ii view: Glencore admits it could exit UK stock market listing

Full-year results to 31 December

• Revenue up 6% to $230.9 billion
• Adjusted profit down 16% to $14.4 billion
• Net debt of $11.2 billion, up from $4.9 billion a year ago
• Total shareholder returns of $2.2 billion, up from $1.6 billion during 2023
• Dividend of 10 US cents per share ($1.2 billion)
• Share buyback of $1 billion

ii round-up:

Miner and commodity trader Glencore (LSE:GLEN) today outlined a downturn in annual profit which broadly matched City expectations, but with shareholder returns falling shy of analyst hopes.

Lower energy coal prices at its mining or industrial division dragged annual 2024 adjusted profits (EBITDA) down 16% to $14.4 billion. 

Total declared shareholder returns of $2.2 billion was below estimates of up to $3 billion, with management’s early 2025 production forecasts for copper and zinc also light of City hopes. The miner is also considering a move in its primary stock market listing away from London. 

Shares in the FTSE 100 miner fell 5% in UK trading having come into these latest results down around a tenth over the last year. That’s similar to fellow diversified miners BHP Group Ltd (LSE:BHP) and Rio Tinto Registered Shares (LSE:RIO) and comes against a challenging economic backdrop in China. The FTSE 100 index is up 13% over that time. 

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Glencore has operations in over 30 countries and is both a producer and trader of more than 60 different commodities. Profits from mining (the industrial division) fell 20% year-over-year to $10.6 billion. Trading, or marketing profit retreated 3% to $3.8 billion. 

A dividend of 10 US cents per share worth $1.2 billion will be paid in two instalments of 5 cents per share in both June and September. A planned share buyback of $1 billion adds to returns and is due to complete by the interim results in August. That’s an effective return of 18 US cents per share, up from 13 cents in 2023.  

Group net debt of $11.2 billion as at 31 December was up from $4.9 billion a year earlier, exceeding analyst forecasts of $8.7 billion. 

Glencore’s net outlay on capital expenditure was $6.7 billion, up from $5.6 billion in 2023. The miner also parted with $7 billion in 2024 to acquire a metallurgical or blast furnace coking coal portfolio from Teck Resources Ltd Class B (Sub Voting) (NYSE:TECK). 

Given early 2025 production and cost estimates, Glencore forecasts a 2025 adjusted profit of $15.5 billion, below current City hopes of around $16.8 billion. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, flagging Glencore as a ‘top pick.’ A first-quarter production update is scheduled for 30 April. 

ii view:

Started in 1974, Glencore is today headquartered in Baar, Switzerland and employs around 150,000 staff and contractors globally. Group customers range from car makers to steel, power generation and battery manufacturing companies. Geographically, major markets include China, Japan and the USA. 

For investors, the tough economic backdrop, particularly for major market China, cannot be overlooked. Glencore’s involvement in coal production may deter potential new investors given its considered role in climate change. Previous corruption allegations and legal settlements add to ethical concerns, while exposure to political instability in countries of operation such as Democratic Republic of the Congo and Kazakhstan also warrants consideration.

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More favourably, both a mining and marketing business offer operational diversity not seen at rivals. An arguable backtracking on global climate change aspirations may leave its involvement in coal looking more sensible. China continues to implement measures to try and boost its economy, while exposure to energy transition metals such as copper, cobalt and zinc used in batteries, is not to be overlooked. 

On balance, profit remains under pressure while a possible move of its primary stock market listing away from London will not suit all investors. But Glencore’s diversity of operations combined with a consensus analyst fair value estimate above 460p per share, mean it will likely remain a popular stock among investors, particularly at these lower levels. 

Positives: 

• Diversity of commodities and operations
• Robust balance sheet

Negatives:

• Uncertain economic outlook
• The weather can hinder performance

The average rating of stock market analysts:

Buy