Half year earnings from the world’s largest miner Glencore (GLEN) fell by a third as the slowing global economy led to demand drying up for raw materials.

Prices for cobalt and copper have both come under pressure, although the group has also struggled with operational problems. Cobalt is used in alloys that protect parts against corrosion, while copper is used extensively in electrical wiring systems.

Glencore's adjusted half year earnings before interest, tax, depreciation and amortisation (EBITDA), the measure most closely watched by analysts, slumped 32% to $5.58bn.

Net income crashed 92% from $2.78bn to $226m.

While the results were bad they haven’t come as a complete surprise to the market, which had been expecting a big fall in EBITDA.

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Net debt, which has been a big burden for the company for several years, also increased to $16.3bn, above Glencore’s self-imposed ceiling of $16bn, but only because new accounting rules mean $865m of leasing liabilities have now been included.

'CHALLENGING ECONOMIC BACKDROP'

Its recent struggles, as well as an ongoing investigation from US regulators over potentially corrupt practices linked to commodities, have led to a marked decline in the share price since the middle of April.

Glencore shares fell close on 2% in trading on Wednesday to 227.35p which means that the stock is now trading about a third lower since the investigation was launched.

Glencore chief executive Ivan Glasenberg blamed the miner’s poor half year results on a ‘challenging economic backdrop for our commodity mix, as well as operating and cost setbacks’.

In addition, the company is taking action to address the problems having put its Mutanda mine in the Democratic Republic of Congo into ‘temporary care and maintenance’ with the current cobalt price, down more than 40% this year, making it ‘no longer economically viable’.

SOME PROBLEMS 'OF OWN MAKING'

AJ Bell investment director Russ Mould said Glencore hasn’t been helped by the fact it is at the sharp end of the US-China trade war, given that China is the world’s largest consumer of the metals it produces and trades.

But Mould also points out that the company is ‘facing some problems of its own making,’ with its African assets underperforming thanks to operational issues.

‘The company cannot afford to sit on its hands and by shuttering its Mutanda cobalt and copper mine in Congo and overhauling management it is at least taking swift action to address these challenges.’

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Issue Date: 07 Aug 2019