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(Bloomberg) -- Glencore Plc earned a pretax profit of as much as $3.7 billion from its commodity trading business last year, according to its annual production report.
The marketing business, which includes the trading of commodities from crude oil to grains and zinc “performed in line with our expectations in 2014,” Baar, Switzerland-based Glencore said Wednesday in a statement. The world’s largest metals trader raised its earnings before interest and taxes forecast for the trading arm by $700 million to $2.7 billion to $3.7 billion in March after the takeover of Xstrata Plc and Canadian trader Viterra Inc.
Founded by Marc Rich, what is now Glencore can use trading profits to counter the impact of falling prices on its mining and oil production units. Some trading houses are benefiting from increased price volatility and the return of a contango structure to crude markets where future prices are higher than current levels. That allows traders to profit by buying futures contracts and storing oil for delivery at a later date.
The Bloomberg Commodity Index, which reflects futures price movements for a basket including crude oil, natural gas and gold, has fallen 21 percent over the past year. That decline means trading houses are also paying less to finance their activities.
Trading earnings before interest, taxes, depreciation and amortization rose 23 percent to $1.62 million in the first half of last year, Glencore said in a report Aug. 20. Adjusted pretax earnings from metals and minerals trading increased 25 percent during the period. Pretax profit from energy trading, which includes coal, crude and oil products, fell by 55 percent amid relatively flat oil prices and oversupplied coal markets, the company said.
Glencore, headed by billionaire and former coal trader Ivan Glasenberg, will present further details of its trading business in its preliminary results presentation scheduled for March 3.
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