Glencore’s 2011 Trading Earnings Slide on Cotton Plunge, Metals

Glencore International Plc’s marketing unit said earnings before interest and tax dropped 18 percent last year, driven down by losses from cotton trading.

Adjusted Ebit from marketing fell to $1.91 billion from $2.34 billion, the world’s largest publicly traded commodity supplier said today in a presentation. Its agricultural business posted an $8 million loss, compared with profit of $659 million a year earlier, while metal-trading earnings dropped 11 percent.

“Agricultural products marketing results were significantly impacted by the unprecedented cotton market environment,” Glencore said. “The extreme volatility produced an outcome of ineffective hedging and high levels of physical contractual non-performance by suppliers and customers.”

Glencore, based in Baar, Switzerland, suffered a decline in demand for cotton last year as slowing economic growth eroded consumption and farmers boosted output. Cotton in New York sank 37 percent in 2011, the biggest annual slump since 2004. It tumbled as low as 84.35 cents a pound in December after peaking at $2.19 in March. Cotton for this March was down 0.3 percent at 96.02 cents a pound by 5:37 a.m. in New York.

“It was an extremely difficult year with prices reaching record levels only to collapse afterwards,” said Keith Flury, an analyst at Rabobank International. “Many businesses found themselves holding high-priced cotton when the market price had dropped significantly, resulting in heavy losses.”

Earnings from metals marketing totaled $1.24 billion, while profit from energy products jumped 55 percent to $697 million.

The London Metal Exchange Index of six main industrial metals dropped 22 percent last year. Glencore today agreed to buy Xstrata Plc in a deal that values the target at 39.1 billion pounds ($62 billion), according to a separate statement.

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To contact the editor responsible for this story: Claudia Carpenter at

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