Glencore, the international mining and commodity trading group, saw its shares drop in morning dealing in London today despite a 23% rise in half-year profits.
The stock fell by 5.55p, or 1.17%, to 320.75p as the Glencore results, while strong, came in below analysts’ expectations.
Earnings per share were up 12% to 0.19 US cents, from 0.17 cents in the first half of last year.
Metals and minerals lead the way
Glencore has already announced $2.85 billion of distributions to shareholders and a $1 billion share buy-back programme, which will bolster the share price by reducing the amount of stock in issue.
The company’s preferred measure of profitability is adjusted earnings before interest payments, tax, depreciation and amortisation (EBITDA). Depreciation refers to the reduction in the value of tangible assets over time, while amortisation refers to the decline in value of intangible assets.
Breaking the figures down into the group’s main sectors, metals and minerals activities saw a 28% rise in adjusted EBITDA from $4.699 billion during the first half of last year to $6.013 billion. This was split between profits from industrial activities, such as mining, and marketing activities, respectively contributing $4.775 billion and $1.238 billion.
In energy products, adjusted EBITDA rose by 19% from $2.18 billion in the first half of last year to $2.586 billion. This was, again, split between industrial and marketing activities, contributing $2.217 billion and $369 million respectively.
Glencore will co-operate with US investigators
Agricultural products, a purely marketing arm of the company, was a weak performer, its results can be blamed in part on continued pressure on margins and weak crop results in Argentina and Australia. Adjusted EBITDA fell 34% to $109 million, from $166 million in the first half of 2017.
Glencore said of agricultural products: “Given some seasonality and the low base, we expect a significantly improved performance in the second half of 2018 compared to the first half.”
In his review, Mr Glasenberg noted that a Glencore subsidiary was ordered in early July by the US Department of Justice to produce documents and other records relating to Glencore’s dealings in Nigeria, the Democratic Republic of Congo and Venezuela to allow officials to check the company’s compliance with laws covering corrupt practices and money laundering.
Glencore would fully co-operate, said Mr Glasenberg.
China is a major consumer of the commodities needed to fuel its economic expansion.
He added: “Notwithstanding such volatility, we currently see underlying demand remaining healthy.”