New | Glencore cuts forecasts on weak metals outlook
Tough market conditions for metals see miner slash earnings targets for trading division and trim 2016 capital spending plans to US$5b
Miner and commodities firm Glencore cut its forecast for earnings from trading, a division meant to help cushion the company against tumbling commodities prices.
Glencore said tough market conditions, especially for aluminium and nickel, were hurting the business even though it had previously said the trading division would meet earnings targets whatever happened to commodity prices.
Announcing a 29 per cent slump in first-half earnings, Glencore said it expected trading, or what it calls its marketing division, to post full-year earnings before interest and tax of US$2.5 billion to US$2.6 billion.
Glencore chief executive Ivan Glasenberg had previously said he expected the trading division to generate US$2.7 billion to US$3.7 billion in full-year earnings before interest and tax.
"Things change over the year. We now ... have got a good idea how the marketing business is looking. We have always shown you can't be precise," Glasenberg said.
Glencore, whose stock is down nearly 46 per cent this year, is the worst-performing stock in the FTSE 100.
"Glencore's high exposure to copper is a weakness. Also, the lower projected earnings of the company's trading arm, which is supposed to help the firm buck the commodities cycle, highlight the limits of its business model in this low-price environment," said Sebastien Marlier, a commodities analyst at the Economist Intelligence Unit.