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

Glencore forecasts earnings in its trade segment to beat expectations after a strong start to the year.

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

The division posted a record $6.4 billion in underlying profit last year due to extreme volatility in the energy markets, with oil, coal and gas prices reaching either multi-year highs or record levels.

Glencore said its marketing division had performed well in the first quarter of 2023 amid continued turbulence, though it also reported a slump in mineral production from its mines.

However, nickel and silver production both fell about a third to 20,900 tons and 4.5 kilo ounces, respectively, while wet weather at the Antamina site in Peru reduced zinc and copper production.

Zinc production was also impacted by the closure of the Matagami site in Quebec and the sale of some activities in South America.

Meanwhile, coal production fell after protesters in Colombia blocked yet another rail line and access to an export terminal used by Glencore.

Last year, the company benefited from skyrocketing thermal coal prices due to production shortfalls due to extreme weather conditions, particularly in Australia, and a temporary export ban in Indonesia.

Prices were further driven by increased demand in India and Europe, where rising gas costs make thermal coal appear relatively cheaper.

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

But while other miners like Rio Tinto and Anglo American have spun off or sold off their coal operations, Glencore currently only plans to cut emissions in half by 2035 before hitting net zero by mid-century.

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

The proposal would create a larger mining giant worth about $90 billion, but Teck’s board of directors rejected it because of the price and the exposure its investors would have to coal and an oil trading unit.

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

Major investor Sumitomo supports Teck’s proposal, while controlling shareholder Norman Keevil firmly refuses to accept an offer from Glencore.

However, authorized advisers Glass Lewis and ISS are calling for Glencore’s takeover offer to be considered. There will be a vote on Teck’s proposal next Wednesday.

In a letter published two days ago, Glencore boss Gary Nagle said his company was “willing to consider” raising its offer and talking directly to investors if his advances were “constantly rejected” by the company’s board. Teck.

Glencore shares were down 1.1 percent on Friday morning at 496.2 pence, though they have rocketed about 250 percent over the past three years.