Market Research Record – In a recent announcement, Glencore Plc has reaffirmed its expectations of an annual profit ranging from $3.5 billion to $4 billion from its commodity trading business. The company is on track to surpass its long-term target for the fourth consecutive year, signaling a return to normalcy in the market. The easing of surging prices and volatility, which was triggered by Russia’s invasion of Ukraine last year, has contributed to this positive outlook.
Despite the calmer commodity markets, Glencore remains confident in its traders’ ability to deliver robust results this year. While the projected profit falls short of the record-breaking $6.4 billion achieved in 2022, it still significantly exceeds the company’s longstanding guidance range of $2.2 billion to $3.2 billion.
The normalization of conditions in the commodities market has enabled Glencore to release some of the additional working capital previously tied up in the business. Although the heightened market imbalances and volatility during 2022 impacted profitability, they also facilitated the investment release in non-RMI marketing working capital.
Glencore’s CEO, Gary Nagle, stated that the company’s profits were influenced by the subdued market conditions, but the overall normalization is beneficial. The decline in Glencore shares indicates the market’s response to this forecast.
Years of substantial profits have left Glencore with a debt level close to zero, prompting investors to anticipate the company’s plans for its cash reserves when interim results are reported on August 8. Earlier this year, Glencore declared its intentions to return over $7 billion to shareholders through dividends and buybacks.
In addition to its thriving trading business, Glencore is a major player in the mining sector. The company has reaffirmed its full-year production forecasts, anticipating increased output for copper, zinc, and nickel in the latter half of the year.
The ongoing battle with Teck Resources Ltd. has been another focal point for Glencore this year. Following an unsolicited offer for the Canadian company, Glencore has proposed acquiring Teck’s steelmaking coal business for approximately $8 billion as an alternative to a full takeover.
Having surpassed its long-term trading profit target for three consecutive years, Glencore is evaluating potential adjustments. However, the company’s senior executives have emphasized their intention to wait for market conditions to normalize before considering any changes to the guidance range.
