Glencore Raises Profit Forecast for Commodity-Trading Unit

(Bloomberg) -- Glencore Plc, the world's biggest commodity trader, improved its earnings forecast for its trading division after coal and zinc prices rallied to the highest in at least four years.

Earnings before interest and tax will be $2.5 billion to $2.7 billion for this year, Baar, Switzerland-based Glencore said in a third-quarter production statement Thursday. That's a slight improvement on its previous estimate of $2.4 billion to $2.7 billion. The company didn't give a reason for the revised forecast.

“This reflects improved trading conditions within the coal division,” Credit Suisse Group AG analysts led by Liam Fitzpatrick wrote in a note.

Billionaire Chief Executive Officer Ivan Glasenberg has been turning around the business after a troubled 2015 which saw investors dump the stock on concerns its debt was too high to weather a prolonged downturn in commodities. That prompted the firm to suspend its dividend, rein in spending and sell $2.5 billion of new shares. Glencore's rebound this year has made it the second-best performer in the U.K.'s benchmark stock index.

The company has largely completed its plan to sell $4 billion to $5 billion of assets this year and will meet its net debt target of as low as $16.5 billion by the end of the year, according to UBS Group AG.

Hitting the asset-sale target “together with the rebound in cash flows should trigger a dividend restart in early 2017,” Credit Suisse said.

‘Strong Positive'

The revised trading profit estimate is a “strong positive for Glencore, as the marketing division has been a point of concern for investors,” Paul Gait, an analyst at Sanford C. Bernstein Ltd., wrote in a note.

For more analyst views on Glencore, click here.

The stock has more than doubled this year, buoyed by a rally in raw materials, after ending 2015 down 70 percent. The shares fell today amid a retreat in mining companies, declining 2.2 percent to close at 241.6 pence in London. That values the company at $43 billion.

Copper production fell 10 percent in the third quarter from a year ago to 358,200 metric tons, Glencore said. Zinc output declined 29 percent, while nickel production jumped 28 percent. Coal output dropped 3 percent.

Glencore has previously said it will reduce copper output by about 7.5 percent this year and cut zinc supply by a quarter as it adopted a “disciplined approach” during periods of low prices. Zinc has climbed 52 percent this year, while benchmark thermal-coal prices from Australia have more than doubled.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.

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Nicholas Larkin