Glencore SWOT & PESTLE Analysis
COMPANY PROFILE -Glencore
Business Sector :Commodity trading and mining
Operating Geography :Mining and Commodity Trading, Diversified
About Glencore :
Glencore is essentially an acronym for Global Energy Commodity Resources. It was formed through a merger between Glencore and Xstrata. It is the third-largest family business in the world and was the largest commodity trading company in the world in 2010 with a global market share of 60% for internationally tradable zinc and 50% for internationally tradable copper. It has also got 14th rank on Fortune’s Global 500 list. It has a strong marketing policy and a widespread distribution network that caters to the needs of customers in the diverse fields of industrial, food processing industries, power generation and construction, steel, automotive and oil. It has more than 150 assets and operates in more than 50 countries with approximately 146,000 employees as of 2018. Its USP is that it is one of the world’s largest globally diversified natural resource companies.Glencore Revenue :
USD 205.5 billion (2017) – FY ending 31st Dec 2017 (y-o-y growth 34.4%)
USD 152.9 billion (2016) – FY ending 31st Dec 2016
Competitive Analysis of Glencore
| 1. Global presence with production facilities in 50 countries. 2. Profitable investments for future in Africa 3. Strong backing as it is family owned business 4. Large quantity of high quality reserves. 5. Low labor and conversion costs | 1. Accused of not paying enough tax on its profits at one of its mines. 2. High debt 3. Accused of violation of licenses 4. Management issues regarding women in top management |
| 1. Diversification of business. 2. Heavy industrialization at global level, causing an increase in demand for fuel (Coal) 3. Large mining reserves. 4. High purchasing power and more investment opportunities. 5. Declining energy prices and depreciating operating currencies. | 1. Price competitiveness from local players 2. Threat from Government Policies 3. Selling of assets to reduce its debt 4. Currently weak global commodity market 5. Pressure from NGOs |
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Detailed SWOT Analysis of Glencore
Strength
1. Global presence with production facilities in 50 countries: Glencore is one of the world’s largest natural resource companies. Active at every stage of the commodity supply chain, it is uniquely diversified by geography, product and activity, maximizing the value it create for its business and its diverse stakeholders. Glencore has its units scattered all over the globe with a strong presence in all of the major continents. It has around 150 assets which mine a variety of minerals including Nickel, Copper, Zinc, Iron and Oil. Other assets include warehousing facilities at a number of places as well port access and storage which enables it to transport its products easily from one place to another.
2. Profitable investments in Africa: Glencore has major investments and a strong footprint across the African continent. The company is deeply invested in countries such as South Africa, Zambia, Congo and Rwanda among others. These investments are delivering consistent returns and also helping the company’s bottom-line. Further in October 2017, Glencore announced to take over 75pc ownership of Chevron’s refineries in South Africa and Botswana for $973 million.
3. Strong and consistent operational performance: Glencore has consistently outperformed all its UK-listed major diversified mining peers with a strong performance in 2017. Its balance sheet is robust, helped by earnings contribution from the highly cash generative Marketing and Industrial businesses. The marketing business is less correlated to commodity prices and helps the company to balance its financials in times of weak commodity market.
4. High-quality, low-cost assets in desirable commodities: Glencore has a portfolio of high quality assets acquired at low prices. Glencore has a strong footprint in commodities such as zinc, copper, nickel and thermal coal and there is an expected increase in demand in the same with positive price divergence over the next few years.
Weakness
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Opportunity
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Threat
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References used in Glencore Analysis Report
1. Glencore half year report 2019 - 2https://www.glencore.com/dam:jcr/de09eded-6a3b-42f7-9b82-f40d1a257dcd/GLEN-2019-Half-Year-Report-.pdf
2. Glencore annual report 2018 - https://www.glencore.com/en/investors/reports-results/2018-annual-report
3. Glencore website - https://www.glencore.com/
4. Glencore Revenue 2008-2018 - https://www.statista.com/statistics/274687/total-revenue-of-glencore-xstrata/
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Glencore SWOT and PESTLE analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.
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