Glencore PLC (LON:GLEN) reported full year revenue of $256.0bn, up 26%, though below market expectations. Underlying cash profit (EBITDA) rose 60% to $34.1bn, reaching record levels. Performance was driven by higher and more volatile energy prices which benefitted the energy products portfolio, particularly marketing and industrial coal assets.
Underlying free cash flow of $10.6bn helped net debt post a year-on-year improvement from $6.0bn to $0.1bn.
Q4 2022 hedge fund letters, conferences and more
For the coming year, management expect some challenges to the broader economic outlook but remain confident several positive tailwinds remain in play. China’s reopening, supply constraints and a global focus on decarbonisation were called out specifically.
The board has proposed a package of shareholder returns totalling $7.1bn. That’s split between a base dividend of $0.40, a “top up” dividend of $0.04 and a $1.5bn buyback programme.
The shares fell 1.8% in early trading.
Glencore's Earnings
Matt Britzman, equity analyst at Hargreaves Lansdown
“The top line may have missed market expectations, but Glencore’s taking full advantage of a messy energy market to line its coffers and there’s good news for shareholders as they get to share in the spoils, with a topped-up dividend and fresh $1.5bn buyback.
Glencore’s marketing business is perfectly poised for a scenario like this, fragmented energy markets due to the war in Ukraine meant there’s been an abundance of price discrepancies across multiple world markets – that’s exactly the scenario that makes this business unit tick.
Glencore’s reluctance to follow in the footsteps of its peers, who’ve cut ties with their less than ESG friendly coal portfolios, is proving a highly profitable decision - albeit one that may not win the group any favours with more ESG conscious investors.
Glencore’s argument is that a slow wind down of coal is the most responsible way to provide a vital energy source whilst economies wean themselves off the energy source. Whether you agree or not from a moral standpoint, it’s likely to be a choice that continues to plump up profits over the medium term.”
