Glencore Plc's (GLE) Utmost Risk Is Trade Barrier, But Other Risks Are Also Evolving

  • Mar 06, 2019 GMT
  • Team Kalkine
Glencore Plc's (GLE) Utmost Risk Is Trade Barrier, But Other Risks Are Also Evolving

One of the world’s largest natural resource company Glencore Plc said in its annual report 2018 published recently that increasing trade barrier is its utmost risk, but other risks like climate change, legal, political, forex, and commodity prices risks have become more imminent.

The company said there had been significant volatility in the commodity prices over past twelve months, any major fall in the current commodity price, primarily in coal, copper and zinc would have an adverse impact on the financial performance of the Glencore. During the last fiscal year commodities like nickel, thermal coal and copper witnessed strong price growth which was in favour of the Glencore's financial health, going forward any improvement in the commodities price will drive future growth of the company.

Glencore mentioned in its annual report of 2018 that in the past twelve months US dollar remained stronger through-out the year against producer country currency, which was beneficial in the short-term time frame to their locally denominated operating costs, but in long term currency movement could result in income volatility.

The company said, during the financial year 2018 risks such as geopolitical, permits and license to operate had become very eminent, primarily on account of various developments in the DRC.

During the past twelve months, the Department of Justice (DOJ) investigation has significantly elevated the risks of Laws and enforcement, coupled with sanctions imposed by US authorities.

Glencore Plc is engaged in exploration, acquisition, development, extraction, production, processing, refining, blending, and delivery of natural resources. Its areas of operation categorised into three business segments which are metals and minerals, energy and agriculture.

It is one of the large diversified natural resource (dealing in 90 commodities) company in the world with 150 plant sites, operation in 50 countries, marketing offices in 90 countries and employed around 158,000 employees.

For the financial year ended 31-December-2018, Glencore reported an adjusted EBITDA of US$15.8bn compared with US$14.5bn in the fiscal year 2017. Adjusted EBITDA improved 8 per cent during the year. Cash generated from operation stood at US$11.6bn for FY18 and earnings per share (EPS) stood at US$0.24 for the financial year ended on 31-December-2018.

During the last financial year of the Glencore, revenue from metal and mineral segment stood at US$83.4bn compared with US$80.5bn in FY18 and Energy products revenue stood at US$139.0bn compared with US$128.3bn in FY17.

At the time of writing (05-Mar-2019), shares of Glencore Plc ended its Tuesday's trading session at GBp 305.95, added 0.75 points or up by 0.25 per cent against its previous day close.

During the last one year, shares of Glencore Plc have reached a 52w high of GBp 409.80 and a 52w low of GBp 268.35.

Glencore’s outstanding market capitalisation of £42.57 billion ranks it among the top large-cap stocks trading on the London Stock Exchange.

The dividend yield of the company stood at 5.01 per cent which was relatively higher as compared with its peers operating within the same line of business.

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