Glencore stock getting hammered as China slowdown, commodities rout hits profit

Glencore reported adjusted first half earnings of $6.46bn, a 29% fall from the same period previous year.

Revenue fell 25% to $85.71 billion.

Adjusted earnings before interest and tax from its trading business, which includes the sale of commodities from crude to copper, fell to $1.07 billion. U.K. newspaper The Telegraph over the weekend described Herro as an activist investor building a stake to pressure billionaire Chief Executive Officer Ivan Glasenberg.

Formerly just a commodities trader, Glencore merged with mining company Xstrata in 2013.

Glencore’s debt pile eased 3% to $29.5 billion, but company watchers said the collapsing profits intensifies the strain on its finances. This compares with Deutsche Bank’s $US1.2 billion estimate.

Glasenberg blamed the share price weakness on the ongoing commodity rout and “short-term hedge funds” that he said did not understand Glencore’s business. This was explained with tough trading conditions in the aluminum, nickel and coal markets, while grain marketing was down due to a strong comparable base but is expected to post improved performance in the second half.

Glencore said further supply cuts were expected in the coming months, as falls in output from Indonesia and the United States have been slower “than required by market forces”.

Glencore expects the sharp fall in coal imports from top consumer China to be offset to some extent by a fall in output from Indonesia, the company’s CEO said on Wednesday.

Glencore’s confidence was reflected in the company’s decision to distribute an interim dividend of $0.06 per share, in line with 2014’s H1 payout. It will pay a dividend of 6 cents a share. Earnings before interest, tax, depreciation and amortization (EBITDA) plunged 29% to $4.61 billion from $6.46 billion a year earlier.

Wednesday’s stock-market drop wiped $3 billion off Glencore’s market value.

Other commodities have also been in decline. Glencore’s relatively diverse exposure to various metals was supposed to help protect it. But recently, commodities to which Glencore is heavily exposed, and which were supposed to hold up relatively well-for instance, copper-have also fallen sharply.

Net income pre-significant items fell by 56% to $882m. We remain 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.

The miner-cum-trader reported weak earnings Wednesday due to slumping commodities prices and a poor half in trading.

The company also lowered its forecast for full-year EBIT from its trading division to a range of $2.5 billion to $2.6 billion. All that squeezed trading profits.