The Strategist

Glencore Showed The Worst Annual Accounts Ever

03/01/2016 - 15:10

2015 annual accounts of one of the largest suppliers of raw materials - Glencore – showed up the weakest for the company since it became public. Net loss triggered by falling oil prices reached almost $ 5 billion.

Glencore's mine. Golda Fuentes via flickr
Glencore's mine. Golda Fuentes via flickr
According to the Swiss company's statements of 2015, Glencore’s net loss was $ 4.96 billion against last year's profit of $ 2.3 billion. The profit was reduced by 70% for the year to $ 1.34 billion, revenues in 2015 decreased by 23% compared to the previous year (up to $ 170 billion). Adjusted EBITDA fell by 32%, to $ 8.7 billion.

At the same time, the company's net debt as of the end of 2015 decreased by 15% compared to the previous year (up to $ 25.89 billion).

In 2016, Glencore management plans to reduce its debt, which was formed in 2013 after the acquisition of mining company Xstrata's, up to $ 17-18 billion by the end of 2016. Once the statements have been made public, CEO Ivan Glasenberg stressed that paying back the debt is a priority for them.

Glencore intends to seek debt reduction by reducing costs, suspension of payment of dividends, issuance of new shares and sale of assets. In particular, the company said it plans to sell assets at $ 4-5 billion in 2016.

The company notes that the financial results in 2015 have been affected by the drop in oil and metals prices, slowing economic growth in China and the strong dollar.

Markets quickly reacted to the company’s unconsoling reporting: Glencore shares on the London Stock Exchange fell by 4.6% to £ 1.29 per share.

As noted by The Wall Street Journal, Glencore goes to the same extremes as other companies working in the extractive industry: they are limiting or stopping paying dividends, reducing capital costs and looking for buyers for non-core assets. In recent weeks, a number of companies working in the extractive industry (particularly, Rio Tinto, Vale, BHP Billiton), reported a sharp deterioration in the financial results and losses.