Glencore Agriculture hit by crop prices and Russian tax

Revenues and profitability for Glencore’s Agricultural Products division both fell in 2015, in line with commodity price deflation. The business was particularly affected by the Russian export tax on wheat.

 

The crop shipper and processor has reported adjusted earnings before interest and tax (EBIT) of $524 million on revenues of $23.15 billion in the year ended December 31st 2015, compared to $992m and $25.82m the year before. Within the total, the crop marketing operation made an adjusted EBIT of $461m on sales of $20.62bn ($856m and $22.52bn), while the industrial activities, comprising crop processing interests, made an adjusted EBIT of $63m on $2.53bn ($136m and $3.30bn).

Grain origination and marketing was challenging during the year, with lower prices, a lack of volatility and limited opportunities for arbitrage, notes the company. Grain volumes handled rose 14% to 43.7 million tonnes, with oilseeds up 6% to 23.3m tonnes.

Earnings were negatively impacted by the ‘punitive’ Russian wheat export tax imposed in February 2015. The ‘solid contribution’ from Viterra’s operations in Canada were overshadowed by the very strong 2014 results in that country, with currency factors in Australia and Canada affecting returns in the latest year.  

The business processed 11.5m tonnes of crop materials during 2015, up from 10.9m tonnes in 2014. Oilseed crushing volumes were up 405,000 tonnes to 6.1m tonnes, helped by the acquisition of plants in Germany and Canada and good processing performance in Europe and Argentina. But biodiesel production fell by 27% to 556,000 tonnes, reflecting weaker demand in line with lower fossil fuel prices and regulatory changes.

The Glencore Group expects to reach an agreement to sell a minority stake in the Agricultural Products division by Q2 2016. The move, announced last year, is part of a $4-$5bn asset disposal programme to help the business restructure its borrowings in the face of the deflation in its majority metals and energy mining interests.

The Group has posted a pre-tax loss of $8.11bn on revenues of $170.48bn in 2015, down from a pre-tax profit of $2.24bn on sales of $221.07bn the previous year.

Posted on March 4, 2016 and filed under Company News, Grain Trading.