Glencore management said it has installed a new target to cut net debt to between $16.5bn and $17.5bn this year.
Upgrading its debt reduction ambitions was not enough to outweigh negative market sentiment caused by a 66% drop in its first-half profit to $300m.
Despite the profit fall, Glencore tried to appease investors by announcing it will reinstate its dividend in 2017.
The large slide in Glencore shares weighed on the FTSE 100 which nudged down to 6830 before recovering through the morning.
Glencore CEO Ivan Glasenberg said that since the firm announced measures to reduce debt levels last September, it has ‘made considerable progress towards achieving it goals.’
“We have already largely achieved our asset disposals target of $4-5 billion with a diverse and material pool of asset sales’ processes also on-going,” he said. “Our divestment strategy remains one of maximising value for shareholders through identifying assets where overall Glencore franchise positioning, optionality and value is substantially preserved or even enhanced. The Glencore Agri stake sale, for example, positions it for the industry’s inevitable consolidation in the years to come. We remain confident and focussed on achieving even lower than previously indicated net funding and net debt levels by the end of this year.”
Helal Miah, investment research analyst at The Share Centre expects a bumpy road ahead while the company chips away at the debt.
“While the company is prioritising reducing the debt levels, we believe that for the time being, the shares will continue to be extremely volatile and therefore continue to recommend Glencore as a ‘hold,’” he said. “We believe that this could be a stock for short term traders taking a contrarian approach and willing to accept a high level of risk.”
“UK stocks and tending towards the negative this morning, led down by miners after Glencore’s disappointing half-year figures, as the market switches its focus from the debt pile to an uninspiring set of earnings and some dire commodity trading,” noted IG market analyst Chris Beauchamp. “The summer lull continues, underlined by the 20 point range in the S&P 500 over the past two weeks or so, and with Janet Yellen’s speech and a long weekend drawing ever closer, the potential for stock market fireworks looks to be decreasing by the hour.”
