GLNCY Glencore Plc (PK)

By Alex MacDonald and Scott Patterson 

LONDON-- Glencore PLC is cutting its net debt faster than expected and its trading arm is on track to meet earnings expectations this year, the Swiss commodities giant said Wednesday, offering another jolt of information for investors worried about the embattled company.

The company aims to cut $10 billion in net debt by the end of 2016. Analysts said those plans seem to be running ahead of expectations with the company on track to reduce net debt to $25 billion by the end of the year, just four months after announcing its net debt reduction plan.

The quickening pace of Glencore's debt reduction comes after investors took fright at the size of its nearly $30 billion debt pile this year. Its share price, which had been falling all year, tumbled almost 30% in one day on Sept. 28 as investors worried the company couldn't weather a prolonged slump in the price of commodities the group trades and mines like copper and coal.

The share price has recovered more than 70% since then--it was up more than 7% in London trading Wednesday morning. But stock in the world's third-largest miner by market capitalization has been gyrating unpredictably on a near daily basis and is still down more than half for the year.

The company has been issuing regular updates on its progress fulfilling its $10 billion debt-reduction plan announced in September. People close to the company said it is actually aiming to reduce more debt than announced in a bid to get its investment-grade rating increased; it is two notches above junk--high for a trading company but low among the world's top miners.

A combination of moves have put Glencore on a faster track for debt reduction: It issued $2.5 billion in new stock, is raising $900 million from a sale of the rights to some of its silver and has made meaningful progress to reduce its working capital, long-term loan advances and capital spending.

"This was as good a denouement to the end of very volatile quarter as one could realistically expect," said Barclays analysts in a note.

The company also suspended two dividend payments worth $2.4 billion, helping the company repay $2 billion in debt and repurchased $400 million in bonds since the end of September. On Wednesday, the company said it was close to securing a second deal similar to its sale of its silver production as part of its plan to raise $2 billion from asset sales.

Glencore also sought to reassure investors about its trading division, which became a flashpoint in recent months as investors fretted the company could lose its investment-grade debt status. That could increase the cost of funding the company's commodities trading and eat into profits of a division that drives a large part of its earnings.

Glencore said the trading arm, which the company calls its marketing division, is on track to generate between $2.5 billion to $2.6 billion in adjusted earnings before interest and taxes this year.

"Marketing was stronger over the quarter, with improved contributions from metals and minerals and agricultural products," Glencore said.

Glencore normally doesn't provide a quarterly update about the trading division, which has been dubbed a "black box" by some investors because of its lack of transparency.

The company also said it will reduce its copper output by a further 55,000 metric tons on top of the 400,000 tons already announced by delaying the ramp up of its loss-making Katanga and Mopani mines in Congo to the end of 2017.

Write to Alex MacDonald at alex.macdonald@wsj.com and Scott Patterson at scott.patterson@wsj.com

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(END) Dow Jones Newswires

November 04, 2015 08:26 ET (13:26 GMT)

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