Glencore share price down, beats estimates on commodities trading

Glencore Plc reported on Tuesday results above expectations as robust performance of its commodities trading operations offset the slide in prices.

The miner and commodity trader stated an adjusted net income of $4.29 billion for in 2014, down 7% compared to the previous year but better than the $4.08 billion average projection of the 18 analysts surveyed by Bloomberg.

The Swiss-based company said its performance was dented by a $1.1-billion charge related to lower commodity prices, but reported a 15% increase to $3.0 billion in adjusted earnings before interest, taxes, depreciation and amortization from its marketing division, driven by robust earnings growth in agricultural trading.

Unlike Glencores core business its trading unit, which is significantly larger compared to other mining companies, benefited from the plunge in commodity prices during the second half of the past year as more companies looked to supply themselves with resources at low prices.

The companys industrial operations, including its mines, stated a 7% drop in adjusted profit to $9.8 billion as costs cuts and production growth managed to offset some of the fall in prices. Overall, adjusted earnings came in 2% lower compared to 2013 at $12.8 billion.

Glencore proposed to lift its divided by 9% to $0.12 a share, despite projections that the miner will not deliver increased payments to its investors.

All-in-all the company posted a net profit of $2.31 billion for the past year, which compares to the $8.05-billion loss it stated in 2013 as costs related to its acquisition of rival Xstrata group crippled earnings. The $29-billion deal, which added coal, copper, zinc and nickel mines to Glencores operations, was completed in May 2013 and has translated in $2.4 billion in cost synergies so far.

The company also said it reduced its net debt to $30.53 billion from $35.80 billion at the end of 2013. Additionally, Glencore projected to spend between $6.5 billion and $6.8 billion in its industrial operations during 2015, down from its earlier estimate of $7.9 billion.

“While there remains the potential for future economic setbacks and no shortage of bearishness towards commodities in financial markets, physical demand for our raw materials remains healthy,” said Chief Executive Ivan Glasenberg.

Glencore gained 0.10% on Monday and closed at GBX 300.55 in London. On Tuesday the stock dropped 2.71% to GBX 292.40 at 14:15 GMT, marking a one-year decrease of 10.38%. The company is valued at $39.53 billion.