Glencore’s net profits more than tripled to record $17.3 billion in 2013, as the commodities giant capitalized on high coal prices, energy market chaos and Russia’s invasion.
According to the FTSE 100 trader and miner, $7.1 billion would be returned to shareholders by $5.6 billion in dividends and a $1.5 trillion share buyback program.
The adjusted earnings before interest taxation, amortisation, and depreciation (ebitda), grew by 60% to reach $34.1 billion. This is also a record. This figure, which is almost $17.9billion, was more than half, and up from $5.2billion in 2021. As Russia cut gas supplies to Europe, coal prices rose more than two-fold last year to $17.9 billion. To keep the lights on, countries switched to coal-fired power stations.
Glencore’s commodities traders earned an adjusted ebitda $6.8 billion. $5.6 billion of that was from the sale and purchase of energy products, including oil, fuel, and coal.
Glencore stated that Russia’s invasion invading Ukraine caused one of the most significant dislocations in global oil markets history. “The unimaginable 2022 developments in global oil markets were significant drivers for our industrial and marketing businesses.”
Profits of record proportions helped reduce the company’s net borrowing to nearly zero.
Based in Switzerland, the company mines many commodities. However, it has become increasingly focused on developing metals like cobalt or nickel for electric vehicle batteries and energy transition. Its core coal mining business has been its most profitable segment in the last year.
Glencore’s chief executive officer, Gary Nagle, stated that the global pandemic and recovery from it, as well as years of underinvestment and conflict in Europe, exposed vulnerabilities in energy security, supply chains, and energy security. This led to a volatile and high commodity price environment in 2022, which allowed the group record profits for the year.
Many critics have criticized companies that generated record profits due to the war. Nagle said that it helped customers ensure energy security during times of uncertainty and disruption. We have received letters from these customers expressing our gratitude for being there during their time of need.
“We have helped to facilitate a real transition away from being in able to use Russian material… and allow them keep the lights on to keep their economies running.”
He stated that the company had taken some steps to tax its windfalls, including paying higher royalty rates on coal in Queensland, Australia since July, and higher levies starting in Colombia this year.
As Europe’s energy crisis has eased, the record-breaking coal prices that drove the 2022 results have fallen back in the last few months. The industry benchmark for Newcastle coal prices saw prices drop from nearly $400 per tonne at year end to $220 per tonne today.
Glencore informed investors today that its 2023 coal Ebitda, based on spot prices, would nearly halve to $9.3 Billion. Early December, Glencore’s 2023 outlook suggested a coal ebitda estimate of $16.7 billion.
Nagle stated that “some of the tightness was due to panic in the markets and Europe buying significant quantities of coal going into winter. The result has been a milder winter in Europe, increased nuclear use in Europe, and greater renewable generation. Therefore, not all of the coal purchased was burned and there are still some stockspiles in Europe.
Nagle stated that although coal prices have been declining, $200 per tonne is still “a remarkable number”. He said, “We are only in February.” Last year, the war had not yet broken out… Anything could happen to tighten the market quickly.”
Britishvolt losses are ‘immaterial’
After the collapse of the gigafactory, Glencore dismissed its PS40 million investment in Britishvolt as “immaterial”.
Gary Nagle, chief executive at the commodities giant, stated that he still believed that a gigafactory for electric vehicle batteries in Britain would succeed so Glencore could supply it metals. He assured the City, however, that it did not intend to take over the abandoned project. Analysts were told by him that they are not buying the project.
Britishvolt had planned to construct a gigafactory in Northumberland near Blyth, but failed to secure emergency funding. Administrators selected Recharge Industries, an Australian battery startup, as the preferred bidder.
Glencore was a key backer of Britishvolt. It made an initial undisclosed purchase as part of a strategic partnership signed in 2021. Glencore also invested PS40 million last year and extended emergency financing to Britishvolt in November last year before it collapsed. It is estimated that the total amount invested was around PS45 million.
Nagle declined confirmation of the figure, but stated that the sum was “lost due to the rounding given our results”.
Glencore’s investment into Britishvolt was, according to him, “a little like venture capital”, where it “put a little money here and there.” He said, “This one didn’t work — it’s unfortunate.”
“We are not gigafactory investors; we are gigafactory suppliers. Why did we invest money in this gigafactory. We financed them funds because they were worthy. We wanted to see gigafactories succeed. This is because it will help the world decarbonise faster and move more electric cars. It also benefits our company as we can supply critical minerals to these gigafactories.
Nagle stated that Britain and especially the Britishvolt site remained attractive locations for a gigafactory. “We think the UK is a great place. It’s had an extensive history of auto manufacturing, it has a lot knowledge, and it’s got great infrastructure. This refers to the North Sea Link power cable that arrives at Blyth from Norway.