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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (34000)	3/12/2009 11:08:49 AM
From: LoneClone	Read Replies (1) \| Respond to of 193231

Glencore profit falls, boosts liquidity to $5bn miningweekly.com By: Reuters 11th March 2009 Updated 5 hours ago LONDON - Swiss commodities trader Glencore International AG posted an 11,9 percent fall in core 2008 profit on Wednesday, but said available liquidity has increased to over $5 billion. The privately held group, which has a 35 percent stake in mining group Xstrata, also said it had repurchased more than $100 million worth of bonds and will consider further purchases. "Debt refinancing requirements in the short-term remain modest, supported by a broad banking group of more than 75 financial institutions," Glencore said in a statement. Investors have had concerns about liquidity at Glencore, affecting the credit default swaps on its debt, but analysts were largely positive about the results. "You have got to give some credit to the company that it was able to deliver on its promise to shrink the balance sheet," said Henri Alexaline, a credit analyst at BNP Paribas. Glencore shrunk total assets on its balance sheet by about 22 percent in six months and shifted its emphasis to the marketing side from the mining businesses, he added. The increase in cash and untapped bank facilities to more than $5 billion alone should allow the company to cover any refinancing needs in 2009, he said. Glencore's results "showed a weaker operating performance but also the company's continuous debt reduction efforts and a solid liquidity position", UniCredit (HVB) analyst Jana Arndt wrote in a note to investors. Five-year credit default swaps on Glencore debt tightened to around 24.75 percent upfront from around 29 percent upfront. "On the face of it these headline numbers look ok, there do not appear to be material headline concerns and the liquidity situation should ease hangover concerns for Glencore's 34.5 percent stake in Xstrata," mining analyst Michael Rawlinson at Liberum Capital said. "Therefore we wouldn't expect to see a replay of the end of 2008 Glencore balance sheet trade." Rawlinson was referring to investors going short on Xstrata shares and going long on Glencore credit default swaps. Xstrata shares jumped 8,0 percent to 349 pence by 1220 GMT, outperforming a 2,7 percent increase in the UK mining index. EXCEPTIONAL PROVISIONS Glencore said in a one-page financial highlights statement that 2008 earnings before interest, tax, depreciation and amortisation fell to $6,79 billion on revenues of $152,2 billion, which grew 7 percent. Net profit of $4,75 billion, down 8,4 percent, was before exceptional provisions of around $3,7 billion for asset impairments, provisional pricing and inventory adjustments. Operating income from the industrial side of the business dropped, and that situation is not going to reverse in 2009, Alexaline said. "That means it has more restructuring to undertake." Looking ahead, "the question is whether the robustness of its marketing activities will be enough to buffer the decrease in operating income from the industrial activities," he said. "Glencore is becoming a smaller company and a bit more prudent, increasing its ability to weather the storm over the next few years." Glencore said key employees had agreed to delay taking any payments in case of terminating employment until at least January 2012 and the firm created "a new layer of permanent equity, representing 15 percent of Glencore's share capital". Alexaline said the move was good for bondholders and it should reduce a long-time market misperception that the partners in Glencore could leave and take their money, leaving the company in disarray.