — Glencore Plc posted a slide in full-year profit as the commodity giant battles slumping prices for key materials and suggested that it’s prepared to cut output to support prices in some markets.

The company reported core earnings of $14.4 billion, 16% lower than the previous year. Still, Glencore said it was returning $2.2 billion to shareholders, including a top up buyback of $1 billion. Glencore also revealed on Wednesday that it is considering whether to move its primary listing from London, where the company has traded since 2011.

The firm also took impairments, said that copper production would fall this year and reported higher debt than some analysts expected. Its shares fell as much as 7.2% in London, the steepest intraday drop in almost two years.

Glencore, which posted record profits just two years ago as it cashed in on the global energy crisis, has since seen its earnings decline. Prices for coal, one of its biggest earners, have slumped amid soaring stockpiles in Asia. Cobalt, where Glencore was once the top producer, has tumbled in value as new supplies flood the market.

While those two commodities have been hit hard, the wider mining world remains under pressure as China’s brittle economy undercuts demand for some of the most important metals. BHP Group, the biggest miner, reported a sharp drop in profits and cut its dividend earlier this week.

Glencore, which has held it primary listing in London since first selling shares in 2011, said the optimal location for that remained under study. In 2023, when the company had planned to spin off its coal business, it had said the standalone unit would trade in New York, a market more favorable to fossil fuels.

Glencore Is Studying Whether to Move Primary Listing From London

Coal prices have slumped to the lowest levels since mid-2021 in the past few weeks, driven by record production in India and China. That’s seen stockpiles swell in these countries.

The slump in coal prices has been dramatic. Australia’s Newcastle coal futures have fallen to about $100 a ton, down 20% since the start of the year. They hit a record $463.75 a ton in September 2022, following Russia’s invasion of Ukraine. Mining has boomed since then on the back of spiking prices and energy security fears.

That’s marked a major turnaround for Glencore’s coal fortunes. The company reported its highest ever profit in 2022, making a staggering $18.6 billion from coal alone.

Glencore, which said it will produce between 92 million and 100 million tons of energy coal this year, is looking at what types of coal and which regions could see a production cut.

“We do have concerns about an oversupplied market,” said Chief Executive Officer Gary Nagle. “There’s a good chance we’ll make a supply decisions in the coming weeks.”

The company may also reduce ferrochrome output and copper smelting. Glencore has a long history of cutting production to support prices in markets such as coal and zinc.

Glencore’s sprawling commodity trading business also reported a drop in earnings as the volatility that its traders thrive on continues to fade. The unit earned $3.2 billion last year, down from $3.5 billion in 2023. 

Debt rose to $11.2 billion after buying coal mines from Teck Resources Ltd, while the company said copper output could fall by as much as 100,000 tons this year and won’t exceed last year’s levels until 2028.  

The company took impairments on its South African coal business and a nickel operation its shuttered.

Glencore’s copper and zinc smelting businesses suffered from a sharp drop in processing fees as supplies of mined ores tightened up. It took a $1.5 billion writedown on various smelting units, and said it is strategically evaluating the longer-term business case for the assets.

–With assistance from Mark Burton.

(Updates with shares in third paragraph)

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