Glencore (GLEN.L), one of the world’s largest diversified natural resource groups, reported early Wednesday that first-half gross operating profit slumped by almost a third, reflecting a “challenging economic backdrop” for its commodity mix, as well as operating and cost setbacks.
Group revenue fell to $107.10 billion during the six months that ended June 30, from $108.55 million a year ago, the company said in its earnings statement. Adjusted earnings before interest, tax, depreciation, and amortization also declined, down by 32% to $5.58 billion from a restated $8.18 billion a year ago.
The firm blamed lower prices for its weak first-half results, saying key commodity average price benchmarks were all lower during the period, with copper down 11%. Particularly weak was cobalt, with price benchmark down 58%, with the market in current oversupply, and the Atlantic steam coal market, impacted by weaker European demand and low gas prices.
While noting that the African copper business failed to meet expected operational performance, the firm said it has moved to address the challenges with management changes as well as overseeing a “detailed operational review, targeting multiple improvements to achieve consistent, cost-efficient production at design capacity.”
A “credible roadmap” to deliver on the “significant” cashflow generation potential of assets at targeted production levels includes transitioning Mutanda operations, the world’s largest copper-cobalt mine in the Democratic Republic of Congo, to “temporary care and maintenance” by year-end, reflecting its reduced economic viability in the current market environment, primarily in response to low cobalt prices.