Glencore profit leaps as it lines up listing

City A.M. Reporter
Privately held Glencore, the world's largest commodity trader, posted a 42 per cent rise on half-year profit as it prepares for a possible giant stockmarket listing.

The Swiss trader posted first-half net income of $1.56bn (£955.3m) as significantly higher metal prices boosted profit from its own mines and other assets.

Company executives spent two days in London this week educating equities analysts about its business ahead of what could be the UK's biggest initial public offering (IPO) later this year.

Sources familiar with Glencore's plans have said it could float 20 percent or more of its stock, possibly split between London and Hong Kong, raising up to $16 billion and valuing the whole company at about $60 billion.

"I would expect 2010 to exceed all previous expectations," said Fairfax analyst John Meyer.

It reported net income of $2.72 billion in 2009, with 40 percent of its profit coming in the first half.

Metal prices continued to rise in the second half of 2010 -- copper futures in London jumped almost 50 percent – boosting profits for miners, while oil and food prices also gained.

"Copper is probably the best bellwether, and it is a big chunk of their business," said Cailey Barker, an analyst at Numis Securities. "This will probably give a good reflection on what the revenues will do."

"If you draw comparisons with the other diversified miners, and especially copper stocks, they have all done very well in the last round of results, all predominantly driven by metal prices," Barker said. However, he added that this had been partly offset by rising costs.

Glencore trades a wide range of commodities and raw materials from its own projects and from third-party producers via marketing agreements. It also has stakes in several publicly traded miners, notably Xstrata.

"Their trading business will flourish, while the mining-related investments will be slightly muted by costs," Barker said.