GLNCY Glencore Plc (PK)

By Alistair MacDonald 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 7, 2020).

LONDON -- Commodities giant Glencore PLC reported a loss for the first half of the year and scrapped its dividend, as the coronavirus pandemic sapped demand and lowered prices and production at its mining division.

The global miner and commodities trader, though, reported record profits on its trading floor, but investors sent shares down sharply. Glencore stock was down more than 4% in midmorning trading in London, recovering somewhat from steeper losses earlier in the session.

Glencore said the outlook remains uncertain in the short term and it will focus on reducing debt down to $16 billion by the end of 2020.

To help reduce that debt, it is scrapping a $2.6 billion dividend, the first time it has canceled its payout since 2016, when its shares plunged on concerns over leverage.

The FTSE 100 miner posted a net loss of $2.6 billion for the six months ended June 30 compared with a $226 million profit a year earlier. This was driven by impairments of $3.2 billion as a result of lower commodity prices related to the uncertainty arising from the pandemic.

Adjusted earnings before interest, taxes, depreciation and amortization fell to $4.83 billion from $5.58 billion, beating market consensus.

The company benefited from record earnings of $2 billion in its trading division, with oil in particular generating money -- $1.27 billion in profits -- amid historic volatility caused by the economic effects of coronavirus.

In capitalising on trading opportunities the company increased its leverage, helping make debt reduction a priority, executives said.

"It's a strong performance under the challenging conditions related to coronavirus," Ivan Glasenberg, Glencore's chief executive, said.

The commodities it mines and drills for were particularly hard hit by the effects of coronavirus. Copper prices fell 11% in the period, thermal coal was down 16%, zinc was down 25% and oil down 36%. The miner doesn't produce, to any great degree, the commodities that have performed well during the pandemic, including iron ore and precious metals like gold.

Glencore said that commodity prices were improving in the second half, including a rise in oil of about 10%.

"There is a very positive upside momentum going into the second half," said Chief Financial Officer Steven Kalmin.

The company's shares have lagged peers by 12% over the past 12 months, according to RBC, which said questions remain for the miner on its environmental, social and governance issues, the leadership succession and the various regulatory investigations.

Glencore said in July 2018 that it had received a subpoena from the U.S. Justice Department, demanding records related to its compliance with American antibribery and money-laundering laws in Congo, Nigeria and Venezuela. It has said it is cooperating with the probe.

Glencore has also said it is the subject of an investigation by the U.S. Commodity Futures Trading Commission.

Mr. Glasenberg declined to comment about the regulatory investigations.

The company is also in the middle of management change, with Mr. Glasenburg having signaled he will step down once a new generation of senior management is in place.

--Jaime Llinares Taboada contributed to this article.

Write to Alistair MacDonald at alistair.macdonald@wsj.com

(END) Dow Jones Newswires

August 07, 2020 02:47 ET (06:47 GMT)

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