Glencore Posts Loss, Cancels Dividend -- WSJ
August 07 2020 - 3:02AM
Dow Jones News
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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