Thursday 6 August 2020 9:31 am

Glencore shares fall as miner cuts dividend amid growing debt

Shares in miner Glencore fell 3.8 per cent this morning after the commodities giant said that it would scrap its $2.6bn dividend to concentrate on reducing debt.

As a result of the coronavirus pandemic, which has lowered prices for the company’s minerals due to a slump in demand, Glencore said it had booked a total of $3.2bn in impairment charges in the first half.

In total, the firm swung to a $2.6bn loss in the period, compared to a profit of $226m the year before.

Earnings also fell 13 per cent to $4.8bn, though this was ahead of analyst predictions of a $4.3bn take in the first half.

Glencore said that its priority was to reduce its net debt, which currently stands at $19.7bn, to its target range of below $16bn by the end of the year.

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As a result, said chief executive Ivan Glasenberg, “it would be inappropriate to make a distribution to shareholders in 2020”.

Killick & Co analyst Andrew Duncan said that though the decision was a “slight disappointment”, it was “a sensible decision given the ongoing uncertainty, and arguably puts Glencore in a better position to deliver on long-term opportunities”.

Despite the challenges presented by the pandemic, Glencore said that it had been able to continue operating normally for the most part.

Its marketing business also performed especially well, with full year earnings expected to come in at the top end of its $2.2bn – $3.2bn range, after hitting $2bn in the first half.

Glencore said it also saw an impressive performance in its oil division, which had benefited from the market volatility, as well as a significant contribution from its metals division.

“Over the longer term, our diversified commodity portfolio, positions us well to play a key role in the next upward economic cycle, benefiting in particular from the commodities required for the transition to a low-carbon economy”, Glasenberg said.

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