Glencore has reported record full-year earnings driven by high energy prices and the Ukraine war, highlighting how trading houses have been among the biggest beneficiaries of the energy crisis.
The Switzerland-based miner and commodity trader’s adjusted earnings before interest, tax, depreciation and amortisation rose 60 per cent to $34bn last year, the company said on Wednesday, triggering a record $7.1bn return to shareholders.
More than half of those earnings came from its coal mining business, where ebitda more than tripled to $17.9bn.
One of the world’s largest trading houses, Glencore has profited both from surging prices for the commodities it produces and from extreme volatility in commodities markets, which propelled its trading division’s profits to a record high.
However, coal prices have dropped recently as a mild European winter and high stockpiles lead to reduced demand.
Chief executive Gary Nagle acknowledged weakness in the coal market but said the current prices were still high relative to historic norms.
“We sit in a world that is growing, is energy-hungry, and coal remains part of it,” he said.
“Some of the tightness in the market [last year] was because of panic in the market, and Europe buying coal going into winter,” which had now eased, he added.
The powerful commodity trading houses that move raw materials around the world have reaped huge profits from the volatile energy prices triggered by Russia’s invasion of Ukraine almost a year ago.
Glencore’s rival Trafigura also generated a record $7.1bn in net profit last year.
While traditional energy companies such as oil and gas producers have been subjected to windfall taxes in several European countries including the UK, the trading houses have largely avoided similar treatment.
Nagle said Glencore had been hit with “material” windfall taxes on its coal production in Australia and Colombia, and that higher coal prices meant higher royalty payments to governments.
However, earnings from Glencore’s extensive trading operations, which generated $6.4bn in earnings before interest and tax last year, have been largely unaffected.
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The company said its 2023 earnings would be significantly lower than last year’s, largely because of lower coal prices.
“Clearly, the cash returns going forward will diminish if the power crisis in Europe is over, and coal prices are structurally lower,” said Myles Allsop, analyst at UBS.
“Clearly, 2022 was peak for coal prices, a peak for Glencore’s earnings and now the debate is, how quickly will earnings and cash flow normalise,” he added.
The group said on Wednesday that it planned to return $5.6bn in cash dividends to shareholders, along with a $1.5bn share buyback.
Glencore shares, which have climbed about 20 per cent over the past 12 months, rose 2 per cent in early London trading on Wednesday.
Last year, Glencore paid more than $1.6bn in penalties and pleaded guilty to charges of bribery and market manipulation, following a co-ordinated investigation by authorities in the US, UK and Brazil. Similar investigations are under way in Switzerland and the Netherlands.