He who sups with Glencore should have a long spoon
Thursday 21 August 2014
Outlook Glencore is often portrayed as the pantomime villain not just of the grasping, greedy commodities sector but also of the wider financial markets.
Ivan Glasenberg, its architect and chief executive, is after all horribly rich (circa $6.8bn – £4bn – according to Bloomberg) and getting wealthier (a dividend cheque for $66m on the way shortly). He’s not exactly cuddly on the conference calls with journalists and analysts. And he likes his privacy.
So it came as something of a surprise when a Glencore watcher pointed out that yesterday’s promise to buy back $1bn of its own shares means it will have handed more back to shareholders than it actually raised in fresh capital when it floated in May 2011.
Not bad, particularly given last year’s $29bn takeover of rival Xstrata and the seemingly endless appetite mines have for capital expenditure.
Of course Glencore shareholders (and Mr Glasenberg is the second largest of them) have not done so well since the float. The shares are 32 per cent down on their 530p float price. If you believe Mr Glasenberg’s tale that after almost five years zinc, nickel and coal are at last moving back from over-supply to under-supply while demand is still rising or at worst constant, it could be a sound time to buy the shares.
Certainly Mr Glasenberg appears rather more astute than his oppos at BHP Billiton and Rio Tinto in deciding to give shareholders what they want before they start calling for heads to roll. Glencore is the first big miner to come up with a share buyback this time round in the cycle, but it won’t be the last. It is also lining up some fairly impressive dividend growth, assuming earnings grow as well as planned.
So by all means jump aboard. But remember: he who sups with arch capitalists should have a long spoon.
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