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Mixed bag for Glencore

An increase in full-year profits from Glencore's marketing activities partially offset the effects of last year's commodity price falls.
March 3, 2015

Despite the ongoing slump in commodity prices, Glencore (GLEN) surprised analysts by bumping up the full-year dividend by 9 per cent. The Switzerland-based resource giant revealed net earnings of $2.3bn for the year, against a loss of $8bn in 2013 that followed an $8.1bn goodwill impairment linked to the Xstrata merger. If you exclude this and other one-off items, group profits came in at $4.29bn, down 6 per cent on the previous year but ahead of the consensus estimate.

IC TIP: Hold at 293p

A 15 per cent increase in cash profits from Glencore's marketing activities, following the integration of Xstrata's coal, copper and zinc businesses, partially offset the effects of commodity price falls. And although metal prices remain in the doldrums, there was good news on the production front, with refined copper production up 4 per cent on the back of the ramp-up at the Mutanda mine in the Democratic Republic of Congo.

The group was forced to book more than $1bn in revaluation charges on its commodity assets. The collapse of oil and gas prices in the second half of 2014 also put a severe dent in cash profits for the industrial segment. But chief executive Ivan Glasenberg believes volatile oil markets could help drive the group's marketing performance in 2015. Such is the duality of the Glencore business model.

JPMorgan Cazenove expects EPS of 26¢ a share in 2015.

GLENCORE (GLEN)
ORD PRICE:293pMARKET VALUE:£38bn
TOUCH:292-293p12M HIGH / LOW:376p236p
DIVIDEND YIELD:4.0%PE RATIO:25
NET ASSET VALUE:371¢*NET DEBT:59%

Year to 31 DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
2010145.04.335.0nil
2011186.04.072.015.00
2012214.01.114.015.75
2013 (restated)232.7-7.7-73.016.50
2014221.14.318.018.00
% change-5--+9

Ex-div: 23 Apr

Payment: 21 May

£1 = $1.54. *Includes intangible assets of $12.3bn, or 94¢ a share