Swiss commodity giant Glencore cuts debt ahead of schedule amid weak prices, share-price drop

GENEVA – Grappling with a severe slump in metals prices, commodities group Glencore said Wednesday that its three-month-old plan to cut its towering debt is ahead of schedule thanks to asset sales, production cuts, cost reductions and other tactics to improve its burdened balance sheet.

The Swiss-based producer of zinc, copper, nickel and other commodities, said it has achieved $8.7 billion in reductions under a $10.2 billion plan announced in September to cut debt and issue shares as its share price plunged amid market weakness along with generally sluggish economic growth worldwide.

CEO Ivan Glasenberg said Glencore is aiming to now cut net debt by almost $3 billion to $13 billion by end of 2016. It’s now targeting debt of $18 billion to 19 billion by then, down from the low $20 billion range that had been previously sought.

“Glencore is well placed to continue to be cash generative in the current environment — and at even lower prices. We retain a high degree of flexibility and will continue to review the need to act further as required,” Glasenberg said in a statement. In a conference call later, he said that the company retains a number of “levers” to pull if needed.

Vowing to press on with the deleveraging, Glasenberg said: “We definitely don’t want to get into this situation again … We’re halfway through the journey, and we’ve still got work to do.”

As for the market in China, a large and growing consumer of commodities in recent years, Glasenberg said Glencore’s various units — whether focusing on zinc, copper or nickel — had reported that “sales are very good in China in the fourth quarter, and looking very good for 2016.”

Most of Glencore’s debt reductions since September have come through the suspension of a $2.4 billion cash dividend next year, and a $2.5 billion equity placement. The company has locked in $1.5 billion in reductions in capital expenditures through next year, and sold $1.1 billion in assets, it said.

The company has been slowing production to reduce supply. In October, for example, Glencore announced it was slashing zinc production by one-third.

In London trading on Thursday, Glencore shares were up 12.7 per cent at 93.67 pence. They have taken a tumble this year since trading above 315 pence in late April, as concerns grew that the company would be unable to manage its high debt at a time of plunging commodities prices.

Those prices generally are about 30 per cent lower this year, Glencore CFO Steven Kalmin said.