SEBASTIAN DERUNGS
Glencore has decided to stop reporting its results every quarter, in a move that is likely to soothe tensions with Xstrata, the mining company in which it owns a 34 per cent stake.
The commodities trader, which raised $10-billion in May in one of Europe's largest ever initial public offerings, on Thursday offered to pay up to $2.4-million to persuade bondholders to approve a change in the conditions of one of its bonds, which would allow it to drop the requirement for quarterly reporting.
Glencore was alone among major London-listed mining companies when it reported first-quarter results last month. BHP Billiton, Rio Tinto, Anglo American and Xstrata all report results only twice a year.
"Information is not free," said Henri Alexaline, credit analyst at BNP Paribas. "If there's one company that understands that, it's Glencore. In Q1 they gave away free information relative to their peers."
The first-quarter results release angered Xstrata after analysts attempted to estimate its first-half earnings from the numbers published by Glencore, causing Xstrata's shares to slide 3 per cent.
Under "income from industrial associates," Glencore recorded the 34 per cent of Xstrata profits equivalent to its equity stake. A London-based mining analyst said Glencore's quarterly results appeared on the day to be "a miss, and the miss looked like it was coming from Xstrata".
Investors were also disappointed in the performance of Glencore's metals trading division, which saw earnings before interest and tax drop 21 per cent year-on-year.
People familiar with Xstrata say the company had decided to stop providing quarterly financial results to Glencore. Xstrata has not supplied financial information to Glencore since Glencore's flotation, according to a person close to the company.
Relations between the two companies are delicate. Ivan Glasenberg, Glencore's chief executive, has said he sees value in combining the two companies, and many analysts and investors are eagerly awaiting a move from Glencore to attempt to buy the 66 per cent of Xstrata it does not yet own.
However, the trader's shares remain well below its IPO price of 530 pence, on Thursday trading at 494 pence.
Investors in Glencore's $950-million bond, which was issued in 2004 and expires in 2014, have until July 27 to agree to the change of terms.
If more than half are in favour, the clause will be dropped. Glencore will make a 0.25 per cent payment to all consenting investors - meaning it could pay out a maximum of $2.4-million.
The trading house intends to continue to publish some financial information on a quarterly basis as other miners do, such as production volumes at its industrial assets, according to a person familiar with the company.