In the week that US activist investor Harris Associates boosted its stake in Glencore (GLEN), the Swiss commodities giant revealed that gross profits had halved to $1.65bn (£1.06bn) for the half year. It's sometimes ventured that Glencore's trading activities help to insulate the group from the worst effects of falling commodity prices, but that wasn't evident in these results. Indeed, it could be argued that the integration of Xstrata's mining portfolio following the 2013 "merger of equals" increased Glencore's exposure to the vagaries of commodity pricing.
The group slipped to a negative earnings position as prices for a host of its mining and energy products bob around multi-year lows, exacerbated by an increasingly negative outlook on Chinese industrial demand. Matters weren't helped by a $792m impairment booked against oil and gas assets in Chad that the group purchased for $1.35bn last year - though this news was sneaked out in an operational update the week before the earnings numbers.
With troubles mounting, Glencore has responded by pulling the reins on next year's capital spend and selling off underperforming mining assets. Although net debt fell during the period, analysts have warned that Glencore will need to bolster its balance sheet substantially by the end of next year or risk losing its credit rating.
Investec expects full-year adjusted EPS of 9.4¢, against 25.1¢ in 2014.
| GLENCORE (GLEN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 182p | MARKET VALUE: | £23.8bn | |
| TOUCH: | 181.55-182p | 12-MONTH HIGH: | 362p | LOW: 169p |
| DIVIDEND YIELD: | 6.3% | PE RATIO: | NA | |
| NET ASSET VALUE: | 344¢* | NET DEBT: | 61% | |
| Half-year to 30 June | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2014 | 114.06 | 2.50 | 13.0 | 6.0 |
| 2015 | 85.71 | -0.53 | -5.0 | 6.0 |
| % change | -25 | - | - | - |
Ex-div:10 Sep Payment:29 Sep £1 = $1.56. *Includes intangible assets of $8.7bn, or 67¢ a share. | ||||
