How Glencore Counters Commodities Cycles: A Review of 2013

Glencore, as its annual report boasts, is a well-diversified commodities company, active in over ninety commodities. It acquired Xstrata in 2013 and realised synergies of around $2.4 billion. Its 2013 revenue came in at 239 billion dollars.

Its KPIs include: EBIT/EBITDA, Funds from Operations (FFO) and Net debt/FFO to Net debt (large expensive projects tend to increase this ratio).

Glencore computes Value at Risk and has set a 1 day 95% VaR limit of $100m.

Glencore shares trade in London (GLEN), Hong Kong and Joburg. Its financial accounts are in USD.

Glencore IPO creates money for management and banks

The FTSE 100 will welcome the world's largest commodities firm (by revenue: 2010, $145bn) to its ranks, around May 24, 2011, on its first day of unconditional trading.

Glencore did its primary listing in London, selling 1.14 billion shares @ 530p, and secondary listing in Hong Kong, at 66.53 HKD (around 530p as well). Shares rose 11p to 541p in the first day of trading. At the 530 offer, Glencore has a market value of £36.7 billion.

Ivan Glassenberg, CEO since 2002, studied accountancy at the University of Witwatersrand in South Africa and got his MBA from University of Southern California, and will have a paper fortune of around £6bn following the flotation, being the owner of 15% of the company. Glencore was founded by Marc Rich (real name Marcell Reich) who started his career at Phibro (then known as Philipp Brothers, a firm founded in 1901) and is credited in a book as having created the spot market for crude oil.

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Listing of funds and news of what they are up to. News such as Glencore selling convertibles to Blackrock, GIC and Zijin Mining Company, China's third largest copper producer. Incidentally, the bonds they issued were December 2014 and convertible into Glencore shares upon an IPO or “other pre-determined qualifying events".

Rights Issues Rampant in City of London

Industrial materials firm Cookson has launched a rights issue. They are asking for £240m at 37% discount. The underwriters are JP Morgan / Merrill Lynch. The company is also cutting 1,250 jobs. Last December Cookson sold off its ceramic filters business to companies owned by Sud-Chemie AG, a chemicals company specialising in adsorbents. The history of ceramic filters, including piezoelectric ceramics, is detailed in this article by Satoru Fujishima. Cookson is a member of various trade organizations, such as the CEA, which has over 2000 member companies.

A rights issue is when a company issues new shares (which it usually offers at a deep discount to the prevailing market price; 20% is not uncommon) to existing shareholders. For this reason, the share price of a company usually falls after a rights issue. Essentially, a rights issue gives shareholders first refusal on the right to buy additional shares as compensation for the price fall after a rights issue (pre-emption rights, in other words).

Highly leveraged Xstrata also announced a heavily discounted (66%) rights issue in a bid to slash its debt from $16.3bn to $12.6bn. The issue ran into controversy that major shareholder Glencore was being offered favourable terms (underwriters: Glencore, JPM and DB). Dissenters included the ABI whose members, 400-strong, constitute 20% of investments in the London stock market.