Glencore Sees Healthy Long-Term Outlook for Commodities
Stock Chart for Glencore Xstrata PLC (GLEN)
Glencore International Plc (GLEN), the world’s biggest publicly-traded commodities supplier, said the long-term outlook for raw materials continues to be positive after a “lackluster” year in 2012.
The “health of global economy” began to improve slowly in 2012, with a positive outlook for the U.S. and China, Glencore said in an e-mailed statement today. Adjusted earnings before interest and tax for marketing operations rose 11 percent to $2.13 billion from a year earlier on improved performance by metals and minerals with higher volumes in copper and nickel, the Baar, Switzerland-based company said.
“We continue to see a healthy long-term outlook for our commodities based on the continuing growth within emerging market economies and sustained levels of consumption within developed markets,” Ivan Glasenberg, chief executive officer, said in the statement.
The Standard & Poor’s GSCI gauge of 24 raw materials rose 0.3 percent in 2012, its worst year in four amid concerns demand will ebb with slowing global growth. The outlook is improving as the U.S. purchases of new homes surged by the most in two decades in January and China’s economic growth accelerated for the first time in two years in the fourth quarter.
“The pick-up in construction of new houses is particularly noteworthy in the context of what appears to be a clear and growing energy advantage versus the rest of the world,” the company said in the statement, referring to the U.S. “The fact that the world’s largest economy is regaining its feet is good news for everyone.”
Global expansion will climb to 3.5 percent this year from 3.2 percent in 2012, even as the euro area contracts for a second year, the International Monetary Fund estimates.
Copper supply will continue to suffer from rising costs, production disruptions, project delays and declining ore grades for the “foreseeable future” despite scheduled expansions in mined output, the company said.
“There are a number of major scheduled zinc mine closures in the next several years which can be expected to bring the market closer to balance,” Glencore said. This should lead to higher prices needed to encourage investment in new capacity, it said.
EBIT from metals and mineral marketing grew 9.7 percent to $1.36 billion as copper and nickel volumes rose 21 percent. Energy results were weaker “due to fewer arbitrage opportunities, against a backdrop of relatively low volatility and the continuing weak freight markets,” with EBIT sliding 38 percent to $435 million.
Agriculture trading swung to a $371 million profit after a $8 million loss in 2011. Grains volumes were 22 percent higher in 2012, while oilseeds and oil trading increased 26 percent and sugar rose 29 percent, the company said.
Glencore bought Viterra Inc. for C$6.1 billion ($5.9 billion) in December and said today it “transforms our agricultural business into a global operation through entry into the Canadian grain market and significant expansion of our Australian operations.”
It is also seeking to buy Xstrata Plc (XTA) in a $33 billion all- share bid acquisition. Approval from China is the final hurdle to completing the takeover to create the world’s fourth-largest mining company. Glencore today extended the deadline to complete the deal to April 16 from March 15.
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