By Scott Patterson and Alex MacDonald
LONDON--Swiss commodities company Glencore PLC said it lost
almost $5 billion in 2015, among its worst performances ever, 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 Tuesday on a
call with reporters. His 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 from China, whose consumption had driven a stream of new
production from mining companies that started about a decade ago.
Now, the companies have slashed spending, taken big impairment
charges 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 cut 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 expected to reduce the supply of metals
that have outpaced demand in recent years, an imbalance that sent
prices for metals such as 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 a 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 said last month that
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."
BHP Billiton Chief Executive Andrew MacKenzie said Tuesday that
his company was caught off guard by China's transition to a
consumer-led economy and away from industrial growth, a trend he
said would "further constrain demand for commodities."
In London, Glencore's shares fell 2.1%, to GBP1.31 ($1.82) on
Tuesday.
The company 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 exceeded only by the $8 billion
loss it took in 2013, when it reported an $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 said Glencore's balance sheet could weather lower
commodity prices. The company is following through on a
comprehensive restructuring of its finances, announced in
September, that includes a suspended dividend.
Those moves have 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 as
of 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 13:48 ET (18:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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