Glencore’s profit slumps as energy crisis recedes

(Bloomberg) — Glencore Plc reported a sharp drop in profits and cut its dividend as markets reeled from price surges and wild swings that brought huge profits following Russia’s invasion of Ukraine.

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Glencore reported core earnings of $17.1 billion, about half the record figure a year ago but still one of its best ever results. The commodities trader and miner’s profits soared in 2022 as Russia invaded Ukraine and energy prices hit record highs. Global trade flows were chaotic, but many of those pressures have now eased.

The company’s commodities trading business also reported a sharp decline in profits as the volatility traders relied on began to subside. The unit earned $3.5 billion last year, down from a record $6.4 billion in 2022 but still its third-largest profit.

Glencore cut its dividend to $1.6 billion, in line with its payout policy, and announced no new share buybacks for the first time in years. The company has been delivering huge returns to shareholders in recent years but temporarily shifted its focus to reducing debt after agreeing to buy Teck Resources Ltd.’s coal business last year.

Nickel plunges

Glencore has been trying to position itself as a producer of metals needed to decarbonize the global economy, but it has also been caught up in the rout of many of the industry’s most bullish commodities. Nickel prices fell 45% last year and were hit hard. Cobalt also plunged on the back of a surge in supply from Indonesia. Other metals such as copper have also underperformed amid China’s economic instability.

Chief Executive Gary Nagle said: “While the current macroeconomic environment remains challenging, global economic growth is expected to bottom out in 2024. Expected interest rate cuts and corresponding restocking in the supply chain may bring to improve demand conditions. Western markets later this year.”

Glencore agreed last year to buy Teck Steel’s steelmaking coal business, ending months of intense takeover bids by the commodities trader. Once Glencore completes the deal, it plans to spin off the newly combined coal unit.

(Updates with CEO comments in sixth paragraph.)

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