Glencore Says Financing Is Sufficient for Next Year

By Chanyaporn Chanjaroen and Brett Foley

Nov. 12 (Bloomberg) -- Glencore International AG, the world's biggest commodity-trading company, said third-quarter profit rose 26 percent and it has enough financing to ``comfortably'' cover debt maturing in the next 12 months.

Net income excluding gains on sales of investments increased to $1.48 billion, from $1.18 billion a year earlier, the Baar, Switzerland-based company said today in a report obtained by Bloomberg News. Glencore has no material unsecured obligations due in the next 18 months and letters of credit are ``fully'' available to its trading businesses, it said. Company spokesman Marc Ocskay declined to comment.

The cost of protecting Glencore's debt rose 12-fold this year after commodity prices dropped and banks curbed financing. The company, which is owned by its employees, trades oil, metals and agricultural commodities and controls mines and smelters. It owns 34 percent of copper producer Xstrata Plc, which has slumped 69 percent this year on the London Stock Exchange.

``We did not get the bloodbath that some in the market were expecting,'' Henri Alexaline, a credit analyst at BNP Paribas SA in London, said today by telephone. ``The group has taken some important steps on the liquidity front which was the major concern of the market.''

Glencore, led by Chief Executive Officer Ivan Glasenberg, raised its target for minimum liquidity to $3 billion from $2 billion. More than 60 banks are committed to financing the company, it said in a presentation sent to investors. Glencore will consider ``possible disposal opportunities'' for 2009.

Aluminum Gain

Metals and minerals accounted for 59 percent of gross income in the third quarter. Aluminum for immediate delivery averaged $2,789.75 a metric ton on the London Metal Exchange in the period, up 9.2 percent from a year ago. Nickel was 37 percent lower while copper was little changed. Glencore's sales gained 37 percent to $50.6 billion and $1.25 billion of working capital was freed up.

Since the end of the quarter, industrial metal prices have slumped 31 percent, according to the London Metal Exchange Index of six metals.

``Despite anticipated weaknesses, primarily in the metals industrial business unit due to lower prices, Glencore's highly diversified and unique business model is expected to provide healthy overall profit contribution'' in 2009, the company said.

Capital expenditure at Glencore's operations will peak this year and decline ``significantly'' from 2009, it said. Expansion projects include the Calenturitas and Jagua coal mines in Colombia and the $279 million copper smelter at AO Kazzinc in Kazakhstan.

Credit default swaps for Glencore's five-year bonds dropped 17.672 basis points, or 1.5 percent, to 1,133.978 points as of 12:01 p.m. London time, according to data compiled by Bloomberg.

To contact the reporters on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net; Brett Foley in London at bfoley8@bloomberg.net