Glencore Posts Record Profit

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Glencore Plc said it could dramatically increase returns to shareholders going forward as the company cashes in on high prices for the commodities it mines and trades.

Glencore announced $1.18 billion in dividends and share repurchases Thursday after surging metals prices helped drive first-half earnings to a record. But while the buyback may be a welcome surprise for investors, Glencore’s payouts remain well below mining rivals like Rio Tinto Group and Anglo American Plc, which last week announced a combined $13.2 billion in shareholder returns, also after record profits.

Glencore’s now in a position to pay out a higher percentage of its earnings after reducing borrowings, Chief Financial Officer Steve Kalmin told reporters. The company cut net debt by 33% from a year earlier to the bottom of its long-term range. The current dividend policy is to pay $1 billion from its trading unit, plus 25% of free cash flows from the sprawling mining business.

“Given where the balance sheet is, we can move to much higher payout ratios potentially going forward,” Kalmin said. “We wouldn’t leverage the business further to pay distributions, but we’re happy to move to 100% pay out ratios.”

Glencore and its rivals have benefited this year from surging prices for commodities from copper to coal, as governments around the world unleash trillions of dollars in stimulus packages to help the global economy emerge from the pandemic, boosting demand for raw materials. At current prices, the company would generate $21.8 billion in profit this year, with a potential free cash flow of $11.5 billion, Glencore said.

“The subsequent economic recovery has seen prices of most of our commodities surging to multi-year highs amid accelerating demand and lingering supply constraints,” said Chief Executive Officer Gary Nagle, who succeeded long-time boss Ivan Glasenberg at the end of June. “Fiscal and monetary stimulus, successful