Glencore posts 29% drop in first-half earnings, cuts trading arm profit guidance
Shares in Glencore slumped after the miner cut its capex target for the full year and said earnings at its trading division would be lower than previously guided, as it posted a 29% drop in core first-half earnings on the back of declining commodity prices.
FTSE 100
8,078.86
17:14 25/04/24
FTSE 350
4,434.34
17:09 25/04/24
FTSE All-Share
4,387.94
16:49 25/04/24
Glencore
468.60p
16:40 25/04/24
Mining
10,403.74
17:09 25/04/24
For the six months ended 30 June, adjusted earnings before interest, tax, depreciation and amortisation beat consensus expectations, at $4.61bn, down from $6.46bn in the first half of last year. UBS has been expecting adjusted EBITDA of $5bn, while RBC Capital Markets had pencilled in $4.7bn.
However, analysts highlighted the fact that Glencore cut its target industrial capex ceiling for the full year to $6bn from a previous range of $6.5bn to $6.8bn.
There was also disappointment over the company’s full-year trading EBIT guidance of $2.5 to $2.6bn, as this was lower than the $2.7bn to $3.7bn range chief executive Ivan Glasenberg had mentioned earlier this year.
Glencore said that due to a sharp drop in oil prices late last year, which continued into 2015, it will write down the value of its assets in Chad by $792m.
Still, the company said net debt fell by $982m to $29.6bn, while the balance sheet remained strong and flexible, with $10.5bn of committed available liquidity at period end.
Glencore declared an interim dividend of 6 cents per share, consistent with the 2014 interim dividend, which it said reflected its confidence in the prospects and strength of its underlying operations, commodities mix and sustainable cash flow profile.
Chief executive officer Glasenberg said: “Against a challenging backdrop for many of our commodities, we have taken a range of pre-emptive actions in respect of our balance sheet, operations and capital spending/recycling in order to preserve our current credit rating and sustain our track record on equity distributions. Our core industrial assets remain well positioned on their respective cost curves.
“We remain by far the most diversified commodity producer and marketer and are well positioned to benefit from any improvement in pricing when it finally and inevitably materialises. Our principal objective remains to grow our free cash flow per share and return any excess capital in the most sustainable and efficient manner."
At 1030 BST, Glencore shares were down 6.6% at 164.55p.
Canaccord Genuity said: “Unless commodity prices improve materially, the company’s balance sheet remains under considerable pressure in our view.”
Markus Huber, senior analyst at Peregrine & Black, said the numbers themselves "weren’t too bad" and part of the problem is to do with more general concerns about the impact of a slowdown in China.
“Currently the stock is pricing in an overly pessimistic scenario where China is concerned,” he said.