Glencore earmarks US$1.5B for probes amid record profit

Mining and commodities trader Glencore (LSE: GLEN) will set aside US$1.5 billion to cover a series of probes into bribery and market manipulation, which it expects to resolve before year-end.

The amount, chief executive officer Gary Nagle told reporters on a conference call, is Glencore’s “best estimate” of what it believes the settlement amount will be.

News of the provision came as the Swiss company posted its highest-ever profit of US$21.3 billion in 2021, almost double a year earlier, thanks to soaring commodity prices. The company also said it would return almost US$4 billion to shareholders.

In the past four years, the company has been the target of investigations by the U.S. Department of Justice (DOJ), the U.K. Serious Fraud Office (SFO) and Brazilian authorities for alleged money laundering and corruption. 

Glencore disclosed in 2018 that the US DOJ had requested documents related to the group’s business in the Democratic Republic of Congo (DRC), Nigeria and Venezuela as part of a probe into possible corruption and money laundering.

Brazil also kicked off an investigation into Glencore and trading groups Vitol and Trafigura over alleged bribery of employees at state-run oil company Petrobras.

A year later, the U.K.’s SFO confirmed it was investigating suspicions of bribery by both the company and its staff.

The Swiss Attorney General followed suit, saying the probe was the result of a wide-ranging investigation by law enforcement agencies opened in early 2020.

The full-year results are the first under new CEO Nagle, who last year succeeded long-time boss Ivan Glasenberg. 

Speaking to reporters, Nagle said he was “not happy” with the US$1.5 billion charge but noted that the company recognized there had been historic cases of “misconduct.”

“We have worked very hard to correct that,” he said during a call conference. “We are changing the culture. We want to complete these investigations, put a line under that and move forward.”

RBC Capital Markets analyst Tyler Broda said in a note to investors that quantifying the main investigations will likely de-risk the company from the “unknown known,” which has been an overhang for the company for years.

Glencore, which is still subject to investigations from Swiss and Dutch authorities, said the timing of those probes remains uncertain but would expect any possible resolution to avoid duplicative penalties for the same conduct.

The world’s biggest commodity trader is the first of the top global miners to report full-year earnings. The world’s largest mining company, BHP (NYSE: BHP; LSE: BHP; ASX: BHP), just reported strong profits for its half-year.