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Aug 09, 2023

Glencore launches shares buyback scheme amid plunging profits and activist attack

Support for CEO wavers as activist calls for resignation

Glencore has issued a $1.2 bn share buyback program despite profits dropping by almost 50 percent in the first half of the year and an activist firm calling for the CEO’s resignation.

The Swiss multinational trading and mining giant announced plans to repurchase its shares in a regulatory update this week, stating its intent to complete the buyback by February 2024. The repurchasing brings Glencore’s total for the year to more than $9 bn. The appeasement for shareholders comes despite profits sharply falling in H1 to $9.4 bn from $18.9 bn the previous year.

Gary Nagle, CEO at Glencore, says as the world moves toward a low-carbon economy, ‘we remain focused on supporting the energy needs of today while investing in our transition metals portfolio. We look to the future confident that we have the right pathway to succeed in a net-zero economy and create sustainable long-term value for all stakeholders, while operating in a responsible and ethical manner across all aspects of our business.’

Climate concerns

Nagle, who has been CEO for the past two years, has recently come under fire and been the target of an activist campaign calling for his immediate resignation. The activist group Bluebell Capital, a shareholder in the company, said in June Nagle ‘has to go’ after failing to address climate concerns around coal use.

Glencore launches shares buyback scheme amid plunging profits and activist attack
Gary Nagle, Glencore

In a letter to the chairman of Glencore, Kalidas Madhavpeddi, Bluebell said that under Nagle’s leadership, Glencore had seen shareholders’ support for its strategy on coal ‘significantly decline and Glencore breach its commitment to engage with dissenting shareholders to address concerns on the climate action transition plan. After two years we have simply lost faith, trust and confidence in Mr Nagle.’

Inflationary pressures

The decline in Glencore’s profits reflects the easing of last year’s energy crisis, which saw bills skyrocket because of Russia’s invasion of Ukraine.

In February, Glencore said it would return $7.1 bn to shareholders after pre-tax profits soared to a record high of $34 bn in 2022. As the macro-environment began to level out, however, Glencore’s profits began to normalize.

‘While lower energy prices have recently tempered some of the inflationary pressures in key western markets, the restart of previously shuttered energy-intensive industries, including some steel, zinc and aluminum production, has been limited by weak end-user markets, particularly in Europe,’ the H1 report explains.

Glencore has been contacted for a comment.