Shares in Glencore tumble as commodities rout hits

Adjusted EBITDA – earnings before interest, taxes, depreciation, and amortisation – fell by 29 per cent to $4.6bn in the first half of the year.

Ivan Glasenberg, Glencore’s chief executive, said: “Against a challenging backdrop for many of our commodities, we have taken a range of pre-emptive actions in respect of our balance sheet.”

According to The Telegraph, the slide in oil prices has forced the miner to drop its targeted capital expenditure for this year to just $6bn, from a previously announced target range of $6.5bn to $6.8bn. Glencore intends to cut capital expenditure further, to “no more” than $5bn in 2016.

Glencore’s boss conceded that the first half “was another challenging one for commodities”. He continued: “Financial markets continued to fixate on the risks to global growth, against a backdrop of a stronger US dollar.”

Accordingly, “our overall financial performance in the first half inevitably reflects our industrial activities’ exposure to lower commodity prices”, he said.

Mr Glasenberg assured investors that Glencore remains “by far the most diversified commodity producer and marketer and are well positioned to benefit from any improvement in pricing when it finally and inevitably materialises”.

Glencore’s net income fell to $882m in the first half, less than half the $2.01bn posted in the same period a year earlier. Yet the drop was less severe than anticipated, with analysts surveyed by Bloomberg predicting a fall to just $711m in the first six months of 2015.

Glencore is also mulling shutting down its Eland platinum mine in South Africa because of the falling price of the previous metal.

The results came as investor Harris Associates took a stake in Glencore, the FTSE 100’s worst performing stock so far this year.

Building a 1 per cent position by last week, Bloomberg reported on Tuesday that Harris had raised its stake to 4.5 per cent, or £1bn at current prices.

David Herro, chief investment officer for international stocks at Harris, told Bloomberg: “We like their copper position, we like their trading position.” He added: “Their other metals don’t seem to be anywhere near as impaired as iron ore. They are well-positioned.”

Harris had not invested in Glencore “as activist shareholders, we’ve made this investment as long-term value investors”, he said.

Mr Herro manages the $29bn Oakmark International Fund, which represents around a fifth of Harris’s total assets under management. He said: “[Glencore] at this price is substantially undervalued. We are a long-only value shop.”