Despite a volatile but favourable trading market
Glencore ends its first half with solid profit growth
- Miner and commodity trader reported a jump in profits and sales
- However, it continues to underperform against other FTSE 100 mining constituents and the failure to increase a share buyback was a disappointment
- The Share Centre continues to recommend Glencore as a ‘hold’ for investors willing to accept a higher level of risk
The mining giant Glencore reported its interim results this morning prompting a 1.5% fall in the share price as some areas disappointed the market. The group decided to take a silent stance on the ongoing money-laundering investigation into its African business by the US Department of Justice.
Glencore has reported that net profits rose by 13% to £2.8bn in the first half of the year while adjusted earnings rose to $8.3bn, reflecting strong performances from its Industrial and Marketing businesses.
A stronger US dollar, increased volatility and the heightened risk of hostile US trade policies remain concerns in the financial market, but Glencore currently sees demand remaining healthy as it remains confident in its business prospects.
High profile CEO Ivan Glasenberg highlighted this favourable but volatile trading and commodity price environment; while he expects market conditions to remain volatile, Glasenberg also commented on the group’s share price which he thinks materially undervalues the business.
It was hoped that the group would announce an increase in its $1bn share buyback programme, but the failure to do so has aided in the decrease of the share price this morning.
Nonetheless, the market should be encouraged by the fall in net debt to $9bn which is expected to fall further as the company intends to concentrate on reducing debt further.
Glencore is one of three miners to report results recently, following Anglo American and Rio Tinto, who also reported large profits. Conversely to Glencore, Rio announced plans to return more than $7bn to shareholders. Glencore’s shares have underperformed its FTSE 100 mining peers over the last year.
Political and legal risks surrounding the company continue to overhang and may prove to further hinder the group. Therefore, despite a solid performance in regards to its results, the shares are no better than a ‘hold’.
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.