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A weak interval for commodity markets has proved catastrophic for Glencore (LSE:GLEN) and its share value.
At 329.6p per share, the FTSE 100 firm is down 16.3% over the previous 12 months. It’s almost 7% decrease immediately (19 February) after asserting a second straight 12 months of sinking earnings.
Due predominantly to falling coal costs, Glencore stated that adjusted EBITDA dropped 16% over the course of 2024, to $14.4bn. The miner additionally crashed to a loss earlier than tax of $998m from a revenue of $5.4bn the 12 months earlier than.
2024 was one other 12 months of operational robustness, with manufacturing throughout its mines and smelters, matching forecasts. However that couldn’t cease the underside line slumping once more.
Ought to I keep away from Glencore shares just like the plague proper now? Or ought to I capitalise on latest weak point and add them to my portfolio?
Hazard forward
Other than gold, the final 12 months has been fairly dire for the metals and minerals enterprise. Since January 2024, the Westpac Export Value Index has fallen greater than 7%, pushed by thumping drops in metallurgical coal and iron ore costs (down 43% and 23%, respectively).
Might enterprise be about to show greater? As issues stand immediately, I wouldn’t guess the home on it.
As Westpac succinctly commented: “We doubt we’ll get way more readability in 2025 with dangers of commerce wars, shifting priorities across the transition to a low-carbon economic system, whereas geopolitical uncertainties all at play.”
Take copper, for example, a key commodity for Glencore on the mining and buying and selling facet. Crippling commerce tariffs and altering inexperienced coverage within the US may decimate demand from key sectors like electrical automobiles (EVs), renewable vitality and electronics.
On Tuesday, US President Trump shook markets by threatening 25% tariffs on imports of overseas automobiles and semiconductor chips.
Taking a long-term view
Does all this make Glencore shares extraordinarily unattractive? I’m not so certain.
First, it is dependent upon an investor’s most popular timeframe. The near-term outlook for steel costs is fairly murky, whereas its coal enterprise may additionally proceed to wrestle. However over an extended horizon — say a decade or extra — the image is way extra encouraging.
The inexperienced economic system and digital sector nonetheless look poised to develop considerably over the subsequent 10-20 years, boosting industrial steel demand. Different elements, like elevated urbanisation, the booming world inhabitants, and rising rising market wealth may also drive consumption.
Glencore’s in depth operations put it in nice form to use this chance. The agency has greater than 60 metal-producing property spanning the globe and a big advertising and marketing division.
A powerful stability sheet offers it scope for growth-boosting acquisitions as properly. Its net-debt-to-adjusted EBITDA ratio stands at simply 0.8.
Too low-cost to overlook?
It’s additionally value contemplating the cheapness of Glencore shares, and whether or not present threats are mirrored in immediately’s low share value.
Analysts suppose annual earnings will rebound 25% in 2025. So the miner trades on an undemanding price-to-earnings (P/E) ratio of 10.9 instances.
In the meantime, its price-to-earnings progress (PEG) ratio sits at 0.4, properly inside cut price basement territory beneath 1.
At immediately’s value, I believe the FTSE 100 miner is value severe consideration. A tasty 5.5% ahead dividend yield provides an additional sweetener for traders.
If I didn’t have already got important commodities market publicity by my Rio Tinto holdings, I’d be look to advert Glencore shares to my very own portfolio immediately.
