LONDON (BLOOMBERG) - Glencore Plc, the commodities group that's lost almost US$50 billion (S$71.3 billion) in market value this year, rallied the most ever Tuesday after the company said it can withstand current market conditions.
The shares surged 19 per cent to 82.02 pence as of 2:18 p.m. in London. The advance recouped some of the 29 per cent slump on Monday driven by concern the company has too much debt to withstand the declines in commodities. The stock rose earlier in the day as analysts said the rout probably didn't reflect the company's true value and Citigroup Inc. wrote management should consider taking the company private.
"Our business remains operationally and financially robust - we have positive cash flow, good liquidity and absolutely no solvency issues," according to the statement from the company.
"Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding."
"The pummeling of Glencore yesterday was irrational," Robin Bhar, an analyst at Societe Generale SA, said by phone from London. "Unless you think commodity prices are going close to zero, then this was overdone."
Glencore has been embroiled in a China-led slowdown that's hit prices for commodities from oil to copper to coal, heightening investor concern about its debt and sending the shares down 77 per cent this year.
To cope, Chief Executive Officer Ivan Glasenberg is working on a debt-reduction plan that includes selling assets, halting the dividend and a US$2.5 billion share sale completed earlier this month.
Analysts had said earlier in the day that the recent losses in Glencore shares weren't justified. Citigroup said if the stock market doesn't stop hammering Glencore shares, Glasenberg should take the company private.
"The markets response is overdone," said Citigroup, which helped Glencore to list in 2011 and has worked on many key deals since. "In the event the equity market continues to express its unwillingness to value the business fairly, the company management should take the company private, whereby restructuring measures can be taken easily and quickly."
Glencore, based in Zug, Switzerland, trades everything from wheat to oil to cobalt. It's the world's biggest exporter of power-station coal, with more than 30 mines in Australia, Colombia and South Africa and is among the top three agricultural exporters in Russia, the European Union, Canada and Australia.
The company controls more than 150 mining and metallurgical, oil production and agricultural assets and employs about 180,000 people.
In the first half, Glencore reported an adjusted net profit of US$882 million, down from Us$2 billion a year earlier. The trading business reported earnings before interest and tax of $1.07 billion.
At its height in 2014, Glencore was worth more than Us$85 billion after its US$29 billion all-share takeover of Xstrata Plc, then the world's biggest coal exporter. Now, the market value has shrunk to US$16 billion as investors fled the company, which carries more debt than its rivals.