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Glencore announces multibillion dollar loss

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World Coal,

Glencore, the world’s fourth-largest diversified miner with a market capitalisation of US$247 billion, announced a US$4.96 billion loss in 2015 as EBITDA slumped by about a third to US$8.69 billion on the back of “substantially weaker commodity prices,” the company said in its preliminary results report.

The company also recognised significant impairment charges on its Koniambo nickel and Chad oil assets, as well as a US$1.03 billion loss related to its cessation of control of the Optimum Coal asset in South Africa, which was placed in business rescue proceedings in August 2015 and subsequently sold.

EBITDA from its Energy Products business, which includes its coal businesses, as well as its oil assets, was down 9% to US$3.1 billion. Thermal coal production fell 2% to 93.9 million t in 2015, while metallurgical coal production was down by 24% at 2.5 million t.

“The decline in Chinese import demand was the key feature of the seaborne thermal coal market in 2015,” the company, which is responsible for about a third of all seaborne traded thermal coal, said. “Lower economic growth, some shift away from manufacturing, rising hydro and nuclear power supply and increased domestic coal supply for coastal ultra-high voltage transmission were all important factors that led to such a decline.”

Despite this, supply from the company’s main geographical regions – Australia, South Africa and Colombia – remained relatively steady with low-energy Indonesian coal taking the brunt of the impact from falling Chinese demand. Overall, the company’s coal production was 131.5 billion t, down 10% from 146.3 million in 2014. The company is expecting another – albeit smaller – fall in production in 2016 with 2016 guidance of 127 – 133 million t.

Coal EBITDA fell 14% to US$2.08 billion with all segments affected. Australian thermal coal earnings held up best, however, falling only 5% to US$1.16 billion.

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