Glencore makes a comeback

Glencore shares are back in favour as its commodities are expected to meet changing patterns of global demand

Analysts’ views on diversified commodities miner and marketer Glencore have done a Uturn in the past three years as its basket of commodities has come back into favour and it has reduced its debt to manageable levels.

Glencore’s shares, now around R57 on the JSE, hit their nadir at R14.20 in September 2015 when investors were alarmed by its hefty Us$30bn of debt, which prompted global ratings agency S&P to downgrade its outlook to negative. Though CEO Ivan Glasenberg had dismissed concerns about the debt levels as exaggerated, Glencore announced it would reduce borrowings by raising about $2.5bn in a new share issue, selling about $2bn of assets and suspending its dividend payments.

By the end of June this year, its net debt was down to $13.9bn and it was able to make the second $500m tranche, equivalent to $0.07/share, of a $1bn distribution to shareholders promised for the 2017 year. S&P has a

BBB rating with a positive outlook on the group’s debt.

Among the commodities in Glencore’s basket, the average zinc price has gained 49% between the first half of this year and the first half of last year while cobalt has doubled and copper is up 22%.

Glencore’s adjusted earnings before interest and tax (ebit) from metals and minerals mining surged 286% while earnings from energy, which includes coal and oil production, turned from a loss of $589m to a profit of $809m on

Glencore