By Jaime Llinares Taboada

 

Glencore PLC on Thursday reported a significantly improved profit for the first half of the year, said that it will pay $4.5 billion in "top-up" shareholder returns, and lifted 2022 cost guidance to account for inflation and lower byproduct credits.

The multinational commodity mining and trading group made a net profit of $12.09 billion for the six months ended June 30, up from $1.28 billion a year earlier, mainly reflecting the performance of its coal business.

Adjusted earnings before interest, taxes, depreciation and amortization more than doubled to $18.92 billion, beating the market consensus of $18.76 billion--provided by Visible Alpha and averaged from eight brokers.

"Global macroeconomic and geopolitical events during the half created extraordinary energy market dislocation, volatility, risk, and supply disruption, resulting in record pricing for many coal and gas benchmarks and physical premia," Chief Executive Gary Nagle said.

The mining division generated adjusted Ebitda of $15.03 billion, mainly reflecting higher coal prices and the acquisition of an additional stake in the Cerrejon coal mine in Colombia in January.

However, the company said the operational performance of some of its mining assets was disappointing due to weather, geological and logistics challenges and the coronavirus affecting staffing. "We are confident, however, in being able to deliver an overall improved production performance in the second half," Glencore said.

The trading division more than doubled its adjusted EBIT to $3.7 billion amid extreme market dislocations and price movements, but Glencore expects more normal conditions for this business in the second half.

The company said net working capital increased significantly in the first half, with its trading business accounting for around $5 billion of net working capital investment. Still, Glencore said it was able to generate significant cash in the period, reducing net debt to $2.31 billion as at June 30.

This debt reduction allowed the group to declare "top-up" shareholder returns of $4.5 billion. This includes a special distribution of $1.45 billion, or $0.11 a share, and a new share buyback of $3.0 billion, or $0.23 a share. This lifts total 2022 shareholder returns to around $8.5 billion, it said.

Looking ahead, Glencore said energy prices are set to remain high in the second half, while the outlook for metals is more complex.

The group also updated its cost guidance for 2022, with forecasts now significantly higher for its mining operations. Cost guidance for the copper assets has jumped to $0.93 a pound from $0.41, reflecting lower cobalt prices. Similarly, zinc guidance rises to $0.29 a pound from minus $0.08 on the back of lower copper, gold and silver byproduct credits and inflationary pressures.

Nickel costs move to $5.64 a pound from $4.11 because of byproducts, inflation and royalties; and the forecast for coal production jumps to $79 a metric ton from $59 on higher cost assumptions and royalties.

RBC mining analyst Tyler Broda said that although cost guidance is markedly higher, the largest driver was lower byproduct credits which are well understood by the market.

"We would expect this result will drive small net consensus downgrades," Broda said in a note.

Shares at 0934 GMT were up 1.8% at 454.1 pence.

 

Write to Jaime Llinares Taboada at jaime.llinares@wsj.com; @JaimeLlinaresT

 

(END) Dow Jones Newswires

August 04, 2022 05:51 ET (09:51 GMT)

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