GLEN Glencore Plc

By Joe Wallace and Adria Calatayud 

Glencore PLC swung to a loss in 2019 as subdued prices for commodities -- including coal -- weighed on earnings in its industrial unit and prompted the miner to write down the value of key assets.

The Anglo-Swiss commodities company booked $2.8 billion in impairment charges, which contributed to a net-loss of $404 million, down from a profit of $3.41 billion in 2018.

Glencore is the biggest exporter and producer of thermal coal among the world's major diversified mining companies, leaving it exposed to a steep decline in the price of the fossil fuel in recent years. The price of coal delivered into ports in Northern Europe -- a benchmark for sales from Glencore's coal-mining operations in Colombia -- fell 39% in 2019 amid a flood of cheap liquefied-natural gas, as well as policies designed to reduce greenhouse-gas emissions.

The drop in prices, which has extended into 2020, prompted Glencore to write down its Colombian coal assets by almost $1 billion, the company said in its annual report Tuesday.

The charges also included impairments to oil operations in Chad, stemming from the expiration of oil-exploration licenses. Glencore had failed to reach an agreement with the country's government about extending them. The company also impaired its copper and cobalt mine in the Democratic Republic of Congo by $300 million to reflect falling cobalt prices and its decision to halt production at the mine in November.

Glencore shares closed down 4.5% in London after the company reported the loss, its first since commodity prices slumped in 2015.

"It's clear that the amount of coal being consumed in the Atlantic [market] is decreasing," said Chief Executive Ivan Glasenberg, a former coal trader who has been consistently bullish about the outlook for the fossil fuel in the developing world. "That will continue to decrease."

Glencore is gearing up for a change of leadership after Mr. Glasenberg -- who became CEO in 2002 -- signaled late last year that the company would make management changes in 2020, paving the way for his retirement.

"We're working on it and there will be a few senior changes coming," Mr. Glasenberg told reporters. "Once the new generation's in place and ready to move on, then it's time for me, too, to move on."

Mr. Glasenberg said Glencore had no plans to stop mining thermal coal, which is burned to generate electricity, pointing to rising demand for the fuel in fast-growing Asian economies.

Glencore's coal reserves in Colombia are due to run out by 2035 and Chief Financial Officer Steven Kalmin said the company would review its operations in the Latin American country if they became unprofitable. Currently, they are breaking even, he said.

Glencore expects to keep mining thermal and metallurgical coal in Australia at current rates for longer, saying that demand for higher-quality Australian coal is rising at power plants and steel producers in Asia.

The miner -- one of the world's biggest producers of raw materials such as copper, cobalt and coal -- also said it was closely monitoring the deadly outbreak of coronavirus, which has caused significant disruption in China, the world's biggest consumer of raw materials.

The initial impact of the epidemic on Glencore's business has been minor, but the company could decide to reduce output if the illness leads to a sizable drop in demand in the commodities it produces, Mr. Glasenberg said.

"We haven't seen a major effect yet," he said. "We don't want to dig the material out of the ground if it's not required in the market."

Another gauge of profitability closely followed by investors -- adjusted earnings before interest, taxes, depreciation and amortization -- fell 26% to $11.6 billion from $15.8 billion in 2018. That was slightly ahead of the consensus forecast of $11.2 billion, according to a compilation of analyst predictions by Vuma.

Glencore's trading division -- which ships raw materials such as oil, copper and wheat around the world -- partially offset the pressure on profit from weak commodity prices. Adjusted Ebitda from marketing activities rose 5.8% to $2.6 billion, driven by the strong performance of the company's oil traders, who benefited from volatility in energy markets.

Analysts at Citigroup said Glencore had "reported a decent set of results," saying that a widening of net debt to $17.6 billion was largely driven by changed accounting standards.

Mr. Glasenberg declined to give more details about the timing and results of various regulatory investigations that have weighed on Glencore's share price in recent years.

The company said in July 2018 that it had received a subpoena from U.S. authorities related to compliance with corruption and money-laundering laws at its operations in the Democratic Republic of Congo, Nigeria and Venezuela. Last year, Glencore said it was also subject to investigations by the U.S. Commodity Futures Trading Commission and by the U.K.'s Serious Fraud Office.

Write to Joe Wallace at Joe.Wallace@wsj.com

(END) Dow Jones Newswires

February 18, 2020 15:22 ET (20:22 GMT)

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