Glencore gears up for acquisitions

A coal train from Glencore. Among its recent deals, the commodities giant last month agreed to buy a large stake in an Australian coal mine.
A coal train from Glencore. Among its recent deals, the commodities giant last month agreed to buy a large stake in an Australian coal mine.PHOTO: REUTERS

LONDON • Glencore built a war chest in the first half of the year, continuing to cut debt as the world's largest commodities trading house prepares to ramp up acquisitions.

While profits improved during the first half, Glencore kept its dividend unchanged at US$1 billion (S$1.4 billion) for the year and used the extra cash to pay down borrowings. Net debt was US$13.9 billion by June, less than half the level in early 2014.

"These results indicate the strong position Glencore has built in the recent past and we expect the momentum to continue," said Citigroup mining analyst Heath Jansen.

Glencore shares slipped 1 per cent to 336.50 pence yesterday afternoon. The stock is up 23 per cent this year.

Glencore chief executive Ivan Glasenberg said: "Our extensive efforts to reposition our balance sheet and drive further... portfolio improvements over the last 24 months are reflected in our strong first-half financial performance."

He added that the company's strong balance sheet provides "headroom for highly selective growth opportunities".

Mr Glasenberg, 60, said in February that the "time is right" to reward shareholders after difficult years in 2015 and 2016, when the company suspended dividends and sold shares to raise cash.

The company cut its preferred leverage ratio to 1.07, well below its target of two, suggesting it has the ability to pursue acquisitions. The leverage ratio reached three in 2015 after commodities prices tanked.

Glencore has already inked some deals, including last month agreeing to pay US$1.1 billion plus royalties for a large stake in an Australian coal mine.

Earlier this year, its agriculture division approached Bunge Ltd to discuss a potential merger.

Speaking after the release of the results, Mr Glasenberg said he would remain "opportunistic" on mergers and acquisitions.

The commodities giant, alongside mining rivals Rio Tinto Group, Anglo American and BHP Billiton, has emerged from a two-year crisis as metal prices, particularly copper and aluminium, recover sharply.

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A version of this article appeared in the print edition of The Straits Times on August 11, 2017, with the headline 'Glencore gears up for acquisitions'. Print Edition | Subscribe