GLNCY Glencore Plc (PK)

By Alex MacDonald and Scott Patterson 

LONDON--Swiss commodities giant Glencore PLC said it lost almost $5 billion in 2015, among its worst-ever performances, but Chief Executive Ivan Glasenberg sounded a rare note of optimism for a mining industry racked by a prolonged price slump.

"Have we bottomed? I think so," Mr. Glasenberg said on a call with reporters Tuesday.

Mr. Glasenberg's upbeat remarks run counter to some other mining executives, who have said they continue to expect more pain in 2016. Glencore's results put an exclamation mark on a dismal 2015 for which $32 billion of losses were reported by the world's five largest independent miners--Glencore, BHP Billiton Ltd., Rio Tinto PLC, Vale SA and Anglo American PLC.

Miners have been ravaged by an unexpectedly sharp downturn in demand growth in China after an endless stream of production from new operations launched during a China-fueled demand boom that started about a decade ago. In response, the companies have slashed spending, taken massive impairments and cut dividends, hoping to salvage their hemorrhaging balance sheets and stave off further ratings downgrades.

Mr. Glasenberg said he was optimistic that 2016 wouldn't be a repeat of 2015. He cited solid demand for Glencore's products world-wide and sharp spending cutbacks among large mining companies, including his own.

Glencore has slashed spending and production at its coal, copper and zinc mines. The copper cuts have taken about 300,000 metric tons of annualized production out of the market, Mr. Glasenberg said.

The spending cuts are going to reduce the supply of metals that have outpaced demand in recent years, an imbalance that sent prices for metals like copper down 25% in 2015.

"You're not going to get new excess supply coming on the market," Mr. Glasenberg said.

Another reason for his optimism: Solid sales to China, where worries about an economic slowdown in the world's biggest consumer of industrial metals have weighed on prices.

"We continue to see good orders into China," including sales of copper, one of Glencore's most important commodities, he said.

Mr. Glasenberg's optimism is partly reflected in the company's share price, which has gained 45% this year, buoyed in part by rising commodity prices. Iron ore and copper have rebounded in early 2016, partly in response to signs of renewed stimulus in China, giving a boost to mining stocks. Glencore has also been supported by its progress on an urgent plan to raise cash from selling assets, cutting costs and refinancing a chunk of debt.

Mr. Glasenberg's rivals are less sanguine about market conditions. Anglo American CEO Mark Cutifani last month said 2016 could be worse than last year for commodities.

"Opinions are divided on whether we have reached the bottom of the cycle, " Mr. Cutifani said at a mining conference in South Africa. "So things may still get worse before they get better."

Glencore's shares were down about 1.5% in London trading on Tuesday morning after the company reported its 2015 results.

The mining and commodity-trading giant said it lost nearly $5 billion in 2015, compared with a net gain of $2.3 billion the previous year on tumbling raw-material prices. Company officials promised to sell more assets than originally planned this year to further shore up Glencore's finances.

Glencore's loss last year was only exceeded by the $8 billion loss it took in 2013 after it reported a $8.1 billion write-down for charges related to its $29.5 billion takeover of Xstrata.

The company's trading arm helped stave off an even bigger loss, pulling in $2.7 billion in earnings before interest, taxes, depreciation and amortization, 11% lower than a year earlier. By contrast, the mining division's adjusted earnings plunged 38% to $6 billion.

Mr. Glasenberg, despite his more upbeat outlook, said Glencore's balance sheet can weather lower commodity prices. The company is following through on a comprehensive restructuring of its finances, announced in September, that includes a range of cost cuts, asset sales and a suspended dividend.

Those moves have already helped it cut its net debt by 15% to $25.9 billion by the end of December from a year earlier. Management is now aiming to sell $4 billion to $5 billion in assets this year, up from a previous goal of $3 billion to $4 billion, targeting a reduction in net debt to $17 billion to $18 billion this year, compared with its previous debt goal of $18 billion to $19 billion by the end of 2016. Glencore's net debt stood at $29.6 billion at June 30.

Glencore's debt-reduction plan includes the possible sale of a minority stake in its agricultural-products business in the second quarter and expectations it will receive final bids for at least one of two copper mines, Cobar in Australia and Lomas Bayas in Chile.

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

(END) Dow Jones Newswires

March 01, 2016 09:04 ET (14:04 GMT)

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