Glencore’s billionaire Chief Executive Officer Ivan Glasenberg said no one can read the Chinese metals market as a slowdown in the biggest buyer helped cut first-half profit by 56%.
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Speaking about his company’s interest in giant Rio Tinto, Glencore chief executive Ivan Glasenberg said: “we did not pursue it or do anything, so you can draw your own conclusions from that”.
Formerly just a commodities trader, Glencore merged with mining company Xstrata in 2013.
Revenue for the first half declined to $85.71 billion from $114.06 billion in the same period last year. This compares with Deutsche Bank’s $US1.2 billion estimate.
US and Indonesian producers are cutting back on supply, Glencore said, but “more slowly than required by market forces”. “The directors of Optimum are of the view that if the supply agreement with Eskom can be renegotiated, there is a reasonable prospect of rescuing Optimum”. Shrinking import demand from China, notably for coal which powers much of the country’s electricity grid, has played havoc with prices.
Overall copper production fell by 3 percent to 730 900 tonnes, although copper from African operations showed growth compared to the same period last year.
Adjusted EBITDA – earnings before interest, taxes, depreciation, and amortisation – fell by 29pc to $4.6bn in the first half of the year, it reported on Wednesday.
Glencore shares were down around 1.2 per cent in early London trading. It also said it is aiming for another $400 million in cost cuts over the next 12 months.
When asked if he felt under any pressure from investors given the 70 per cent collapse in Glencore’s share price since the company floated in 2011, Mr Glasenberg said Glencore was in similar territory to other major miners. The net debt pile was also trimmed by $1bn to $29.6bn.
The turmoil in commodity markets has made Glencore the worst performer on the U.K.’s FTSE 100 Index this year.
When asked whether he was interested in the Hunter Valley coal sale, Mr Glasenberg said; “Let’s see what they do with the process, they are in a process, we will see what happens”. The Canadian crop harvested in September 2014, though within a normal range, fell well short of the previous year’s record crop and there are some “dryness” concerns regarding the 2015 crop the company said. Following the latest falls that has dwindled to £1.77bn. Mr. Glasenberg had said as recently as in March that the division would generate between $2.7 billion and $3.7 billion “no matter what commodity prices are doing”. This was explained with tough trading conditions in the aluminum, nickel and coal markets, while grain marketing was down due to a strong comparable base but is expected to post improved performance in the second half. All that squeezed trading profits.
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“The measures today further highlight the company moving in the right direction with levers to pull to mitigate further declines in price if required”, Barclays Plc analysts Amos Fletcher and David Butler wrote in a note to clients.
