Glencore income eases in first half

by Eric Schroeder
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BAAR, SWITZERLAND — Amid a climate of falling prices and global economic weakness, net income at Glencore International eased 8% during the first half of fiscal 2012. At $2,275 million, income was down from $2,474 million in the same period of fiscal 2011.

Adjusted EBITDA also was lower, falling 17% to $3,199 million from $3,845 million.

Revenues of $107,957 million were up 17% from $92,120 million in the same period last year.

“Financial markets were relatively optimistic entering 2012, following the sovereign debt-related challenges experienced during H2 2011,” said Ivan Glasenberg, chief executive officer. “This optimism generally faded as the half progressed and, with it, expectations for economic growth and commodity prices. Concerns over how precisely the European situation would and could be resolved have continued to erode global risk appetite. For the world’s two most important economies, the U.S. and China, 2012 is essentially a year of political transition. Each of these factors extends into H2 2012 and is likely to continue to hinder the gradual process of underlying economic recovery following the 2008 financial crisis.”

Glencore announced on March 19 that it will acquire Viterra Inc., subject to regulatory and shareholder approvals. Viterra’s shareholders voted to approve the acquisition on May 29. Substantially all regulatory approvals now have been received, including competition and foreign investment clearances in Canada and Australia. The only outstanding approval remaining is MOFCOM, China.

Strong sales of metals, minerals and agriculture mostly offset a decline in average prices for many key commodities in the first half of the year, Glencore said.

Glencore reported EBITDA of $146 million in its Agricultural Products segment, up 39% from $105 million in the same period a year ago. Revenues in the segment rose 7% to $9,446 million from $8,840 million.

“Grain prices were directionless and range bound in H1 2012 and, for most of the period, were below the price levels of H2 2011 and well below price levels of H1 2011,” Glencore said. “Oilseed prices, having reached a low early in the year, subsequently increased as Argentine production fell short of expectations due to an extended drought for the second year in the past three years. Cotton prices were also subdued, considerably below 2011 levels and gradually weakened over the period.

“At the end of H1 2012, a drought in the U.S., FSU and Eastern/Southern Europe began to impact both grain and oilseed production forecasts and increase prices. Subsequently, with continuing dry and hot weather, particularly in the U.S., it has become apparent that production shortfalls will be severe and supply/demand will consequently be extremely tight. H2 2012 is therefore likely to be a considerably higher priced and more volatile environment than H1 2012.”

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