Glencore Plc’s lowest profit in its five-year history as a public company shows that for all its success in soothing investor concerns about a debt-heavy balance sheet, it’s still a long road to recovery.
Weak raw-material prices caused profit at the commodities giant to plunge 66 percent in the first half to $300 million. The shares dropped 3.1 percent in London even as Glencore promised to cut debt even further and said it may resume paying dividends next year.
The company, the world’s biggest coal exporter, also recorded a $395 million loss after hedging future coal production prior to a price rally. The results from Glencore reflect the dire state of the mining industry — BHP Billiton Ltd. also suffered its lowest profit yet and Rio Tinto Group’s were the poorest in more than a decade.
Last year’s collapse in commodities forced Glencore to roll out a rescue strategy that included scrapping its dividend, selling $2.5 billion of stock, disposing of assets and slashing spending.
“We are optimistic on Glencore’s commodity exposure, but we still see challenges ahead for the company,” Chris Lafemina, a mining analyst at Jefferies International, said in a note. “Poorly timed coal hedges have ironically limited Glencore’s leverage to the ongoing recovery in coal prices.”
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