Glencore Strikes Vein Of Investor Optimism
11 Dezembro 2015 - 6:03AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 12/11/15)
By Alex MacDonald and Scott Patterson
LONDON -- Shares in Glencore PLC climbed after the Swiss miner
delivered an upbeat earnings forecast, unveiling more cuts to its
debt pile and saying it could turn a profit even if commodity
prices fell further.
Glencore's stock gained 7% Thursday in London, surging as much
as 14% in intraday trading, another wild ride for a company whose
share price has experienced big swings in recent months as prices
for copper and other commodities it digs up and sells have
plunged.
A combination of lower costs and solid gains from its trading
arm will help Glencore generate earnings before interest, taxes,
depreciation and amortization, or Ebitda, of $7.7 billion next
year, the company said, topping some analysts' expectations.
"This company is well set up for current prices," Glencore Chief
Executive Ivan Glasenberg said on a conference call Thursday.
It was a rare bit of good news for a company whose share price
has fallen more than 70% in 2015 as investors worried that its debt
was too high and commodities prices too low for it to survive long.
Its trading arm became a perceived liability as concerns increased
that its access to cash would dry up if the company lost its
investment-grade credit rating.
On Thursday, Glencore said trading will churn out between $2.4
billion and $2.7 billion in adjusted earnings before interest and
taxes in 2016, as a result of lower working-capital levels and
reduced output of copper, zinc, lead and coal following production
cutbacks.
That was ahead of some analyst expectations. Credit Suisse had
forecast the division to generate $2.35 billion next year.
Glencore, the world's fourth-largest mining company by market
value, said it is now aiming to reduce its net debt even more than
planned. By the end of 2016, the company said it would reduce net
debt to between $18 billion and $19 billion compared with a
previous target of just above $20 billion, announced in
September.
Glencore has had net debt as high as $29.6 billion this year, a
high level among the world's big miners.
The company said it has delivered on the bulk of its
debt-reduction commitments, or $8.7 billion this year, through
asset sales, cost cuts and dividend suspension. It is now boosting
its net debt-reduction target by almost $3 billion, to $13 billion,
and has increased its targeted asset sales to a range of $3 billion
to $4 billion, from $2 billion previously, with a view to selling
more if needed.
The company has sold $1.1 billion in assets since September, and
is working on selling a minority stake in its agricultural
business, either to a strategic investor -- its preferred option --
or via an initial public offering, according to Chief Financial
Officer Steve Kalmin. The company also is looking at further sales
of precious metals, copper and possibly even infrastructure, he
said.
Glencore has been hammered, along with other miners, by a slump
in commodity prices stemming from an economic slowdown in China,
the world's largest consumer of raw materials, and a sudden ramp up
of supplies following years of investment in mine expansion.
The price of copper, Glencore's largest earnings driver, hit a
more than six-year low last month and is down 27% this year at
$4,854 a metric ton as of Thursday. Still, Mr. Glasenberg said the
company had free cash flow of $2 billion a year and could generate
cash even if copper prices fell to $3,500, a level even the most
bearish analysts haven't predicted.
"We have many levers we can pull in this company," he said. "We
will pull them when required."
Glencore said it is still generating positive cash flow at
current spot prices at all of its assets that are fully operational
except for two. The company is deciding whether to close its
unprofitable Murrin Murrin nickel operations in Australia and its
Sherwin alumina operations in the U.S. It is still trying to turn
around its Koniambo nickel operations in New Caledonia, but Mr.
Glasenberg said the company has "no intention to . . . burn cash."
Glencore also said it would further reduce capital expenditures
this year and next.
(END) Dow Jones Newswires
December 11, 2015 02:48 ET (07:48 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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