Glencore first-half profit tumbles amid commodities rout

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Glencore’s first-half profit has more than halved as the commodity trader and miner suffered from plunging commodity prices.

Net income excluding significant items dropped by 56% to $882m (£563m) from a year earlier as the price of aluminium, nickel and other raw materials fell. Adjusted earnings before interest, tax and other items fell 29% to $4.6bn.

Glencore’s shares fell on news by over 7% to 162.6p. The shares have halved in the past year and have fallen by more than two-thirds since the company’s flotation in 2011, cutting Glasenberg’s fortune to about £2bn from £6bn.

The FTSE 100 company, based in Switzerland, said it had cut planned capital expenditure for this year to $6bn from up to $6.8bn and that spending would fall further to a maximum of $5bn next year.

The company is cutting spending to preserve its BBB credit rating and keep funding costs low. Net debt fell by $1bn to $29.6bn and gross borrowings fell to $50.5bn from $52.7bn.

Glencore has been hit hard by plunging prices of coal, metals and other raw materials as demand from China has fallen. JP Morgan analysts wrote last week that Glencore needs to cut its net debt by $16bn by the end of next year to preserve its credit rating.

Ivan Glasenberg, Glencore’s chief executive, said: “We remain committed to a strong investment grade credit profile and our disciplined approach to allocating capital. In light of current market conditions and continuing our recent net debt reduction trajectory, we are targeting a further decline in net debt to $27bn.”

The company said it had $10.5bn of undrawn credit and cash, giving it flexibility to support its balance sheet. It held the interim dividend at 6 cents a share, which it said was a sign of confidence in the company’s prospects amid nervous markets.

Glasenberg said: “Financial markets continued to fixate on the risks to global growth, against a backdrop of a stronger US dollar. Commodity prices are now at levels not seen since the financial crisis of 2008/2009 and various markets appear increasingly driven by perceptions and technical factors rather than reality or fundamentals.”

Powered by Guardian.co.ukThis article was written by Sean Farrell, for theguardian.com on Wednesday 19th August 2015 08.49 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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