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Switzerland-based commodities giant Glencore (LSE:GLEN) International more than doubles its basic earnings per share (EPS) as it revealed its 2011 full year results, its last time to report before merging with global mining company Xstrata.
Glencore, which became public in May last year, saw its Basic EPS jump 106% from US$0.35 to US$0.72, resulting from a 28% rise in revenues in 2011 compared to results from a year ago and brought a 7% increase in net income before exceptional items.
Glencore reached US$186 billion revenues in 2011, US$41 billion higher than in 2010, attributed to higher prices of commodities, despite lower demands from developed economies offset by developing countries, amidst the backdrop of a “challenging economic conditions and markets.”
“In light of this challenging economic environment we are pleased that Glencore has been able to continue to deliver a healthy financial performance,” Glencore Chief Executive Ivan Glasenberg noted on the 2011 presentation.
The group said metal prices generally went up in 2011 compared to 2010, but base metals were 10% to 15% lower in the second half of the fiscal year compared to the first half, impacted by the nuclear disaster in Japan, unrest in North Africa and the Middle East, and the sovereign debt crisis in Europe.
“The Japanese Tsunami severely impacted domestic and regional supply/demand patterns, while the Arab Spring tightened the outlook for global energy markets with resultant higher prices in oil,” the CEO said in his review.
The group reported a 39% rise in brent oil from US$80 per barrel ($/bbl) to US$111/bbl. Oil, along with coal and other energy products, contributed the largest increase in adjusted EBIT at 56% to US$1.072 billion.
In total, Glencore achieved US$4 billion net income, 7% more than what it gained in 2010.
Logical Next Step
Glencore declared there is no turning back on its proposed merger with Xstrata, a complimentary business that will create “a new powerhouse in the global commodities industry.”
“This is a natural combination which will realise immediate and ongoing value from marketing the combined Group’s products to maximise supply chain margin opportunities including via blending, swapping and storing to meet customers’ needs more efficiently and cost effectively,” Mr. Glansenberg said.
The merger of the two groups is set to be completed on the third quarter of 2012, after both companies have released their full year reports for 2011, even as minority stakeholdersStandard Life Investments and Schroders plan to move against it.
2012 Outlook
In viewing the climate for 2012, Glencore singled out China as the central driving factor. The company also pins its hopes on the emerging markets, as demand slows down in the developed economies.
Mr. Glasenberg, commented:
“Looking ahead, in the short-term we expect a continuation of the healthy growth seen within emerging markets during 2011. Whilst looking to the longer term, we see no change to the fundamental drivers for healthy markets in our major commodities. Emerging market urbanisation will continue to increase commodity intensity per capita as people strive to improve their living standards to a level which is taken for granted in developed societies. China will continue to remain the central driving factor given its existing scale, resources and growth objectives.”
Company Spotlight
Glencore International is a leading global producer and trader of commodities operating in more than 30 countries employing more than 54,000 employees, divided into three segments: metals and minerals, energy products, and agricultural products.
With headquarters in Switzerland, Glencore International is publicly trading on the London and Hong Kong stock exchanges, enjoying premium listings.
Today in London, Glencore shares are down 4.75 pence, or 1.1% , to 415 pence per share, at midday local time.
References
↑ Glencore Company History
↑ Glencore Company Overview
↑ Glencore International Investor Relations
