Glencore sets aside $1.5bn as graft probes seen closing

The company has been under investigation by the DoJ since 2018, relating to possible corruption and money laundering in countries including Nigeria and Venezuela.
Image: Simon Dawson/Bloomberg

Glencore Plc said it expects long-running corruption probes by US and UK authorities to be resolved this year as the world’s biggest commodity trader reported its highest-ever profit and almost $4 billion in shareholder returns.

Glencore said it was setting aside $1.5 billion to resolve investigations by the US Department of Justice, the UK Serious Fraud Office and Brazilian authorities for possible money laundering and corruption. A fine that size would be a big black mark for a blue-chip company, but is dwarfed by Glencore’s profit — the company reported record core earnings of $21.3 billion, nearly double a year earlier.

The company has been under investigation by the DoJ since 2018, relating to possible corruption and money laundering in countries including Nigeria and Venezuela. The probe, along with other investigations by UK authorities, marred the final days of former Chief Executive Officer Ivan Glasenberg as he sought to oversea a change in both culture and management in the company.

A possible fine and further sanctions have also long been seen as a value destructive overhang on the stock and the chance to remove it by the end of the year is likely to be welcomed by investors. The company said the timing and outcome of investigations in Switzerland and the Netherlands remains uncertain but would expect any possible resolution to avoid duplicative penalties for the same conduct.

Glencore, the world’s biggest commodity trader, has positioned itself to be one of the biggest winners from what some analysts see as a new commodity supercycle. Its sprawling suite of mines produce many of the materials need for the energy transition and, as the world’s biggest coal shipper, the company is also benefiting from the global energy crunch.

In recent years, Glencore has missed out on the bumper profits and massive dividends that its iron ore mining rivals have made. Now, the strong surge in coal prices means it’s positioned to join in on big shareholder returns.

The company said on Tuesday it will pay $3.4 billion in dividends and announced a new $550 million share buyback. Its trading unit, which has benefited from the wild swings in commodity prices, delivered profits of $3.7 billion.

The full-year results are the first under new CEO Gary Nagle, who last year succeeded long-time boss Glasenberg. He’s so far maintained his predecessor’s strategy of simplifying the business and paying down debt, which has fallen to $6 billion, well below the bottom end of its target range.

Glencore is the first of the major miners to report full-year earnings — BHP Group just reported bumper profits for its half-year — in what is expected to be a yet another strong earnings season for the sector. The industry has been one of the biggest winners as the global economy rebounds from the pandemic, fueled by trillions of dollars of government stimulus.

Those tailwinds have seen Glencore has climb to the highest price in almost a decade in recent weeks, jumping almost 50% in the past year.

© 2022 Bloomberg

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