Diversified miner Glencore has raised its earnings forecast for its full year to end-December, citing a strong performance from its marketing division.

Glencore is one of the world’s largest traders of physical commodities, and that sets it apart from many of its peers, which rely mostly on physical production.

Ahead of the release of its half-year results this week, the group said on Friday that it expects earnings before interest, taxation, depreciation and amortisation to be at the upper end of its previous guidance of between $2.2bn (R44bn) and $3.2bn.

“Although some of our industrial operations were temporarily suspended in line with national and regional guidance, or where our risk assessment determined a suspension was appropriate, the majority of our assets continued to operate relatively normally,” said Glencore’s SA-born CEO, Ivan Glasenberg. “Our marketing business has also risen to the challenge, delivering robust countercyclical earnings.”

In a production update Glencore reported “an overall strong first-half operating performance amid the unprecedented challenges presented by Covid-19”.

The biggest hits to production were in ferrochrome, which was 42% lower than in the first half of 2019, and in cobalt, which was 33% lower. Coal and lead were down 15% and 13%, respectively. Some commodities were unaffected. Nickel production was flat and zinc production was 3% higher than in the comparative period.

“In the near term, we remain alert to the continuing challenges that Covid-19 presents. While we expect our operating cash flow to remain solid, we are ready to adapt to changing market conditions,” Glasenberg said.

Glencore’s share price was 1.27% higher on Friday to close at R39.18, having fallen 12.29% in the year to date and 32.69% in the past three years.

The group will on Thursday report its financial results for the six months to June.

UBS analysts in a note said the Glencore valuation was attractive. “The commodity risk [versus] reward is skewed to the upside, and there are potential catalysts with senior management to retire and African Copper set to improve in 2020/2021,” the analysts said. They see potential for Glencore to positively surprise with its interim results this week, driven by the exceptional marketing performance, among other things.

Beyond that, UBS analysts expect a turnaround of Glencore’s ramp-up of assets and a reduction in net debt as well as possible reinstatement of a dividend.


Update: August 2 2020

This story has been updated to include more information, closing share price and analysts' comment.

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