Glencore meanders back to life

Glencore meanders back to life©Bloomberg

In business, a near-debt experience can easily turn into a near-death one. A year ago, shareholders were slapping the pallid cheeks of commodities-and-mining group Glencore and beseeching: “Don’t go towards the light!” On the evidence of interim results, Glencore has meandered back from the other side with only the odd angel feather clinging to its collar as evidence.

The Swiss group has made about $4bn in divestments, including a deal to sell gold output from an Aussie mine for more than A$880m. Net debt, which once stood at $29bn, should fall to $17bn by the year’s end. That will take the ratio of borrowings to earnings to below a 2:1 target. Dividends should resume next year.

Critics say Glencore flatters its debt numbers by excluding inventory that may not be as readily saleable as it imagines. Even so, the business never risked bankruptcy in normal market conditions. The left-field peril was a panic. Last September the shares crashed 30 per cent intraday after an analyst suggested they could expire worthless. If banks and insurers had taken fright too, a liquidity problem could have become a solvency crisis.

When investors first tackled chief executive Ivan Glasenberg about Glencore’s artery-clogging $29bn debt pile, he replied as complacently as a 20-stone junk-food addict proud of cutting down to one pack of cigarettes a day. Since then, the hard-nosed billionaire has embraced his balance sheet diet as evangelically as a clean-eating guru.

It has been a quiet success for public market stewardship. Glencore was demonised as a commodities titan run by shady traders when it floated via an overpriced IPO in 2011. Some of its African mining deals have raised eyebrows. So has Mr Glasenberg’s tendency to slam “overproduction” by larger miners. But Glencore has been a more punctilious quoted business than pessimists expected.

As for Mr Glasenberg, there was little crowing from him about Glencore’s recovery, despite a 170 per cent rebound in the shares. A net loss of $370m reflected the $400m cost of a failed coal-price hedge. Besides, a near-death experience tends to sober a man.


Auld Creakie

It is Nicola Sturgeon’s tragedy to be the most effective politician in the UK while lumbered with one of the least tenable economic prospectuses. As leader of the Scottish National party, she insists Scotland could be both independent and prosperous. Yet National Statistics is killing her vibe by demonstrating the exact opposite.

The latest communiqué from the abacus rattlers pegs Scotland’s 2015-16 budget deficit at a steep £12.6bn. The SNP’s prediction that an independent Scotland could balance its books (before interest) by 2016-17 now sounds like the ranting of one of the Royal Mile’s tartan-clad eccentrics. A collapse in oil revenues is to blame.

The SNP wants to break away from the UK while remaining in the European Union. Alba has successively reinvented itself as Silicon Glen and the Saudi Arabia of Wind. Might it now promote itself as the Singapore of the North, luring City businesses keen to retain a pan-European passport?

Edinburgh has a decent financial cluster and boasts better fishing and shooting on its doorstep than such niche rivals as Malta. However, the output the UK might lose through financial industry emigration has been estimated at just £8bn a year. A share of taxation on that sum would do little to close the gap in Scotland’s accounts. Southward migration by Scottish-registered banks too large to depend on a Scottish government guarantee could even transform gains to losses.

Ms Sturgeon is a bird in a gilded cage delineated by large subsidies from the taxpayers of Southern England. She cannot admit independence, at current oil prices, would mean cutting spending while raising taxes and debts. An old Highlander of Lombard’s acquaintance had a phrase that describes her consequent evasions: “Och, blethers!”


Faculty of hard knocks

Next month many universities will put on open days for prospective students. So there is a chance some parents could end up misguidedly dragging teenagers to an “open day” Sports Direct is mounting on September 7.

Glencore meanders back to life©PA

The sportswear retailer has been criticised for its employment practices. Founder Mike Ashley has accordingly invited the public to visit his controversial Shirebrook warehouse “to engage in an open discussion”.

Shirebrook has been described as a “gulag” where inmates are bullied for wearing the wrong clothing brands. It therefore has much in common with a university during freshers’ week. Parents will note tuition fees are very reasonable (zero). Immersive courses in pick and pack are on offer.

Young Quentin will probably still insist he’d rather study archaeology at Durham. His parents should take him to Shirebrook anyway. He’ll see the kind of place where he could easily end up if he fluffs his A-levels.

jonathan.guthrie@ft.com

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Glencore meanders back to life
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