Glencore Plc’s billionaire chief executive officer, Ivan Glasenberg, is having to trade his way out of a hole.
With profits from his mining division evaporating, the debt-laden commodity company’s reliance on trading jumped to an unprecedented 76 percent of earnings in the first half of last year. Ongoing losses in mining mean that percentage is likely to increase when Glencore reports results next week.
Investors will be hoping Glasenberg’s 30 years of commodity-trading expertise will pay off as the company wrestles down its $30 billion debt load. While the 42 percent rebound in the stock so far this year indicates a debt-reduction plan announced in September is on track, the challenges presented by the rout in raw materials and China’s slowing growth are far from over.
“The industrial assets are going to struggle to a degree in terms of generating super-revenue in a low commodity-price environment,” Clive Burstow, who helps manage $35.2 billion at Baring Asset Management Ltd. in London, said by phone.
“But that’s where the trading business, if it delivers what they’ve always said it can deliver, which is that differentiator, then it becomes more interesting,” according to Burstow, who said he recently bought back into Glencore after last year’s 70 percent share-price slump. A spokesman for the company declined to comment.
The 2015 stock selloff prompted Glasenberg to enact a program to maintain the investment-grade credit rating, trimming its borrowings from $30 billion to $18 billion by the end of this year. He has already scrapped the dividend, sold $2.5 billion of new shares and is selling assets including a stake in its agricultural division.
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