Glencore tanks 8%, results hit by commodity rout, China

August 26 01:53 2015

Glencore shares slumped 7.8 percent after the miner and commodities trader posted a 29 percent fall in first-half earnings on Wednesday on sliding metal and oil prices. Glencore, whose trading division has until recently provided some insulation from the global commodities rout hammering other miners, said adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was $4.6 billion.

The company, which is based in Switzerland and listed in London, said this month it would take a $790 million charge on oil assets in Chad due to a steep fall in oil prices. “These (earnings) are pretty much what we expected,” Paul Renken, senior geologist in the mining research team at VSA Capital told on Wednesday. “We knew that the prices for all these commodities they are selling for the most part are down quite a lot, just in the last three or four months or so. So it didn’t particularly surprise us.”

Glencore’s stock hit a record low of 161.50 pence on Wednesday, continuing this week’s slump, which has been driven by the ongoing rout in commodity prices. This is less than a third of its debut price of 530 pence in 2011. The shares are down about 45 percent so far this year, underperforming other global miners such as Rio Tinto and BHP Billiton, and compared to a 26 percent fall in the FTSE 350 mining index.

Oil prices are down because of a supply glut and both Brent and U.S. crude have lost more than half their value from a year ago. Coal prices, another major commodity for Glencore, have also been weak and the sector shows no signs of reversing its own supply glut.This, combined with expectations of shrinking demand from China, paints a bleak outlook.