Glencore share price muted, but strong set of results reported

Glencore full year results show a record year for the group

Full year results (FY22) for Glencore showed record profitability for the company and in turn a sizeable shareholder return via its dividend offering and a buyback scheme being announced.

Salient features of the FY22 results (vs FY21 results) are as follows:

Adjusted EBITDA (Earnings Before Interest Tax Depreciation and Amortisation) of $34.1bn (+60%)

• Net Income of $17.3bn (+248%)
• Cash generated by operating activities of 32.9bn (+97%)
• Net debt $100m (-99%)

The group’s 2022 results were primarily driven by higher energy prices over the reporting period and supported (to a lesser extent) by increased volumes and favourable forex translations (from weaker Aussie Dollar, Rand, and Euro).

The Russian invasion of the Ukraine, met promptly with sanctions saw Glencore profiting from a surge in coal prices, while metal related operations were negatively affected by increased input costs and prolonged lockdowns in China.

The company now boasting ‘negligible’ debt levels is looking to reward shareholders through a $5.1bn dividend distribution as well as a share buyback of $1.5bn. The $7.1bn total payout sees a record profit accompanied by a record shareholder distribution.

How to trade the Glencore results?

A Refinitiv poll of 18 analysts, as of the 15 of February 2023, finds a consensus rating of ‘buy’ for Glencore. The mean of analyst targets suggests a longer-term fair value of GBP643.27, roughly a 25% discount to the current share price.

Glencore Plc (LSE) – Technical view

The share price of Glencore has retraced from highs earlier this year to find support on the 200-day simple moving average (200MA) (blue line). The share price is also looking oversold at current levels.

The long-term trend is still considered up, although this consideration would need to be reviewed should the price move to trade below the 200MA at 498. In this scenario, 465 become a downside support target from the move.

However, while the 200MA remains support a long bias to trades on the company is considered. For long entry we would like to see a rebound from oversold territory and price close above either the 535 level or black trend line on our chart. In this scenario, 535 and 557 become initial upside resistance targets from the move, while 585 would be a longer-term resistance target.