Lonmin Share News (LMI)

LONDON (Alliance News) - Glencore PLC on Wednesday reported a substantial fall in earnings, as expected, in the first half of the year, due to weaker commodities and oil prices and following the company's mixed production results earlier this month.

Glencore, like its peers, is suffering from steep declines in commodity prices such as iron ore and copper, whilst also battling the decline in oil prices, compounded by a slowdown in economic growth in China, the world's largest importer of metals.

The FTSE 100-listed multi-commodity miner reported a pretax loss of USD527.0 million in the first half of 2015, swinging from a USD2.49 billion profit a year before, as revenue tanked to USD85.70 billion from USD114.06 billion.

The company had already warned earlier in August it would book a USD790 million impairment related to its assets in Chad due to the decline in oil prices. Exceptional items totalled USD1.55 billion in the first half, comprised of the Chad impairment, a USD377 million foreign exchange loss, a USD256 million loss on Glencore's stake in London-listed Lonmin PLC, and USD235 million related to a metal leak. The metal leak occurred at the company's Koniambo mine in New Calendonia back in December 2014.

That is a large rise in exceptional items, compared to the USD290 million booked in the first half of 2014.

Glencore reported earnings before interest, tax, depreciation, amortisation and exceptional items of USD4.61 billion in the first half of 2015, down 29% from USD6.46 billion a year earlier.

Ebit before exceptional items was down 61% to USD1.42 billion from USD3.62 billion, with the fall in earnings mainly caused by the fall in commodity prices.

Marketing Ebitda, meaning Glencore's trading arm, was down 27% to USD1.20 billion with an Ebit of USD1.10 billion, down 29%, both caused by "tough metals' trading conditions," particularly aluminium and nickel affected by the collapse in physical premiums and subdued levels of global stainless steel production. Industrial Ebitda was down 29% to USD3.40 billion.

Glencore said it expects "better second half contributions from metals and agriculture to underpin full year Marketing Ebit guidance of USD2.50 to USD2.60 billion".

Net debt at the end of the first half had fallen to USD29.60 billion, compared to USD30.50 billion at the beginning. By the end of 2016, the miner is hoping to have net debt fall further to around USD27.0 billion.

The miner kept its interim dividend flat year-on-year at 6.0 cents per share for the first half, alleviating worries that the company would cut its dividend to cope with the fall in commodities prices and its large debt.

Glencore already released its production figures for the first half earlier in August and the results were mixed. Copper, lead, coal, gold and silver production all fell in the period with zinc, ferrochrome and oil being the only areas experiencing a lift year-on-year.

The miner also slashed its capital expenditure budget earlier in August after spending USD3.0 billion in industrial capital expenditure in the first half. That is now expected to total USD6.0 billion for the full year, down from its previous guidance range of USD6.50 to USD6.80 billion.

On Wednesday, it said it will look to spend no more than USD5.0 billion in 2016 based on current market conditions.

"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," said Chief Executive Ivan Glasberg.

By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance

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