Glencore boss splashes out on shares but governance questions remain

Here comes Tony Hayward to show the doubters they have got it wrong about Glencore.

The chairman has put his hand in his pocket to buy some shares. He’s splashed out the mighty sum of, well, nearly £91,000.

It would be a chunky sum for most of us, admittedly, but Hayward earns a shade over $1m a year, or £700,000, at Glencore and is a wealthy man from his long stint at BP. It’s not exactly a bold act of faith.

For his next adventure, Hayward could try something different. Try explaining in detail how non-executives “challenge” the executives at Glencore, a process he championed in last year’s annual report.

Did Hayward express any doubts to chief executive Ivan Glasenberg about the wisdom of last autumn’s $1bn share buy-back? That cash would come in handy now. Instead Glencore squandered it by buying its own shares at about 300p a pop, versus Wednesday’s 91p.

And, given the group’s debts of $30bn, why was a same-again interim dividend sanctioned in August? It looked reckless, as the shareholders themselves pointed out. A fortnight later, even before the cheques had been dispatched, Glencore, in effect, had to ask for the money back via a £1.6bn placing. Buy a few shares, by all means, but answers on governance at Glencore would be more valuable.

Trouble brewing for AB InBev/SAB combo?

Altria and the Colombian Santo Domingo family, the two big shareholders in SABMiller, will smile upon a bid from Anheuser-Busch InBev at the right price, so we are led to believe. It’s probably true, and the deed could be done any day. But maybe – just maybe – the Santo Domingos will spring a surprise.

They did in 2005 when they sold their 65-year-old brewing business to SAB for $7.8bn, thereby acquiring their 14% stake. The red-hot favourite had been Heineken, which was thought to have offered $1bn more for Bavaria. Chairman Julio Mario Santo Domingo, who died six years later, explained his thinking at an entertaining press conference. “We married for beauty, not for money,” he declared.

Easy to say if you’re a billionaire, of course. But nephew Carlos Pérez Dávila, one of the family’s representatives on SAB’s board to this day, provided the harder business rationale. “Value was important but we were looking for something deeper than that,” he said. “We were looking for a place to park this asset, hopefully for another generation.”

It was an excellent choice. SAB’s shares at the time were 900p-ish and they had improved to £30 even before the Brazilians at AB InBev showed up.

It may be that the Santo Domingos now think their shares are best parked with AB InBev for next generation. What’s more, the talents of Graham Mackay were clearly part of the calculation back in 2005; sadly, SAB’s chief executive died a couple of years ago.

But it is just possible the Santo Domingos may wish to stick with SAB, a company that has served them well. They would still have to persuade Altria, the tobacco firm that owns 27%, to stay loyal, but at least there would be the prospect of a bar-room quarrel.

Let’s hope so, because Megabrew, as an AB InBev/SAB combo has been dubbed, should be nobody’s idea of a beautiful marriage. It would be a monopolistic, high-debt fling in which drinkers will end up paying more. In Colombian long-termism, we trust (sort of).

Sainsbury’s not out of woods just yet

Sainsbury’s expects its pre-tax profits this year to be “moderately” ahead of the previous consensus City forecast of £548m, but there was nothing moderate about the share price reaction – up nearly 14%. There was a strong smell of burnt fingers in the market: Sainsbury’s has been one of the most heavily-shorted shares in the FTSE 100 index.

But, before shareholders get too excited, they should take a step back. Defying the City’s gloom-mongers puts a feather in the cap of chief executive Mike Coupe, but it does not mean Sainsbury’s profits will increase this year. It would require a miraculous second-half to beat last year’s outcome of £681m. Indeed, the company is still on course for its lowest profits since 2009.

Let’s not be too churlish, though. Sainsbury’s, through the downturn, did not suffer any calamity in the style of Tesco and Morrisons. It is a tightly-managed operation and all those boasts management likes to trot out – about every industry award won, and this time even the improved “ripeness and quality of our avocados” – are clearly finding an audience.

There is a sense that trading conditions are improving slightly. Very welcome, but we’re still talking about like-for-like sales declines. You wouldn’t call it stability yet.

Powered by article was written by Nils Pratley, for on Wednesday 30th September 2015 19.56 Europe/ © Guardian News and Media Limited 2010


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