Glen­coreH1 profit falls on China-led drop in raw ma­te­rial prices

China Daily (Canada) - - BUSINESS - By BLOOMBERG

Glen­core Plc, the com­mod­ity trader and miner headed by bil­lion­aire Ivan Glasen­berg, re­ported a 56 per­cent slump in first-half profit as its trad­ing unit failed to off­set a Chi­nese-led drop in raw­ma­te­rial prices.

Ad­justed net in­come de­clined to $882 mil­lion from $2.01 bil­lion a year ago, the Baar, Switzer­land­based com­pany said onWed­nes­day. That beat the $711 mil­lion av­er­age of seven an­a­lyst es­ti­mates com­piled by Bloomberg. The com­pany, which will pay a div­i­dend of 6 cents a share, cut its full-year forecast for trad­ing profit.

The world’s big­gest nat­u­ral re­sources com­pa­nies are bat­tling a slump in com­mod­ity prices that has left cop­per and oil near six-year lows as China’s econ­omy ex­pands at the slow­est pace in a quar­ter of a cen­tury. Glasen­berg said in an in­ter­view that no­body can read the Chi­nese econ­omy right now.

“Mar­kets are weak,” Glasen­berg said. “China in the first half was a lot weaker than any­one had ex­pected.”

Glen­core shares slid 1.6 per­cent in Lon­don trad­ing to 173.30 pence, ex­tend­ing this year’s de­cline to 41 per­cent. It re­mains the worst per­former in the FTSE 100 In­dex.

In pre­vi­ous years, Glen­core had cush­ioned the im­pact of lower com­mod­ity prices through its trad­ing busi­ness, the world’s largest at a public com­pany.

How­ever, in the first half, trad­ing was weak due to what the trad­ing house said was a “col­lapse” in the premi­ums that traders are able to charge clients for the de­liv­ery ofmet­als such as alu­minum and nickel.

Ad­justed earn­ings be­fore in­ter­est and tax from its trad­ing busi­ness, which in­cludes the sale of com­modi­ties from crude to cot­ton, fell to $1.07 bil­lion. That com­pares with the $1.28 bil­lion av­er­age es­ti­mate of nine an­a­lysts sur­veyed by BloombergNews.

The com­pany cut its full-year Ebit forecast for the trad­ing busi­ness to $2.5 bil­lion to $2.6 bil­lion, down from $2.7 bil­lion to $3.7 bil­lion it an­nounced in De­cem­ber.

“The first half of 2015 was another chal­leng­ing one for com­modi­ties,” Glen­core said. “Fi­nan­cial mar­kets con­tin­ued to fix­ate on the risks to global growth, against a back­drop of a stronger dol­lar,” it added.

Af­ter writ­ing down the value of as­sets, Glen­core re­ported a net loss of $676 mil­lion, com­pared with a profit of $1.72 bil­lion a year ear­lier.

Glen­core is de­fend­ing its cov­eted in­vest­ment-grade credit rat­ing and div­i­dends by low­er­ing ex­pen­di­ture and selling some as­sets.

The com­pany last week said it’s trim­ming this year’s spend­ing plan by as much as $800 mil­lion to no more than $6 bil­lion and selling $290 mil­lion of mines. In ad­di­tion, on Wed­nes­day it said its cap­i­tal in­vest­ment next year will be capped at $5 bil­lion.

Heath Jansen, a min­ing an­a­lyst at Cit­i­group Inc in Dubai, called the cuts in spend­ing “a pos­i­tive”.

The com­pany cut its net debt by $982 mil­lion in the first half to $29.6 bil­lion, more than what an­a­lysts had ex­pected. It im­paired the value of its oil as­sets in Chad by $792 mil­lion af­ter pay­ing $1.35 bil­lion last year for them.

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