Glencore shares fall to new low as results fail to impress

Shares in Glencore, the commodity group floated in May, closed at a fresh low on Tuesday with the City unimpressed by the performance of its trading division. Despite its first results statement as a public company showing a 47% rise in net profits, the shares lost 22.4p to 501p as the City fretted about the performance of the group's marketing division, which trades the natural resources Glencore produces as well as selling them on behalf of other miners and farmers. One mining analyst, who did not want to be named said: "The point is that these results didn't come out and say that this could be a fabulous business and deliver earnings in all types of commodity price environments. Glencore's key differentiator when compared with an Anglo American or an Xstrata is its marketing [trading] division, but it is not justifying the quality premium multiple." Glencore said net profits rose to $1.3bn from $886m in the first three months of last year, while earnings from its industrial operations, which produce raw materials such as copper, oil and grain, grew by 50% to $1.1bn. Even though earnings in the marketing division rose by 37% compared with the first quarter last year, analysts said the figures implied disappointing 2011 earnings when annualised. Glencore chief executive Ivan Glasenberg said: "Maybe the analysts are expecting quarterly results to be precisely divided by four ... We are building a company for the long term. We are developing the Congo assets, we are developing the Colombian assets, we are growing the assets. We can't sit here trading quarter by quarter. The long term thinkers in this company will produce long term results." Since its listing last month, Glencore's shares have struggled below their 530p flotation price. The price will be crucial as the company has made no secret of its intention to use its shares as currency for acquisitions, particularly miner Xstrata, in which it holds a 34% stake. Glencore said that it had signed a memorandum of understanding with CST Mining, a Hong Kong-listed copper miner, to acquire its 70% stake in a project in Peru for $475m. The country elected ex-military rebel Ollanta Humala as president last week on a platform that included boosting government control of natural resources and increasing mining royalties. "We've been operating in Peru for more than 20 years," Glasenberg added. "This is going to occur from time to time. We work in those countries and we believe that they're not going to kill the industry by putting taxation on the mining industry that would make it unworkable".