Glencore expects marketing arm’s profits to beat top end of guidance

Glencore forecasts earnings in its trading segment to surpass the high end of expectations following a robust start to the year.

Adjusted earnings before interest and tax in the natural resources giant’s marketing business are estimated to exceed its long-term guidance range of $2.2billion to $3.2billion.

The division achieved a record $6.4billion in underlying profits last year as a result of extreme volatility in energy markets, with oil, coal and gas prices either hitting multi-year highs or record levels.

Bumper results: Glencore’s marketing division achieved a record $6.4billion in underlying profits last year as a result of extreme volatility in the energy markets

Glencore said the marketing arm had performed well during the first quarter of 2023 amid continued turbulence, although it also reported a slide in the production of minerals from its mines.

However, nickel and silver output both slumped by about a third to 20,900 tonnes and 4.5-kilo ounces, respectively, while wet weather at the Antamina site in Peru hit production of zinc and copper.

Zinc output was also affected by the company shutting down its Matagami site in Quebec and selling off some operations in South America.

Meanwhile, coal production fell after protesters in Colombia once again blockaded a rail line and entrance to an export terminal used by Glencore.

Last year, the firm benefited from thermal coal prices skyrocketing thanks to production shortages caused by adverse weather events, especially in Australia, and a temporary export ban in Indonesia.

Prices were further elevated by increasing demand across India and Europe, where soaring gas costs have made thermal coal seem comparably cheaper.

Target: Glencore is seeking to acquire Canadian rival Teck Resources for £18.5billion

The FTSE 100 group has come under significant pressure from some investors in recent years to divest its coal operations due to growing concerns about climate change. 

But, while other miners such as Rio Tinto and Anglo American have demerged or sold their coal operations, Glencore currently only plans to halve emissions by 2035 before reaching net zero by the middle of the century.

Glencore is seeking to acquire Canadian rival Teck Resources for £18.5billion in a deal that would see the two firms’ coal businesses merged, then spun off into one entity and listed on the New York Stock Exchange.

The proposal would create an enlarged mining giant valued at about $90billion, but Teck’s board has rejected it on the grounds of price and the exposure its investors would have to coal and an oil trading unit.

Instead, the Vancouver-based group wants to separate its base metal and steelmaking coal operations into two companies – Teck Metals, which would focus on copper, and Elk Valley Resources.

Major investor Sumitomo supports the Teck proposal, while controlling shareholder Norman Keevil is resolutely refusing to accept any offer from Glencore. 

However, proxy advisers Glass Lewis and ISS are calling for Glencore’s takeover bid to be considered. A vote on Teck’s proposal is due to take place next Wednesday.

In a letter published two days ago, Glencore boss Gary Nagle said his firm was ‘willing to consider’ raising its bid and talk directly to investors should its advances be ‘continually rebuffed’ by the Teck board.

Glencore shares were 2 per cent lower at 491.75p just before trading closed on Friday, although they have still climbed by approximately 250 per cent in the past three years.