Commodities trader Glencore International posted a 50 percent rise in headline first-half profit and said it saw opportunities emerging from turbulence in its key markets as commodity demand remains strong.
A robust outlook and a more modest than expected quarter-on-quarter drop in its closely watched marketing business -- which trades commodities from grains to oil -- comforted investors, who sent the stock up as much as 6 percent in early trade on Thursday.
As we look across the board, we still see demand looking strong in Asia, the Chinese see buying opportunities ... so commodity prices are resilient at the moment, Chief Executive Ivan Glasenberg told reporters.
The turmoil in the market has allowed us to look more aggressively at opportunities, because not everything is as high priced as it was a few months ago.
In what was read as a sign of confidence in commodities markets from the world's largest diversified commodity trader, Glencore had said on Wednesday it would spend $280 million buying the shares in Australia's No 2 nickel producer Minara that it does not already own.
Glencore, which owns stakes in a long list of listed and unlisted producers, has said that the ability to seize acquisition opportunities thrown up by market conditions was a key reason for its listing earlier this year, when it ended almost four decades out of the public eye.
Glencore has $10.4 billion of cash and committed credit lines, but has also said it is committed to its BBB credit ratings.
Glencore reported an adjusted earnings before interest and tax (EBIT) of $3.3 billion, in line with forecasts, while net income rose 57 percent to $2.45 billion.
Shares in the group, which have been battered during the market rout, were up 1.6 percent at 396 pence by 5:50 a.m. EDT , outperforming the broader sector but still well below their listing price of 530p.
Analysts and investors had feared Glencore, whose shares have tracked investment banks more closely than miners, would post weak trading results, as seen at some of the top commodity traders among the investment banks.
It's looking good, said analyst Subu Varada at Standard Chartered in Hong Kong. There was a raft of downgrades leading into the results, as people thought it would come down a lot more. In-line results are good in these markets.
ENERGY TO IMPROVE IN Q3
Operating profit for Glencore's whole trading or marketing division rose 45 percent year-on-year in the first half, but dipped in the second quarter against the first, as an improved metals division struggled to make up for weaker earnings in energy products where volatility had boosted arbitrage opportunities in the first three months of the year.
The second quarter has been tight (in oil trading), there has been massive volatility in the oil price and there was no trend in the business ... The opportunities, the fundamentals of the business did not present themselves, Glasenberg said.
The third quarter is starting as not bad, but it does not look like it will be in the region of the first quarter.
Energy trading income fell 37 percent in the second quarter on the first, when it benefited from disruptions to the oil supply chain caused by the Japanese earthquake and Libya, but over the half, income was still more than double a year ago.
Rival trader Noble Group Ltd., seen by many as one of the closest models to Glencore's on the trading side, saw earnings from its metals, minerals and ores division recover in the second quarter after a dip in the first three months.
On the industrial side, which includes Glencore's metals, energy and agricultural production, operating profit rose 54 percent, boosted by higher prices and increased gold and copper volumes, and the company is expected to benefit from ramped up production at key operations in the second half of the year.
Glencore said all its projects are on budget and on track apart from its Prodeco coal project, where it was forced to cut production forecasts after delays in the delivery of mining equipment from Japan.
It said first production from its Aseng oil field in Equatorial Guinea was ahead of schedule and is expected by the end of 2011.
Kazzinc, another of the group's key industrial projects, is expected to meet or exceed gold production and Glencore said it was on track to finalize the restructuring of Kazzinc's precious metals division Altynau, for which it is considering a 2012 listing, among other options.