Glencore reports steep drop in profit as the good times come to an end for the mining giant

Glencore has reported a drop in profit and reduced shareholder returns following the “normalisation of international energy flows.”

The firm’s full-year 2023 figures showed the group reported earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $17.1bn in 2023, down by around half compared to a year ago.

The group’s mining and production business recorded a 52 per cent drop in EBITDA to $13.2bn (£10.5bn) mainly thanks to lower earnings from coal production.

Meanwhile, Glencore’s marketing and trading business reported a 46 per cent drop in earnings before interest and tax (EBIT) to $3.5bn (£2.8bn) due to a return to a “more stable market environment” for oil and gas following the volatility seen after Russia invaded Ukraine in 2022. This was the third-highest profit in the company’s history for trading.

In line with its policy to return a set percentage of profits to investors, the company lowered its base dividend to $1.6bn (£1.3bn) or 10p per share. However, the group did not announce an additional cash return by way of a share buyback as it has done in the past.

Glencore paid out $10.1bn (£8.1bn) to shareholders in 2023 with buybacks and dividends and reported a net debt/adjusted EBITDA ratio of 0.29 times at the end of December.

Glencore chief Gary Nagle said: “Over the past few years, our capital structure and credit profile has been managed around a $10bn net debt cap, with sustainable deleveraging (after base distribution) below the cap periodically returned to shareholders via special distributions and buybacks. Under this framework, we announced $20.3bn of shareholder returns since 2020, comprising $10bn of base distributions and $10.3 billion of “top-up” returns.”

“Although there are no “top-up” returns at this point, the business is expected to be highly cash generative at current spot commodity prices (spot illustrative annualised free cash flow generation of c.$5.2bn from adjusted EBITDA of c.$15bn), which augers well for top-up returns to recommence in the future,” he added.

Glencore agreed to buy Teck’s steelmaking coal business last year and when completed the company plans to spin the entity off into a new business.