Glencore shares plummet to new low after firm reveals $676m loss

(REUTERS)

The global commodities rout sent trading and mining giant Glencore plunging to a $676m (£431m) first-half loss, sending its shares to a new record low and extending its chief executive Ivan Glasenberg’s paper losses this year to more than £1.3bn.

Shares in the Swiss-based company – dubbed the “millionaire factory” during London’s biggest-ever float in 2011 as dozens of traders made paper fortunes – plunged almost 10 per cent, or 17.15p, to close at 158.95p, its low for the day and and its lowest close since the float.

The latest decline leaves Glencore’s suffering investors nursing losses of 47 per cent this year, far worse than the FTSE 100 overall as well as its struggling mining peers.

Mr Glasenberg owns 8.4 per cent of Glencore, worth £3.1bn at the beginning of the year. Following the latest falls that has dwindled to £1.77bn. The South Africa-born trader joined the company more than 30 years ago under founder Marc Rich, who spent years on the run from the US Government before being controversially pardoned by Bill Clinton.

Glencore’s shares are down more than two-thirds since the float four years ago but it still has some fans. The US activist investor Harris Associates has taken advantage of the weakness to build a 4.5 per cent stake. Harris has become the fourth biggest investor behind Qatar Holdings, Mr Glasenberg himself and the US fund giant Blackrock.

Despite the day of turmoil Mr Glasenberg said Glencore was “well positioned to benefit from any improvement in pricing when it finally and inevitably materialises” and announced a $766m interim dividend, worth around $64m to the chief executive.

But the company also admitted a “challenging backdrop for many of our commodities” as weak demand from China sent the cost of copper – Glencore’s biggest earner – slumping to a six-year low.

The company is also up against tough nickel and coal markets while its trading business has seen a collapse in the premiums it can charge due to low demand. Mr Glasenberg also said the trading arm would post full-year profits of no more than $2.6bn, compared with previous guidance of up to $3.7bn.

The bottom-line loss – also driven by one-offs including a $792m writedown on its Chadian oil operations due to collapsing crude prices – compares with a $1.72bn profit last year.

The company has also cut back capital spending to $6bn this year and $5bn next year as it “battens down the hatches” according to Shore Capital’s analyst Yuen Low.

Mr Low said: “A lot of the assets are lower quality than other commodity producers. The good thing is that they don’t have a lot of exposure to iron order but they have significant exposure to copper, nickel and coal.”

Glencore’s debt pile shrank 3 per cent to $29.5bn, but company watchers said the collapsing profits intensified the strain on its finances.

The broker Investec said: “Unless commodity prices improve materially, the company’s balance sheet remains under considerable pressure in our view.”