(MENAFN- Gulf Times) Commodities trader and miner Glencore reported an 18% rise in 2016 profit yesterday, buoyed by a rebound in raw material prices, and said it was well-placed financially for small acquisitions or a special dividend payout.
Analysts said the results beat expectations, driving the share price 2.7% higher by 1100 GMT, building on gains of nearly 20 % so far this year.
Companies across the mining sector, which was pounded by the commodity market rout of 2015, have exceeded expectations following a recovery in the price of raw materials such as iron ore and coal last year.
Glencore's earnings before interest, tax, depreciation and amortisation (EBITDA) were $10.3bn, up 18%.
For the trading, or marketing division that sets Glencore apart from other miners, adjusted earnings before interest and tax (EBIT) were $2.8bn, up 14% and above previous guidance of $2.5bn-$2.7bn.
It now says, marketing this year should deliver between $2.2bn and $2.5bn in profit, adding the lower range reflected the sale of 50% of Glencore Agriculture in December 2016.
Glencore, like other miners, has embarked on asset sales to drive down debt and has said it will maintain a lower net debt to EBITDA ratio, a crucial measure of available cash in capital-intensive mining.
Chief executive Ivan Glasenberg said that ratio could slip below 1 this year if no further acquisitions were made, compared with its goal of 2:1 and the 3:1 ratio it used to favour.
Net debt by the end of 2016 had fallen to $15.5bn, a fall of $14.1bn, compared with 18 months ago.
'Since our IPO in 2011 and subsequent acquisition and integration of Xstrata, Glencore has never been so well positioned as it is today, Glasenberg said.
He told reporters on a call surplus cash could be used for small deals or 'bolt-ons on the edge of existing assets, rather than huge acquisitions, and perhaps big dividends.
He was still bullish for commodity prices, predicting good demand from China, buyer of around half the world's raw materials, and that new supply would be offset by lower production from ageing assets as across the industry, miners spend conservatively.
He cited industry-wide figures that capital expenditure dropped from a peak of around $71bn in 2012 to an estimated $25bn in 2016.
'What started the negative vibe was increased supply, Glasenberg said. 'The industry has changed.
Analysts said the results were ahead of consensus.
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