After a brief wobble at the starting bell, Glencore (LSE: GLEN) shares are trading higher today (7 August) following the release of half-year numbers.
Based on the performance of the stock since the beginning of the year, I suspect most investors will be sighing in relief.
Mixed bag
Despite hailing “strong strategic achievements“, Glencore reported a net loss of $233m for the first six months of 2024. This was a result of lower energy prices and the company recognising $1.7bn of what it called “significant items“, including impairment charges.
That’s a big difference from the £4.6bn in net income achieved over the same period in 2023.
However, there were positives. Net debt stood at $3.6bn by the end of June. That’s a sizeable reduction from the $4.9bn on the company’s balance sheet at the end of 2023.
The company also maintained its production guidance for the full year (with a skew to the second half) and confirmed it would be retaining its coal and carbon steel materials business after consulting with shareholders.
Speaking of its owners, how much would I have now if I’d invested £10,000 in one of the world’s largest diversified natural resource companies at the start of the year?
Let’s run those numbers
On 2 January, the Glencore share price stood at 469p. As I type, it’s down to 402p. That’s a loss of 14% and compares unfavourably to the FTSE 100 index in which the company features. Despite recent volatility, the latter has climbed almost 5% since markets opened in January.
If I’d invested £10,000 back then, my position in Glencore would now be worth in the region of £8,600.
I suppose it could be worse. Had I invested that £10,000 when the shares hit a record high of 576p in January 2023, I’d be looking at a capital loss around a third, or £3,000!
I’ve not taken into account the contribution of a single dividend payout in June either. Then again, I doubt this would have made much difference.
As things stand, Glencore’s forecast yield is a smidgen under 3%. That’s far from awful. But it’s fairly average for stocks of this size. Contrast it with sector peer Rio Tinto‘s 6.8% yield and I know which I’d rather hold as a passive income play from the mining space.
Not for me
To be clear, there are things I like about this company. It’s got exposure to over 60 commodities and operates in over 35 countries. It serves a diverse range of customers in different sectors (eg automotive, manufacturing, oil) and also provides financing and logistics to commodity consumers and producers.
All this has got to be attractive considering the drive to decarbonisation and clean energy sources that depend on the sort of metals Glencore deals with.
As things stand however, I can think of better opportunities in the UK stock market. The fact that economic growth in one of the world’s biggest buyers — China — isn’t quite as stellar as it once was makes me wary of the near-term outlook.
The shares aren’t cheap for the sector either, changing hands for almost 12 times forecast earnings.
