Glencore’s investors want it to stop digging

Graph And Coins

It’s all happening in Zug, the former Swiss fishing village that now hosts one of the world’s largest concentrations of millionaires.

Zug is home to more registered companies than people, and among its 30,000 corporations is Glencore, which will share gory details about the downturn in its fortunes at half-year results on Wednesday.

Unless you are filling up at a petrol station, now is not a great time to be investing in oil. The plummeting price of petrol and the end of the Chinese production boom has hurt the mining and commodities trading company run by the outspoken Ivan Glasenberg. Since its May 2011 float, the shares have lost two-thirds of their value.

Shareholders are hoping to extract a new strategic plan from Glencore’s drill-operator-in-chief. The company needs to keep its BBB credit rating in order to lubricate its trading arm with affordable borrowing. But the credit rating could slip unless Glasenberg takes a pickaxe to the debt mountain – which analysts predict will stand at $48bn by results time. Last week, Glencore made a start by promising to pare back capital expenditure for the second half of 2015.

After the financial crash, Glasenberg was fond of chiding rivals for letting themselves become overleveraged, saying things like: “Because all these people didn’t have their balance sheets set up correctly, no one could take advantage of the prices.” Wise words.

The sound of activism

A Toblerone for the first person to guess what John Menzies and Glencore have in common? That’s right, Zug again. Like Glencore, Lakestreet Capital Partners, the activist investor that has called for Menzies to be broken up, also has a big office in town.

Lakestreet stealthily bought a chunk of Menzies before announcing its presence on the shareholder register in April, with a bold claim that the company could be worth nearly twice as much if its newspaper distribution arm was separated from its aviation services bit – which does everything from baggage handling to aircraft windscreen de-icing.

There was support at the time from another shareholder, US investment company Kabouter Management. But the Menzies family, who still have a big stake, and their allies DC Thomson, the Dundee-based publisher with over 8%, are yet to be persuaded.

Anyway, the intervention has helped lift the shares. There has been barely a ripple since the annual meeting in May. Has Lakestreet decided to sell up and say so long, farewell, auf wiedersehen, adieu? Nein. On 3 July, the raiders announced their holding in Menzies had risen from 3% to over 6%. Kabouter has also upped its stake in recent weeks, to 10%. The pressure is now on new Menzies boss Jeremy Stafford, who is new in the job, to find a drop of golden sun for investors on Tuesday.

Greece roars away

The motorcycle-riding Essex University graduate – and former Greek finance minister – Yanis Varoufakis was back in the limelight again on Thursday, as Athens prepared to vote on a third bailout plan. The next big IOU falls due on the 20th of this month, when a €3.2bn slug of bonds must be repaid to the European Central Bank.

Varoufakis slammed the 400-page bailout agreement as a “landmine of euphemisms”, and called for a glossary of troika-speak. Oops: readers may remember his Syriza party banned the word “troika” in an act of defiance against the three organisations enforcing austerity. The politician, who voted against the latest package early on Friday after an all-night debate, was clearly too exercised to use the preferred term, “institutions”.

However, the top prize for going off-message goes to the Hellenic Republic Statistical Authority, which revealed an entirely unexpected growth in Greek GDP. Instead of shrinking, as forecast, an economy expected to remain in recession until 2016 expanded by 0.8% in the three months to the end of June, according to initial estimates.

That’s twice as fast as Germany and a tad more than the UK. Economists are now asking: are these numbers doctored, by Zeus?

Powered by article was written by Juliette Garside, for The Observer on Sunday 16th August 2015 09.00 Europe/London © Guardian News and Media Limited 2010


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