FT Lex : Glencore: whatever it takes

Glencore: whatever it takes

Risks remain but managers at the miner-cum-trader are at least getting the message right


Two months ago, Glencore’s shares fell 30 per cent in a day after analysts at Investec suggested the company’s equity could shrink dramatically if weak spot prices for the commodities it produces persisted. The reasoning was that almost all of the company’s operating earnings would be eaten up by the costs of servicing its debt. Applying a price-earnings multiple of 15 to whatever was left after taxes implied a market capitalisation of $6bn. Spot prices have worsened since then — copper, for instance, is down another 15 per cent. Yet Glencore’s equity value is more than $20bn.
The company has intensified its efforts to cut costs and debt. On Thursday, it said that “capital preservation” measures would add up to $13bn from a previous target of $10.2bn. The extra is coming from lower capital expenditure, the likelihood of more forward sales of output and higher proceeds from disposals. As a result, net debt will drop to $18-19bn by the end of 2016; earnings for 2016 (before interest, tax, depreciation and amortisation) will be about $7.7bn, well above market consensus of around $6.5bn.
Plenty could still go wrong. The company can expect little help from commodity prices. Divestments are in train but not yet completed. An unforeseen event — think of the tailings dam burst at BHP’s Brazilian iron ore mine — could easily blow the finances off course. And Glencore is not going to be in a position to buy assets at the bottom of the cycle, as less leveraged players may. Conversely, lower input costs are reducing both capital and operating costs. The strong dollar is a boon for a company with no operations in the US, and margins in the trading business are proving more resilient than expected.
It is not just about the earnings, though. Six months or so, investors thought Glencore managers had their heads in the sand. Since then, they have cut its dividend, tapped shareholders for cash and followed up with a Mario Draghi-style “whatever it takes” message. The shares are still well below the 125p at which the group recently raised equity — but they are no longer just options on the company’s survival.

(Finanz&Wirtschaft) AMS is trouble with Apple in the house

The Austrian chipmaker said to have lost more important orders for iPhone, iPad & Co.. Orders from Apple had been moved - because AMS have plated price expectations.
The chipmaker AMS has reportedly serious difficulties with its main customers: Apple.
The Austrians, whose shares are listed on the Swiss stock exchange, are said to have partly lost an important contract as a supplier of microphones, it's from well-informed, business-related circles. In addition, a firmly planned order for Apple chargers will move. In the field of optical sensors Apple Hole now a discount rivals. Both times is with exaggerated ideas on price have snubbed the Apple buyers AMS leadership.
It should be all in all involve an endangered order volume with Apple by considerably more than € 100 million: one-fifth of the AMS-sales.An official confirmation of this information was not getting. Apple generally does not comment on the relationship with suppliers. Also AMS is condemned to silence; the company may not even officially confirm that Apple is part of the clientele.

>>> US Early premarket gappers

Early premarket gappers

Gapping up: AMSC +14.3%, HMY +13.4%, XOMA +7.8%, AU +7.3%, FORD +7.2%, NSR +6.4%, SBGL +6%, OLLI +6%, QTNT +5.7%, MT +5%, GPRO +4.2%, MNOV +3.9%, CMG +3.7%, NVGN +2.8%, SDRL +2.8%, GFI +2.4%, SUNE +2.3%, RBS +1.8%, RIO +1.7%, STM +1.6%, TEVA +1.4%, VLTC +1.3%, GSK +1.2%, HSBC +1.2%, MNR +1.1%, FTI+0.9%, AMD +0.9%, ATHN +0.6%

Gapping down: AIXG -29.5%, CSIQ -13.5%, FSLR -10.4%, CIEN -7.7%, CHK -4.9%, PE -4.3%, CMTL -4.3%, ITCI -3.6%, WES -3.3%, CSTM -3.2%, PBR -1.8%, RDS.A -0.9%, SNY -0.9%, JKS -0.9%

>>> Ciena beats by $0.04, beats on revs; guides Q1 and FY16 revs below consensus

Ciena beats by $0.04, beats on revs; guides Q1 and FY16 revs below consensus

  • Reports Q4 (Oct) earnings of $0.42 per share, excluding non-recurring items, $0.04 better than the Capital IQ Consensus of $0.38; revenues rose 17.1% year/year to $692 mln vs the $683.53 mln Capital IQ Consensus.
    • Gross margin 44.9% vs. ~44% guidance
  • Co issues downside guidance for Q1, sees Q1 revs of $555-590 mln vs. $634.75 mln Capital IQ Consensus; adj. gross margin ~44%.
  • Co issues downside guidance for FY16, sees FY16 revs +8-9% to ~$2.64-2.67 bln vs. $2.77 bln Capital IQ Consensus; adj. gross margin in mid-40% range.