Glencore scraps $2.6bn dividend to focus on debt cuts

Glencore scrapped its deferred $2.6bn dividend to bolster its balance sheet as half-year profits fell on weak commodity prices and the Covid-19 pandemic but oil trading posted record profits.

The Swiss-based miner and commodity trader on Thursday said core earnings were 13% lower at $4.8bn, although better than expected. The fall was cushioned by a strong result at its trading arm, which bought oil at rock-bottom prices in March and April and sold them at a profit as crude recovered.

Earnings before interest at the trading, or marketing, arm came in at $2bn, offsetting weaker results from the mining unit which was hit by lower thermal coal prices and coronavirus lockdowns in South Africa and South America.

Full year adjusted EBIT guidance was now expected at the top end of Glencore’s long-term $2.2bn - $3.2bn range.

Net debt rose 12% to $19.7bn in the six months to June 30 as the company borrowed more to buy cheap oil.

The company recorded a net loss of $2.6bn after taking a $3.2bn hit from of impairment charges, including $1bn on the value of its Colombian coal assets. Glencore made a net profit of $266m in the same period last year.

“The outlook remains uncertain in the short term. Notwithstanding our cash-generative business and secure liquidity positions, the oard has concluded that it would be inappropriate to make a distribution to shareholders in 2020, instead prioritising the acceleration of net debt reduction,” said chief executive Ivan Glassberg.