Half year earnings fall at Glencore

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 amortisation (EBITDA) was $4.6bn.

The company said last week it would trim capital spending for 2015 to $6bn from the $6.5bn to $6.8bn range announced in February. It said that capital spending next year was expected to be no more than $5bn.

Glencore, based in Switzerland and listed in London, said this month it would take a $790m charge on oil assets in Chad due to a steep fall in oil prices.

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.

Glencore makes about a quarter of its earnings from commodities trading, which had previously allowed it to withstand the steep fall in oil and metal prices slightly better than pure play miners.

Earnings from its marketing division fell 27 per cent to $1.2bn, due to tough metals’ trading conditions.

The price of copper, Glencore’s largest earner, is at six-year lows weighed down by a slowdown in China, which is one of the world’s biggest consumers of metals and other raw materials.

Coal prices, another major commodity for Glencore, have also been weak and show no sign of reversing as a supply glut, combined with expectations of shrinking demand from China, paint a bleak outlook.

Ivan Glasenberg, Glencore’s chief executive officer, said: “Against a challenging backdrop for many of our commodities, we have taken a range of pre-emptive actions in respect of our balance sheet, operations and capital spending/recycling in order to preserve our current credit rating and sustain our track record on equity distributions.

“Our core industrial assets remain well positioned on their respective cost curves. We remain by far the most diversified commodity producer and marketer and are well positioned to benefit from any improvement in pricing when it finally and inevitably materialises. Our principal objective remains to grow our free cash flow per share and return any excess capital in the most sustainable and efficient manner.”

As commodity prices fall, Glencore’s share price tumbled to record lows of 168.80p this week, less than a third of its debut price of 530p in 2011.

The shares are down about 40 per cent so far this year, underperforming other global miners such as Rio Tinto and BHP Billiton, and compared to a 26 per cent fall in the FTSE 350 mining index.