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.


Commerzbank slapped with fine for deals with defunct Cypriot bank

Updated 05 July 2020

Commerzbank slapped with fine for deals with defunct Cypriot bank

  • Laiki, once Cyprus’s second-largest bank, was taken into administration and wound down in March 2013

FRANKFURT: Cyprus’s securities regulator has imposed a €650,000 ($730,800) fine on Germany’s Commerzbank for its role in transactions carried out by a local bank that collapsed during the country’s 2013 financial crisis.

The country’s CySEC commission said Commerzbank had been sanctioned over investment operations conducted by the now-defunct Laiki — also known as Cyprus Popular Bank — in 2011, following Laiki’s merger with Greece’s Marfin-Egnatia Bank.

Commerzbank declined to comment on the case, which followed an eight-year probe by Cypriot authorities.

The investigation, which was launched following calls by left-wing AKEL lawmaker Irene Charalambides, looked into whether the Cypriot deals may have broken laws prohibiting a company from buying its own stock.

CySEC said Laiki invested in two structured products issued by Commerzbank in 2008. Marfin-Egnatia, which was at that time a Laiki subsidiary, was an index sponsor responsible for the composition of the portfolio.

As a result of the 2011 merger between Laiki and Marfin-Egnatia, Laiki became the index sponsor, creating a conflict of interest, CySEC said.

It said Laiki and Commerzbank acted in “concert” to manipulate the market in relation to Laiki shares on several occasions in April and May 2011.

CySEC said it had not fined Laiki because it is in administration and did not want to put an additional burden on former depositors, bond holders and shareholders.

Laiki, once Cyprus’s second-largest bank, was taken into administration and wound down under terms of a €10 billion international financial assistance package to Cyprus in March 2013.

Some €4.3 billion in uninsured deposits exceeding the EU threshold of 100,000 were wiped out, and thousands of people lost their life savings.

Charalambides said she felt vindicated by the result of the investigation.

“The resolution authority should consider the possibility of civil lawsuits against Commerzbank to ensure that the funds channelled to these structured bonds, with the objective of manipulating shares, be returned, and given to depositors whose funds were subjected to a haircut,” she said in a statement.