Trading cushions Glencore's 2012 profit drop

Tue Mar 5, 2013 2:52pm EST
 
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By Clara Ferreira-Marques

LONDON (Reuters) - A rise in profits from trading helped Glencore (GLEN.L: Quote) offset lower prices in 2012, with net income down by a quarter as the commodities group prepares to seal a $34 billion takeover of miner Xstrata XTA.L.

The headline drop, modest relative to a bruised sector, was a vindication for former trader and Glencore boss Ivan Glasenberg, who has long extolled the marketing arm's ability to grow in tough conditions. Trading growth, though, came largely from agricultural products, rather than mainstays coal and oil.

Glasenberg's pronouncements on the strategy of the combined trading and mining giant have been keenly awaited and he said on Tuesday that he was optimistic the group would soon receive an approval from Chinese regulators, the last remaining hurdle.

Glencore said China's Ministry of Commerce was probing areas including the supply of copper concentrate, the raw material for copper smelters, among other markets.

But Glasenberg gave away few specifics on his plans for the merged group, sticking with what he said was a focus on investor returns and an intention to grow the proportion of profit coming from marketing, a slice which will shrink to roughly 30 percent immediately after the deal completes.

"(Incoming Rio Tinto Chief Executive) Sam Walsh said at the Rio presentation that they are now going to act like owners. We don't need to act like owners, we are owners," he told analysts.

That means, Glasenberg said, an opportunistic approach to deals, from a marketing agreement and share purchase in unlisted Brazilian iron ore producer Ferrous last week, to a bumper oil funding deal with Russia's Rosneft.

It also means taking advantage of the travails of large diversified players, who are under scrutiny from shareholders as boom-time acquisitions sour, placing more assets on the block.   Continued...

 
The logo of commodities trader Glencore is pictured in front of the company's headquarters in the Swiss town of Baar November 20, 2012. REUTERS/Arnd Wiegmann