Glencore lifts guidance for its key trading unit but lowers core commodity forecasts

Courtney Goldsmith
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Glencore reduced a number of commodity forecasts (Source: Getty)

Although Glencore cut production guidance for its core commodities in a third-quarter production report, the mining giant now expects its trading business to make even more profit than expected this year.

The FTSE 100 firm lifted its so-called marketing division's full-year earnings before interest and tax (Ebit) forecast to between $2.6bn (£2bn) and $2.8bn, reflecting higher raw materials prices.

This is the third time this year the firm has upgraded guidance for the unit. Earnings were originally expected to be between $2.1bn and $2.4bn for the year.

Read more: Higher commodity prices help boost Glencore earnings

However, the mining business was a different story for Glencore as it listed a number of issues set to dent full-year production.

Copper production guidance was lowered by two per cent due to power disruptions in Zambia, zinc was set two per cent lower due to declining grades and coal was lowered six per cent because of strikes in Australia and weather-related disruptions in Colombia.

Ferrochrome and lead output forecasts were also lowered two per cent on operational issues.

Despite the output reductions, Glencore did not expect the changes to hit its full-year earnings.

Shares in the firm closed 0.76 per cent higher at 370p.

S&P analyst Aaron Ho was cautious about Glencore's position.

Ho said:

Without any material positive updates, we continue to be cautious on GLEN's near term prospects as headwinds (eg oversupply issues) remain prevalent within the global mining and metals sector.

In our opinion, negative operating and financial leverage can still kick in if sales diminish. We note that the uptrend of several commodity prices have started to reverse.

However, Bernstein analysts reiterated an "outperform" rating, according to Reuters, saying Glencore's commodity mix made it well-placed to benefit from rising electric vehicle demand.

Read more: Glencore finally snaps up a stake in Australian coal assets for $1bn

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