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Glencore earnings are riding high on coal prices with rewards for shareholders

Story Highlights

Mining giant Glencore came up with an outstanding performance in its half-yearly results, thanks to strong demand for coal.

Miner Glencore (GB:GLEN) posted its half-year results with revenue up by 43% to £134.4 billion – thanks in part to the company remaining loyal to thermal coal, despite price volatility and controversy.

The company’s earnings (adjusted EBITDA) grew by a huge 119% to £18.9 billion, as compared to £8.6 billion in the first half of 2021.

Glencore’s shares jumped around 6% on Thursday post the results. The stock is trading up by 48% in the last year.

The company decided to pass on the rewards to its shareholders. The board approved a $4.5 billion package including a special dividend of $1.45 billion and a share buyback of $3 billion. This led to a total shareholder return of $8.5 billion in 2022.

The current dividend yield for Glencore is 3.84%, slightly above the sector average of 3.09%.

Coal is the hero of the show

Glencore’s coal production increased by 14% to 55.4 million tonnes. It was amplified by the extra 66.7% acquired in the Cerrejón coal mine in Colombia.

In January 2022, Glencore closed this acquisition from joint venture partners BHP Group (GB:BHP) and Anglo American (GB:AAL). With this deal, Anglo American made an exit from the thermal coal market which benefited Glencore.

Gary Nagle, the chief executive, said, “Global macroeconomic and geopolitical events during the first half created extraordinary energy market dislocation, volatility, risk, and supply disruption, resulting in record pricing for many coal and gas benchmarks.”

Record coal prices increased industrial EBITDA to $15.0 billion, accounting for the majority of total EBITDA.

View from the city

According to TipRanks’ analyst rating consensus, Glencore stock is a Strong Buy. This is based on 11 Buy ratings.

The average price target is 613.18p, which implies upside potential of 32.9%. The analyst price target has a high and low forecast of 730p and 540p, respectively.

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Conclusion

Glencore is one of the big beneficiaries of the Russia-Ukraine war. The company is enjoying this competitive advantage over its rivals in this volatile energy market.

The ongoing uncertainty in the commodity markets and inflation pose some headwinds for the second half, but overall the long-term outlook is strong.

Disclosure

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