Glencore : things you should know while trading

With its headquarters located in Baar, Switzerland, Glencore is a major player in the mining and commodity trading industries. After merging with Xstrata in May 2013, Glencore established its position as the world’s industry leader.

When it was still known as Glencore International, the business was one of the biggest integrated manufacturers and marketers of commodities in the world, with a strong global presence. Its dominance was obvious as it possessed substantial market shares in a range of commodities, such as zinc, copper, grain, and oil.

Glencore’s journey from its inception to its current position as the biggest commodity trader in the world serves as proof of its adaptability and determination. Glencore continues to be a powerful force influencing the future of mining and commodity trading as it navigates the complexity of the global market.

Operational Reach & Worldwide Acknowledgment

Glencore’s prominence is demonstrated by its recurrent inclusion in esteemed international rankings. The fact that it ranked tenth on the Fortune Global 500 list in 2015 is evidence of its enormous reach and power. The business maintained a strong reputation throughout the world as evidenced by its inclusion in the 2020 Forbes Global 2000 and later rankings.

Glencore is a global producer of steel, food processing, power generation, and automobiles. There are locations for its production facilities all over the world. Its extensive portfolio, which satisfies the needs of global markets, includes metals, minerals, coal, natural gas, crude oil, and agricultural products.

Key Shareholders & Corporate Evolution

Glencore was founded in 1994 when the management of Marc Rich + Co AG was bought out. Since then, the company has gradually grown. It established itself as a major participant in the global financial scene when it made its debut on the London Stock Exchange in 2011. Glencore thrived even after leaving the Stock Exchange of Hong Kong in 2018, with its shares being traded on the Johannesburg Stock Exchange.

The fact that the Qatar Investment Authority became Glencore’s biggest shareholder demonstrated the company’s attractiveness to international investors. However, as demonstrated by Qatar’s Sovereign Wealth Fund’s decision to sell a sizable stake in the company in March 2022, the company experienced changes in the composition of its shareholders.

Is Glencore’s Weakness a Market Correction Signal Despite Strong Financials?

Examining Glencore’s (LON: GLEN) recent performance, which includes a 14% drop in its stock price over the last three months, makes it hard to be enthusiastic about it. However, a company’s long-term financial position, which seems to be strong in this case, usually affects stock performance. Let’s examine Glencore’s ROE (Return on Equity), one of the most important metrics used to assess how well a company’s management makes use of its capital.

Glencore’s ROE doesn’t appear particularly promising at first glance. We might give it some thought, though, since the company’s ROE is comparable to the 8.2% industry average. Furthermore, we are happy to report that over the previous five years, Glencore’s net income increased at a rate of 49%. It is likely that the company’s revenue growth is being positively influenced by other factors, especially in light of the moderately low ROE. For example, the business is run effectively and has a low payout ratio.

Interestingly, regarding Glencore’s net income growth compared to the industry, we discovered that the company’s growth exceeded the industry average growth rate, which stands at 9.9%.

A significant determinant of stock valuation is earnings growth. An investor should be aware of whether the market has factored in the anticipated growth (or decline) in the company’s earnings.

Does Glencore Use Its Profits Effectively?

With 40% as its three-year median payout percentage (retaining 60% of its income), Glencore’s payout ratio is neither excessively high nor low. Based on the above discussion, it appears that Glencore spends its money effectively enough to see impressive growth in earnings and a well-covered dividend.

Glencore has also been paying dividends for at least ten years, demonstrating its seriousness about distributing its earnings to shareholders. We looked at the most recent analysts’ consensus data and discovered that, for the next three years, the company is expected to continue paying out roughly 43% of its profits. As a result, projections indicate that Glencore’s ROE in the future will be 8.8%, which is comparable to its ROE at the moment.

Overall, Glencore’s business appears to have certain positive aspects. Undoubtedly, the company’s high earnings growth can be attributed to its high reinvestment of profits into the business, even with a low rate of return. Having said that, current analyst estimates indicate that the company’s earnings growth will slow down.

Glencore (GLEN) Reduces Dividend Due to Declining Profits

Glencore PLC (GB: GLEN), which is listed on the FTSE 100, reduced its dividend after reporting drastically lower 2023 profits as a result of falling energy prices. The company declared that in order to lower its debt and preserve liquidity, it would be significantly cutting its 2024 dividends.

Compared to the previous year, Glencore’s revenue for the full year 2023 decreased by 15% to $217 billion. To $17.1 billion, adjusted EBITDA experienced a sharp 50% decline. This was mostly explained by the fact that the world’s commodity markets settled after the extraordinary profits generated by the spike in energy prices brought on by the conflict in Ukraine.

Due to charges associated with the Mutanda cobalt operation and other zinc oxide assets, the total revenue attributable to equity holders decreased by 75% to $4.3 billion.

Glencore cut shareholder returns for 2024 to $1.6 billion from $10.1 billion (including dividends and share buybacks) the previous year due to lower earnings. The dividend for the company in 2024 is $0.13 per share. Glencore’s decision to reduce shareholder returns also comes just after Teck Resources’ (NYSE: TECK) steelmaking fossil fuels division was officially acquired for $6.9 billion.

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This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.