Prices sink Glencore profit

Glencore has seen full-year profits drop 43% on a year ago after commodity prices were hit by the downturn.

Ivan Glasenberg

It booked net income, excluding exceptional items, of $2.7bn last year versus the $4.7bn it reported for 2008.

The private Swiss-based commodities giant said revenues fell year-on-year by over 30% to around $106.4bn.

Net debt, taking into account readily marketable inventories, fell to $10.2bn from $11.5bn and the company had $3.8bn in cash and undrawn facilities.

“The beginning of the year was characterized by a recessionary and low commodity price environment,” it said.

However, it said an improvement in demand conditions and economic indicators led to commodity price rises towards the end of year.

“Nevertheless, given the very weak start to the year, average prices for many commodities were significantly lower in 2009 compared to 2008,” it said.

Glencore said current trading was in line with expectations and meaningfully ahead of the same period last year.

“Many of the factors which drove the recovery in demand and pricing in 2009 should continue in 2010,” it said.

In December Glencore issued $2bn of convertible bonds as part of its overall strategy towards the public equity markets.

“Investors have the option to convert the bonds into Glencore shares upon IPO or other pre-determined events,” it said.

“In relation to the potential conversion, the terms of the bond apply an initial pre-money conversion equity value of $35bn,” it added.

Glencore is one of the biggest charterers of both bulkers and tankers but is a privately owned rather secretive company that rarely discloses much about its activities.

It is owned by its management and employees was founded in 1974 by billionaire commodity trader, Marc Rich.

The company now headed by South African coal trader, Ivan Glasenberg, employs some 2,000 people in 50 offices around the world.

But it also owns or is a significant shareholder in major industrial, mining and agricultural operations around the world employing another 50,000 people.

Glencore currently has ownership tie-ups with Greek tanker owner Omega Navigation and Italy’s d’Amico International.

However, its owning interests are hugely overshadowed by its massive chartering activities.

Late last year Glencore agreed to buy a 51% stake in bunker player Chemoil Energy and has offered to buy all the remaining shares.

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