Earnings

Glencore reports 18% 2016 core profit rise on commodity rebound

Gianluca Colla | Bloomberg | Getty Images

Miner-trader Glencore reported an 18 percent increase in 2016 profits, buoyed by a rebound in commodities, and said the company had never been so well-positioned financially, meaning it was ready for small acquisitions or big dividends.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were $10.3 billion, up 18 percent.

Marketing adjusted earnings before interest and tax was $2.8 billion, up 14 percent and above previous guidance of $2.5-$2.7 billion.

For 2017, Glencore is guiding for $2.2 billion to $2.5 billion marketing profits and said the low range reflected the sale of 50 percent of Glencore Agriculture in December 2016.

A commodities rout in 2015 led Glencore to announce asset sales and along with the rest of the industry, it embarked on resolute cost-cutting.

On Thursday, it said low costs for copper, zinc and nickel would be sustained into 2017 along with expected higher coal margins.

"Since our IPO in 2011 and subsequent acquisition and integration of Xstrata, Glencore has never been so well positioned as it is today," Glencore Chief Executive Ivan Glasenberg said.

He told reporters in a media call surplus cash could be used for small deals, for instance, on the edge of existing assets and perhaps a special dividend.

"We could do many things. We could give our long-suffering shareholders a generous gift of a special dividend, to ourselves as shareholders that would not be a bad thing to do."

Glencore's board recommended on Thursday a dividend of 7 cents per share after promising late last year it would reinstate payouts.

A glitch in the recovery was the decision to hedge 55 million tonnes of coal in a rising market, which led to what Glencore labelled an "opportunity cost" of $980 million.

Glasenberg, however, said Glencore would carry on hedging as appropriate and was in the process of locking in coal prices with Japan over a year-long contract.

Analysts said the results were ahead of consensus.

"Today's results strengthen our view on the stock. The results were solid and we applaud the company's supply discipline again. Outperform," Bernstein wrote in a note.