(Bloomberg) — Glencore Plc will return more than $7 billion to shareholders in dividends and buybacks after the commodities giant reported another blockbuster profit driven by its coal and trading divisions.
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While Glencore and its rivals have been positioning themselves to take advantage of rising demand for metals linked to the energy transition — such as copper for wiring and nickel for batteries — the commodity giant’s profits last year were overwhelmingly driven by mining and trading fossil fuels.
Glencore’s core profit rose 60% to a record $34.1 billion, of which more than half — $17.9 billion — came from coal production, the company said in a statement on Wednesday. The commodity trading unit earned $6.4 billion in core profit, also its highest ever.
Glencore has been one of the biggest beneficiaries from the chaos in commodity markets caused by Russia’s invasion of Ukraine. The company’s decision to keep mining coal while rivals exited has paid off massively, as the dirtiest fuel surged to a record last year, while its sprawling trading business has benefited from sharp price swings and dislocations in energy markets across the world.
“The unprecedented developments in global energy markets were material drivers for both our marketing and industrial businesses,” Chief Executive Officer Gary Nagle said in the statement. “Demand for many of our commodities is likely to remain healthy, while supply constraints persist and inventories remain relatively low.”
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With debt hovering around zero, Glencore said it will make a record payout to shareholders of $5.1 billion dividend, a top up payment of $500 million and buyback of $1.5 billion.
Glencore shares fell with other equities in London on Wednesday, trading 1.4% lower at 8:31 a.m.
Glencore is the first of the big diversified miners to post 2022 earnings. While other producers are also making big profits, Glencore’s huge coal exposure sets it apart. That’s a reversal from previous years when the company typically lagged mega miners BHP Group and Rio Tinto Group because it doesn’t produce any iron ore.
Now, Glencore has the advantage. Coal prices spent much of last year at record levels as utilities curb imports from Russia due to the war in Ukraine, tightening the amount of available supply, while surging natural gas prices increase demand for other energy sources.
Glencore’s earnings from coal were closing in on the entire group’s profit of $21.3 billion a year earlier, and have put it on course to overtake Rio Tinto as the world’s second-most profitable miner.
Still, the company has come under growing pressure from some investors to detail its plans to eventually stop mining coal when its current deposits run out. It began a consultation process last year after enough shareholders voted against its climate plan. Some investors have been asking for more information about the wind-down plan, and assurances that coal production numbers will not jump back up in the years ahead.
Glencore Gets Rich on Coal, But Questions Persist Over Exit Plan
The commodities giant’s traders also had a strong year, with core profit jumping 73%, as it benefited from wild swings in energy markets that followed the invasion of Ukraine.
Trading earnings were driven driven “primarily by our energy departments successfully navigating the extreme market imbalances, volatility and dislocations across crude oil, LNG, refined products, coal and logistics infrastructure,” Nagle said.
While Glencore is churning out record profit and shareholder returns, the past few years have been marred by a raft of investigations that came to a head last year when the company admitted to bribery and market manipulation and said it will pay about $1.5 billion to settle with the US, UK and Brazil.
There are still two investigations into the company outstanding: one in Switzerland and another in the Netherlands related to “potential corruption pertaining to the DRC,” the company said.
Glencore is also continuing efforts to simplify its business — it’s already sold several smaller or less profitable assets in recent years, and has now started a sales process for its stake in Peru zinc miner Volcan Cia. Minera.
(Updates with share price.)
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