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Glencore announces loss of $5 billion in 2015

Debt-laden mining and commodities giant Glencore on Monday reported results deep in the red for 2015 due to plunging prices for metals and oil.

Glencore announces loss of $5 billion in 2015
The logo at the company's headquarters. Photo: Fabrice Coffrini/AFP

Debt-laden mining and commodities giant Glencore on Tuesday reported results deep in the red for 2015 due to plunging prices for metals and oil.

The Switzerland-based company posted a loss of $4.96 billion (4.5 billion euros) last year, compared to a net profit of $2.3 billion just a year earlier.

Not counting $6.3 billion in so-called significant items, including losses linked to bankruptcy proceedings at its optimum coal mine in South Africa, the company said it had raked in a net profit of $1.3 billion last year. But even this adjusted profit ticked in 69 percent lower than in 2014.

Glencore saw its commodities marketing activities slide 11 percent to $2.7 billion, hit by a slumping metals market as well as by a strong base-line comparison on agricultural products in 2014. But a “robust performance from oil marketing” helped slightly offset the downward trend.

The company's production activities plunged 38 percent to $6.0 billion, “reflecting lower prices in all key commodities.”

Glencore had in September announced drastic moves to trim its then towering $30-billion debt, including suspending production at a number of mines andselling off assets.

The company said on Tuesday that by the end of 2015, its debt had shrunk to $25.9 billion. “Our rigorous focus on debt reduction, supply discipline and cost efficiencies enabled Glencore to record a robust performance in difficult market conditions,” company chief executive Ivan Glasenberg said in the earnings statement.

He insisted that the company's “diversified portfolio … (and) highly resilient marketing business, underpins our ability to continue to be comfortably cash generative at current and even lower commodity prices.”

Glencore said it was “confident” it would shed $4.0 to $5.0 billion in assets in 2016.

It is among other things expecting to sell off a minority stake in its agriculture products business and bring in bids for the potential disposal of its Cobar and/or Lomas Bayas mines by the end of the second quarter.

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ECONOMY

Switzerland must strengthen control of its financial sector, IMF warns

The IMF urged Switzerland on Thursday to strengthen its financial sector regulation as supervising UBS has become "more challenging" since it grew into a global banking behemoth after its takeover of Credit Suisse.

Switzerland must strengthen control of its financial sector, IMF warns

Switzerland’s biggest bank was strongarmed by the government into buying Credit Suisse last year over fears that the second largest lender in the country might go under and spark a global financial crisis.

“Lessons from the CS (Credit Suisse) case should inform further reforms to strengthen the regulatory and supervisory framework,” the IMF said in a statement concluding its annual staff mission to Switzerland.

Like UBS, Credit Suisse was among 30 international banks deemed too big to fail due to their importance in the global banking architecture.

The merger raised serious concerns in Switzerland around jobs, competition and the size of the resulting bank relative to the Swiss economy.

“The complexity of the combined bank’s global operations also makes supervision more challenging,” the International Monetary Fund said.

“In the event of future crisis, the previous merger options may no longer be feasible,” Pelin Berkmen, the head of the IMF delegation, warned at a press conference.

The Washington-based institution noted that UBS is the largest “G-SIB” — global systematically important bank — relative to its home country’s economy.

The IMF said the “powers and resources” of the Swiss financial sector’s supervisor must be increased “to enable early and effective intervention” when necessary.

The G20’s Financial Stability Board, set up following the 2007-2008 global financial crisis to lead industry reforms, made a similar recommendation in February.

The Swiss Financial Market Supervisory Authority (FINMA) has also called for increased powers to punish bad banks.

UBS bought Credit Suisse at the bargain price of $3.25 billion.

The bank initially reported a net profit for 2023 of $29 billion but it published a revised figure of $27.8 billion on Thursday after reviewing the fair-value estimate of the deal.

The IMF said the Swiss economy “boasts strong fundamentals” and growth is “expected to recover gradually this year” to 1.3 percent, followed by 1.4 percent in 2025.

But it added the country faces “several challenges” including “mounting spending pressures”, future financing gaps in the pension system and vulnerabilities in the real estate sector.

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