Glencore Sinks To All-Time Low On Continued Debt Fears--Update
28 Setembro 2015 - 9:23AM
Dow Jones News
By Scott Patterson And Alex MacDonald
LONDON--Investors pounded shares of mining giant Glencore PLC
Monday, sending it to a new all-time low amid fresh concerns that
persistently low commodity prices will cripple its debt-laden
balance sheet.
The Swiss company's stock has collapsed in recent months despite
a series of moves designed to bolster investor confidence and ease
its debt burden. Glencore raised $2.5 billion earlier this month by
issuing new equity to pay down debt.
Monday's plunge, in which Glencore tumbled about 25% at one
point to a record low of 71 pence, put its stock more than 40%
below the price investors paid just weeks ago in the stock
offering.
But ongoing weakness in China, coupled with soft prices for
commodities such as copper and zinc that are central to the
company's earnings, have scrambled Glencore's efforts to boost
confidence.
Investec Securities said in a report Monday that if commodity
prices don't rebound, the value of Glencore's stock is "virtually
eliminated." That's because Glencore, with nearly $30 billion in
debt, would need to dedicate excess cash to repaying debt
obligations, the analyst said.
If prices don't recover, "Glencore may have to undertake further
restructuring beyond the dividend suspension, capital raising and
asset sales programs it has already announced," Investec said.
Glencore's internal projections are at odds with Investec's
analysis, according to a person close to the company. Glencore
expects earnings before interest, taxes, depreciation and
amortization this year in the high single digits, the person
said.
Goldman Sachs Group Inc. has similar concerns though. Investors
aren't "convinced that Glencore has gone far enough to totally
allay fears that the industrial assets can service the new lower
debt level," analysts at the New York bank said in a Friday
note.
Not all analysts believe the situation is so dire.
Sanford C. Bernstein analyst Paul Gait said in a Sept. 23 note
that the sell-off in Glencore's shares are overdone.
"For there to be no equity value left in the business at all,
there would need to be a significant further fall in the commodity
price deck, " he said.
Other factors weighing on Glencore: poor Chinese macroeconomic
indicators showing a slowdown in the world's second largest economy
and concerns that Glencore may struggle to execute its $10 billion
worth of measures in a timely fashion and reach its target of
reducing net debt by a third to around $20 billion by the end of
2016.
Glencore is also seeking to raise around $2 billion from asset
sales which at least two analysts say could be tricky to
execute.
The company is planning to sell stakes in its agricultural
businesses, hiring Credit Suisse Group AG and Citigoup Inc. to
unload a minority stake, a person familiar with the matter said.
The person said the business would be valued at around $12
billion.
On Monday Glencore also agreed to sell a Brazilian nickel
project for $8 million. It is also looking to sell stakes in its
precious metals assets.
China's industrial profits fell 8.8% on year in August,
extending July's fall as the slowing economy hit enterprises'
profitability.
Copper, the company's biggest earnings driver and a barometer
for the health of the global economy, is down a fifth so far this
year, having hit a six-year low last month.
Glencore's shares are down about 75% so far this year, making it
the worst performer out of the blue chip index and are down nearly
90% since listing its shares in London in 2011.
SP Angel mining analyst John Meyer said the stock feels
oversold. "I would be looking for Glencore to rebound from
here...[but] only time will tell."
Write to Alex MacDonald at alex.macdonald@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 28, 2015 08:08 ET (12:08 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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