Once was enough for Glencore.
After releasing its maiden set of quarterly results just two weeks ago — sparking a rout in its its shares because of a disappointing performance from its key metals trading business — the company appears keen to remedy the situation.
From the team at Credit Suisse, who had a meeting with Glencore management recently:
Following a strong Q1 energy EBIT is expected to be lower in Q2. Lower spot volumes / buying activity led to the weak Q1 result in Metals and Minerals (down 20% YoY). The company expects improved conditions as we progress through the year (restocking, Japan normalisation). The company hopes to move from quarterly to half yearly reporting which we would view as a positive development reducing the focus on short term earnings moves.
The real reason for the move, of course, is only partly to do with reducing the focus on short-term earnings. The main reason Glencore won’t report quarterly earnings from now on is because it can’t.
Here’s why.
Xstrata no longer has any obligation to provide Glencore (a 35 per cent shareholder) with the figures it needs to create the ‘income from associates’ line in its results. That burden ceased once Glencore listed on the London Stock Exchange and reported its first set of results. As Xstrata accounts for around 97 per cent of Glencore’s net income from associates, this is not a figure the Swiss-based company can do without.
And there is no way in the world Xstrata, which reports half-yearly, is going to give the figure to Glencore and risk a repeat of the situation a couple of weeks ago where its results were effectively released to the market by someone else, analysts panicked, slashed forecasts and its share price sank like a stone.
Xstrata CEO Mick Davis doesn’t want to see that again and nor, we suppose, does his investor relations team.
By Neil Hume and Tracy Alloway
Related links:
Xstrata extrapolated (thanks Glencore) – FT Alphaville
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