Glencore expands debt plan as profits sharply drop

Glencore expands debt plan as profits sharply drop

Glencore PLC (LSE:GLEN) has enhanced its plan to cut debt after reporting its worst half-yearly profit since listing on the London Stock Exchange five years ago.

The miner widened its debt-reduction target by US$500 million and plans to cut net borrowings to as low as $16.5 billion by year-end.

The shares dropped as much as 5.2% as lower raw-material prices cut first-half profit by 66%.

Last year’s slump in commodities and Glencore’s shares required the company implement a rescue strategy that included cuttings its dividend, selling its $2.5 billion of stock, disposing of assets and cutting spending.

The shares have doubled this year due to a plan that has been designed to almost halve borrowings.

Glencore has made progress by announcing a $670 million deal to sell future output from an Australian gold and copper mine.

Colin Hamilton, analyst with Macquarie Group Ltd in London said: “The mining sector is still in divestment mode, it’s still trying to get its balance sheets in order.”

The company’s plan to cut borrowings has been assisted by the sale of almost 50% of its agriculture business for $3.1 billion.

A Kazakhstan gold mine, an Australian coal rail unit and two copper times have also been put up for sale.

Ivan Glasenberg, CEO of Glencore added: “After a difficult start to the year, the more constructive tone of markets in recent months has helped support the pricing of many of our key commodities.

“While we are highly cash generative at current spot prices, we remain mindful that underlying markets continue to be volatile.”