Glencore Sees Healthy Emerging Markets Growth, Outlook Bullish
March 05 2012 - 3:00AM
Dow Jones News
Commodities titan Glencore International PLC (GLEN.LN) said
Monday it expects to see healthy growth within the emerging markets
in the short-term, after disclosing higher 2011 earnings despite
cotton trading losses that weighed on its marketing activities.
The Baar, Switzerland-based group reaffirmed that all its mining
projects were developing on time and within budget as it continues
to prepare for its planned merger with 34%-held diversified mining
affiliate Xstrata PLC (XTA.LN). It also said it sees no change to
the bullish long-term commodities outlook.
"Thus far in 2012, market conditions have improved and the year
has started well across all segments of our business," said chief
executive Ivan Glasenberg. "Emerging market urbanization will
continue to increase commodity intensity per capita as the demand
for goods and products that industrialised societies take for
granted increases," he added.
Glencore said net profit attributable to shareholders more than
trebled to $4.05 billion in 2011 from $1.29 billion in 2010.
Revenues increased 28% to $186.2 billion while earnings before
interest and taxes, or EBIT, adjusted for exceptional items rose 2%
to $5.4 billion.
Adjusted EBIT from industrial activities, including mining,
refining and smelting, rose 18% to $3.5 billion due to generally
stronger commodity prices and increased production from its coal,
copper and gold mines as well as the start up of the Aseng oil
field in Western Africa, ahead of schedule and budget.
But unusually volatile cotton prices last year played havoc with
earnings in Glencore's marketing division, where adjusted EBIT fell
18% to $1.9 billion. Glencore said the volatility made hedging
ineffective as well as difficult for cotton customers and suppliers
to honor contracts.
Excluding the impact of cotton, adjusted EBIT would have been up
10% on the year in 2011, Glencore said.
Glencore's shares have fallen 21% since its initial public
offering price of 530 pence a share in May last year as concerns
about the global economy dented the valuation of mining equities in
general.
Glencore listed its shares in May on London and Hong Kong to
much fanfare in what was considered a stepping stone to a tie-up
with globally diversified miner Xstrata, a miner with which it has
historically close commercial ties.
The two companies have proposed a merger of equals that would
create a commodities juggernaut with a market capitalization of
more than $80 billion and mining and trading assets in oil, grains,
base metals, precious metals, shipping, and bulk commodities such
as coal.
Glencore and Xstrata have agreed to a deal in which Glencore
would give Xstrata shareholders 2.8 Glencore shares for every
Xstrata share. Shareholders representing close to 5% of Xstrata's
share capital however believe that the current ratio isn't
sufficient. Equity analysts expect Glencore to raise its offer to
3.0, based on a Dow Jones poll of seven analysts.
-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328;
alex.macdonald@dowjones.com
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