Tuesday 18 February 2020 8:27 am

Glencore braced for coronavirus impact as earnings fall

Glencore saw earnings drop 26 per cent to $11.6bn (£9bn) last year as the commodities giant warned that it was “closely watching” the coronavirus outbreak’s impact on global markets.

Shares in the blue-chip stock fell 0.8 per cent as markets opened.

The figures

Although earnings declined to $11.6bn from $15.8bn in 2018, Glencore still beat analyst expectations, which had predicted a take of $11.2bn.

The Swiss-headquartered firm also posted a net loss of $404m, a swing from a $3.4bn profit the year before, largely due to $2.8bn of impairment charges.

Net debt also increased 20 per cent to $17.6bn, up from $14.7bn last year.

The company also reported cash flow of $5bn, and announced a dividend of $0.20 per share.

Why it’s interesting

With China the world’s leading importer of commodities, the economic impact of the coronavirus outbreak was always likely to effect Glencore’s results.

The disease, which has now killed 1,868 in China alone, is yet another stumbling block for a company which has been beset by a raft of operational challenges in the last year, which saw the firm’s share price as much as 19 per cent in 2019.

The commodities giant is also under investigation by the Serious Fraud Office, as well as the US Department of Justice, over allegations of bribery.

In addition, the firm was taken by surprise in December when chief executive Ivan Glasenberg hinted he might step down this year, and not in the three to five years previously expected. 

Glencore remains under pressure from investors, many of whom are concerned about the environmental impact of fossil fuel use in the extractives sector.

In today’s results the firm reported a near doubling of its first greenhouse gas target with a reduction in scope 1 and 2 emissions intensity of 10 per cent since 2016.

In line with its commitment to a Paris consistent strategy, the firm is aiming for a 30 per cent reduction in absolute scope 3 emissions by 2035, including natural depletion of its coal and oil resource base over time.

What Glencore said

Chief executive Ivan Glasenberg said: “Our performance in 2019 reflected the prolonged and uncertain trade deal negotiations, generally weaker prices for our key commodities and some operational challenges experienced at our ramp-up and development assets.

“Looking ahead, in the short-term, we are closely watching coronavirus developments and potential scenario impacts on global growth and markets”. 

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