Glencore. Picture: REUTERS
Glencore. Picture: REUTERS

London — Glencore may have had a nightmarish year so far, but the world’s top commodity trader is still raking in mountains of money.

The company is facing a US corruption probe, got mired in a dispute with its billionaire former partner in the Democratic Republic of Congo (DRC), and has been caught in the fallout from new US sanctions on Russia — among other issues. Yet despite all the bad news, Glencore is expected to report its most profitable six months ever when the company publishes first-half results on Wednesday.

While some of the issues have since been resolved, the company’s shares are down 17% this year, compared with gains by rivals such as BHP and Anglo American. Analysts are more optimistic, meaning that Glencore’s share discount to the average target price is near its widest in half a decade.

"Glencore has always had reputational issues, but even by their standards this has been a particularly horrific six months," said Ben Davis, an analyst at Liberum Capital. "Glencore is showing that it’s a riskier beast than its rivals and it trades at a discount because of that."

What’s gone wrong for Glencore this year

Despite all of the above, Glencore is expected to report adjusted earnings before interest, taxes, depreciation and amortisation (ebitda) of about $8.5bn in the first half, its biggest ever.

Those earnings are likely to be driven by bumper profits from coal — Glencore is the world’s biggest shipper — where prices have surged, along with increased copper and cobalt production. The company has already forecast that profits from its hallowed trading business will be close to an all-time high.

Credit Suisse says that while the US probe has cast a shadow over the company, it has more growth potential than its closest rivals, saying, "We estimate Glencore is on track to deliver peer-leading volume growth over the next three years."

Glencore is the last of the big miners to report first-half earnings — BHP runs on a different financial calendar and will post full-year results later this month — with Rio Tinto and Anglo American already reporting big profits. The companies’ use of extra cash has diverged, with Rio saying it would funnel $7bn back to shareholders, while Anglo approved a $5bn new copper mine.

Glencore has favoured building a war chest for deals in recent years rather than giving money back to shareholders. Yet last month, just days after being hit by the US probe, it announced it was buying back $1bn worth of shares. The repurchase amount could be increased this week, Liberum and Macquarie suggested.

Said Davis from Liberum, "I expect an increase in the buyback but management might be reticent, especially if they want the firepower to go out and do other things."