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Glencore, the world’s largest commodities trader, reported a surge in profits on Tuesday as it opened its financial results to scrutiny for the first time as a public company.
Net profit in the first quarter rose 47 per cent from a year earlier to $1.3bn, driven by stellar results in oil trading. The energy trading division, which includes coal, reported a 140 per cent jump in earnings before interest and tax from a year earlier, as it cashed in on volatility in energy prices unleashed by the Middle East turmoil and Japan’s earthquake.
Glencore, which last month raised $10bn in one of Europe’s largest ever flotations, also confirmed it was in discussions to make its first significant acquisition as a public company.
Ivan Glasenberg, chief executive, confirmed the company had signed a memorandum of understanding with CST Mining, a Hong Kong-listed copper miner, to acquire its 70 per cent stake of a project in Peru for $475m.
Mr Glasenberg described the mine as “a good add-on to rest of our activities in Peru”, although he added that the discussions were non-binding.
Since its listing a little under a month ago, Glencore’s shares have struggled to regain their IPO price of 530p.
The medium-term share price movement will be crucial for Glencore as the company has made no secret of its intention to use its shares as currency for opportunistic acquisitions.
In early trading on Tuesday, the shares dropped 1.2 per cent to 517.3p after Mr Glasenberg dismissed speculation that Glencore may make a bid for Eurasian Natural Resources Corporation, the Kazakh miner whose shares have tumbled amid corporate governance concerns. The bid speculation had helped both shares of both companies rally on Monday.
“We can confirm that, although we talk to a lot of people, we are not currently actively considering a bid for ENRC,” Mr Glasenberg said.
Glencore’s results mirrored a jump in profitability for other traders, as tight supplies of oil, coal and agricultural commodities created ideal trading conditions. Trafigura, one of Glencore’s closest rivals in oil and metals trading, saw profits double in the October-March period, while Hong Kong-based Noble Group reported a 77 per cent rise in first quarter net income.
“Glencore’s marketing operations in many commodities benefited from healthy global demand and trade flows, as well as the additional arbitrage opportunities brought on by increased market volatility and tighter supply conditions,” the company said.
The results were also flattered by comparison with the lacklustre conditions of 2010. Low price volatility led to a drop in profitability throughout the year in oil trading; the first quarter in particular was dismal, with some companies struggling to break even.
Earnings before interest, tax, depreciation and amortisation were $2bn, up 46 per cent from the first quarter, but slightly down from the fourth quarter of 2010.
Glencore confirmed its intention to pay an interim dividend of $350m in August
