London - Glencore said profit from trading commodities rebounded, putting the embattled miner on course to hit its full-year earnings target for the division as it weathers a rout in prices. The shares rallied to their highest in almost two weeks.
Adjusted earnings before interest and tax will be $2.5 billion to $2.6 billion for this year, the Swiss company said in a statement Wednesday, reiterating an August forecast. JPMorgan Chase & Co analysts said this was “significantly better” than its estimate of $2.24 billion.
Third-quarter trading was stronger and there were “improved contributions from metals and minerals and agricultural products,” it said. The producer also said it will cut an additional 55,000 metric tons of copper output by the end of 2017.
Glencore, weighed down by a $30 billion debt load, also outlined a new goal to trim borrowings by $5 billion to $25 billion by the end of the year while at the same time targeting net funding of $40 billion. Billionaire CEO Ivan Glasenberg has been shuttering coal, copper and zinc mines in a bid to combat a rout in prices that’s sapping profits for the biggest miners. The shares rallied to the highest in more than a week.
“The company has suffered a sharp drop in confidence,” Liam Fitzpatrick, an analyst at Credit Suisse Group who has an outperform rating on the stock, wrote in a note to clients. “Concerns over marketing and industrial earnings are overdone and net debt should fall rapidly through operating cash flows and divestments. We expect marketing to remain a cash cow.”
In its first-half results in August, Glencore reported a 29 percent drop in its adjusted earnings before interest and tax from its trading business to $1.07 billion. The company cut its full-year forecast then to $2.5 billion to $2.6 billion, down from $2.7 billion to $3.7 billion previously.
Streaming deal
The Baar, Switzerland-based company late Tuesday said it sold a share of its future silver output from its Antamina mine to Silver Wheaton in a deal that includes a $900 million upfront payment.
The stock has climbed 88 percent since plunging to a record low on Sept. 28, after the company moved to alleviate investor concerns about its ability to curb its debt load.
Glencore rose as much as 7.1 percent and was up 4.7 percent at 125.45 pence by 10:22 a.m. in London. The shares have tumbled 58 percent this year, making them the worst performers on the FTSE 100 Index. Rival Anglo American has plunged 51 percent this year.
The world’s biggest mining companies are seeing profits narrow amid slowing economic growth in China, the largest commodities buyer. That’s reducing demand for raw materials and adding to oversupplies. Copper has dropped about 18 percent this year on the London Metal Exchange and reached a six-year low in August.
Bond repayments
Glencore said it has repaid three bonds amounting to $1.95 billion since the end of the third quarter and repurchased a further $400 million of bonds.
In September, Glencore said it would cut copper production from mines in Zambia and the Democratic Republic of Congo by 400 000 tons. It’s now raised that estimate to 455 000 tons and said the shutdowns have been implemented and that there would not be any incremental output in 2015 or 2016.
Copper output from its mines rose 1 percent to 396,600 tons in the three months through September, up from 391 300 tons a year earlier, it said. The company, also the biggest shipper of power-plant coal, said total production of the fuel fell 15 percent to 34 million tons in the period.
Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.