GLNCY Glencore Plc (PK)

By Alex MacDonald 

LONDON-- Glencore PLC swung to a steep, first half-year loss, hit by sharp price falls in the raw materials it extracts and lower profit from the trading business that was supposed to cushion it against such a commodities-market rout.

The world's third-largest globally diversified miner by market capitalization on Wednesday reported a net loss of $676 million in the six months to end-June--missing analysts' expectations for a net profit of around $728 million--compared with net profit of $1.72 billion in the same period last year.

Revenue fell 25% to $85.71 billion.

The company's stock fell sharply in morning trading in London, dropping more than 9%, as investors knocked off the equivalent of more than GBP2 billion ($3 billion) off Glencore's market capitalization. The stock is now down around 46% this year.

Glencore took the big hit at its mining business largely because of weaker commodity prices, particularly copper, coal and oil which are trading near multiyear lows. Earnings before interest, taxes and exceptional from its industrial activities, which includes mines and farms, fell 84% to $341 million in the first half of the year from the same period a year before.

Chief Executive Ivan Glasenberg has said that the company's hybrid nature --a global diversified miner married up with one of the world's biggest commodities trading operations--should protect its performance some of the ups and downs of the markets. That was part of the rationale for his blockbuster merger with mining giant Xstrata in 2013 after taking Glencore, then principally a trading company, public in 2011.

The company's trading division reported a 29% drop in first-half adjusted Ebit to $1.1 billion over the same period. This compares with Deutsche Bank's $1.2 billion estimate.

The company lowered its forecast for full-year EBIT from its trading division to a range of $2.5 billion to $2.6 billion. 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."

Glencore said on Wednesday that tough trading conditions, particularly in aluminum and nickel as well as coal markets, explained the decline. Shrinking import demand from China, notably for coal which powers much of the country's electricity grid, has played havoc with prices.

Despite the difficult market environment, Glencore succeeded in lowering debt. The company said gross debt fell to $50.48 billion at June 30 from $52.69 billion at the end of 2014.

Glencore also declared an interim dividend of $0.06 a share, in line with last year's interim dividend.

Mr. Glasenberg said Glencore plans to reduce net debt to $27 billion by the end of 2016 from $29.55 billion at June 30 while maintaining its dividend-payment plans and keeping an eye out for opportunistic mergers and acquisitions.

Glencore shares were down around 1.2% in early London trading.

Write to Alex MacDonald at alex.macdonald@wsj.com

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(END) Dow Jones Newswires

August 19, 2015 05:31 ET (09:31 GMT)

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