Glencore’s net profits more than trebled to a record $17.3 billion last year as the commodities giant cashed in on the high coal prices and energy market chaos caused by Russia’s invasion of Ukraine.
The FTSE 100 miner and trader said that it would return $7.1 billion to shareholders through $5.6 billion in dividends and a $1.5 billion share buyback programme.
Its adjusted earnings before interest, taxation, depreciation and amortisation (ebitda) rose by 60 per cent to hit $34.1 billion, also a record. More than half of this, or almost $17.9 billion, came from coal production, up from $5.2 billion in 2021. Coal prices were on average more than twice as high last year as in 2021, as Russia curtailed gas supplies to Europe and countries turned to coal-fired power plants to help keep the lights on.
Glencore’s commodities traders brought in adjusted ebitda of $6.8 billion, with $5.6 billion of this coming from buying and selling energy products including oil, liquefied natural gas, fuel and coal.
“Russia’s invasion of Ukraine generated one of the largest dislocations in global energy markets in recent history,” Glencore said. “The unprecedented 2022 developments in global energy markets were material drivers for both our marketing and industrial businesses.”
The bumper profits helped to reduce the company’s net debt to almost zero.
The company, based in Switzerland, mines a variety of commodities and has been increasingly focused on developing metals such as cobalt and nickel for use in electric vehicle batteries and the energy transition. However, over the past year its core coal mining business has dominated its financial results.
Gary Nagle, Glencore chief executive, said: “The global pandemic, recovery from it and years of underinvestment, followed by conflict in Europe, exposed pre-existing vulnerabilities in energy security and supply chains, underpinning the generally high and volatile 2022 commodity price environment, which enabled the group to generate record profitability for the year.”
Companies generating record profits thanks to the war have attracted widespread criticism. Nagle defended its results, saying: “We’ve assisted our customers in ensuring the energy security in a time of disruption and risk and uncertainty. These customers have sent us letters of thanks — we were there in their times of need.
“We’ve helped step in and facilitate a real proper transition away from being able to use Russian materials… and allow them to keep the lights on and keep their economies going.”
He said it had been subject to some measures to effectively tax its windfall profits, including paying “significantly” higher royalties on coal since July in Queensland, Australia, and higher levies from this year in Colombia.
The record high coal prices that drove its 2022 results have fallen back over the past few months as the energy crisis in Europe has eased, with Newcastle coal prices, an industry benchmark, halving from almost $400 per tonne at the end of last year to about $220 per tonne at present.
Glencore told investors today that its 2023 coal ebitda based on current spot prices would almost halve, to $9.3 billion. In early December its 2023 outlook had suggested coal ebitda of $16.7 billion.
Nagle said: “Some of the tightness in the market was because of panic in the market and Europe buying significant amounts of coal going into the winter. We’ve then seen a milder winter across Europe, higher nuclear usage in Europe and higher renewable generation in Europe. So therefore, not all the coal that was bought was burnt and there’s some stockpiles in Europe.”
Although this had led to weakness in coal prices Nagle said that $200 a tonne was still “a phenomenal number”. He added: “We’re only in February. This time last year, the war hadn’t broken out yet… Anything could happen that could tighten up the market very quickly.”
Britishvolt loss is ‘immaterial’
Glencore has dismissed its lost £40 million-plus investment in Britishvolt as “immaterial” after the collapse of the gigafactory developer.
Gary Nagle, chief executive of the commodities giant, said he still hoped a gigafactory to make electric vehicle batteries would succeed in Britain so that Glencore could supply it with metals. However, he reassured the City that it had no intention of taking over the failed project. “We’re not buying — don’t worry about Britishvolt,” he told analysts.
Britishvolt planned to build a gigafactory near Blyth in Northumberland, but it collapsed into administration last month after failing to secure emergency funding. Administrators have named Recharge Industries, the Australian battery start-up, as the preferred bidder.
Glencore was a cornerstone backer of Britishvolt, making an initial undisclosed investment as part of a “strategic partnership” signed in 2021, investing £40 million early last year, and reportedly extending emergency financing to Britishvolt last November before its collapse. The total sum invested is believed to have been about £45 million.
Nagle declined to confirm the figure but said the sum was “lost in the rounding given the context of our results”.
He said Glencore’s investment in Britishvolt had been “a bit like venture capital” where it put “a little bit of money here, there and everywhere”. “This one didn’t work — it’s unfortunate,” he said.
“We are not investors in gigafactories; we are suppliers to gigafactories. Why did we invest in this gigafactory? Why did we advance them funds in the first place? We wanted to see a gigafactory succeed because the more gigafactories succeed, the better for the world in terms of faster decarbonisation and the move to electric vehicles, and also better for our company because then we can be a supplier of our critical minerals to these gigafactories.”
Nagle said that Britain, and the Britishvolt site in particular, remained an attractive location for a gigafactory. “We believe the UK is a good place: it’s had a long history of auto manufacture, there’s a lot of knowledge base here, and it’s got great infrastructure in terms of the land area and where the [interconnector] comes in”— a reference to the North Sea Link power cable from Norway that comes ashore near Blyth.