Glencore posts first annual loss in four years as impairments bite

The Democratic Republic of Congo supplies about 60 percent of the world’s cobalt, most of it from large mines owned by Glencore. (AFP)
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Updated 18 February 2020

Glencore posts first annual loss in four years as impairments bite

  • Glencore has been hit by falling demand for coal and weaker prices in some of its key markets

LONDON: Glencore reported its first annual net loss since 2015 on Tuesday after writing down $2.8 billion in coal, oil and copper assets.

The world’s largest commodities trader has been hit by falling demand for coal and weaker prices in some of its key markets.

The $2.8 billion in impairments mainly related to the closure of its African copper operations, which suffered from low cobalt prices, the expiry of licenses in its Chad oil operations and weak demand for coal from Europe, which hit its Colombian operations.

“The amount of coal being consumed in the Atlantic is decreasing, right now, seaborne coal demand is about 70 million tonnes and I don’t see a big recovery and it will continue to decrease,” said Chief Executive CEO Ivan Glasenberg.

“The reserves are depleting in Colombia, by 2035, we won’t have any production in Colombia.”

Overall, the Anglo-Swiss miner reported a net loss of $404 million for 2019, compared to a profit of $3.41 billion a year earlier.

Core earnings or adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of $11.6 billion beat analysts’ estimates of $11.25 billion.

Glencore stock has underperformed its peers due to its exposure to coal and multiple corruption probes linked to its operations in Nigeria, Venezuela and the Democratic Republic of Congo. Glencore is cooperating with the investigations. The company said its legal costs jumped to $159 million from $86 million in 2018.

The company cut the value of its oil business in Chad by $538 million after some mining licenses expired. Since 2015, it has booked impairments of $2.4 billion on assets in Chad.

In Colombia, Glencore runs two coal operations through its company Prodeco and owns a third of the Cerrejon coal mine. The business has been under pressure due to low prices for coal shipped from the region.

In 2019, Prodeco’s profits were down significantly as it invests near term in mine development activities, expected to increase the operation’s medium-term volume productivity and earnings prospects.

$8bn blow to Erdogan as investors flee Turkey

Updated 09 July 2020

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.