Editorial: Glencore in the crosshairs

Glencore CEO Ivan Glasenberg said in 2018 that he expected to retire within three or four years. But during an investor day in London on Dec. 3, the South African billionaire said that day could come within the next 12 months.

“I have always said I don’t want to be an old guy running this company,” Glasenberg, who turns 63 on Jan. 7, told analysts and investors. “I hope we can get the new management in place as early as possible in the new year.

“There is a good crop of people who should take over and as soon as those guys are ready … I’ll be ready to step aside. So it could happen soon, no exact time, but as soon as I believe they are ready, I will move aside.”

His comments came just two days before the Serious Fraud Office (SFO) in the U.K. announced it was launching an investigation over “suspicions of bribery” at the commodities giant, where Glasenberg has been CEO since January 2002. The SFO said it was examining the “conduct of business by the Glencore group of companies, its officials, employees, agents and associated persons,” but did not give details. Glencore says it will cooperate with the probe.

The British government isn’t the only one that has the world’s most powerful commodities trader in its crosshairs.

In April, Glencore confirmed that the U.S. Commodities Futures Trading Commission is looking into the company and its subsidiaries to determine whether they had engaged in “corrupt practices in connection with commodities.”

Last year, the U.S. Department of Justice subpoenaed Glencore over possible violations of the Foreign Corrupt Practices Act in relation to its operations in the Democratic Republic of the Congo (DRC), Nigeria and Venezuela, and Canadian regulators fined Glencore’s subsidiary, Katanga Mining, $30 million. The Ontario Securities Commission said the company issued misleading statements and did not properly disclose its dealings with Dan Gertler, an Israeli businessmen, with close connections to Joseph Kabila, the DRC’s president from January 2001 until January 2019. (The U.S. put Gertler on a sanctions list in 2017.)

The probes have cast a shadow over the company, while lower prices for many of its commodities — along with impairments and a more punitive mining code in the DRC — have pinched its bottom line.

In the first six months of the year, Glencore reported adjusted earnings before interest, tax, depreciation and amortization of US$5.6 billion — 32% lower than in the year-earlier period. Net income fell 92% year-on-year to US$226 million. Net debt stood at US$16.3 billion at the end of the first half, at the upper end of its guidance range.

Shareholders — including Glasenberg, who owns 8.6% of the company — have seen the value of their shares fall 21% over the last 12 months.

In mid-December, Forbes estimated Glasenberg is worth US$4.3 billion — down from a net worth of US$7.3 billion in 2012, shortly after an initial public offering in 2011 valued the company at US$60 billion and made Glasenberg and his partners profoundly rich.

News of the U.K. fraud agency’s investigation has cranked up the pressure for change at the Switzerland-based company, and if Glasenberg does step down in 2020 as he has telegraphed, he will be one of several executives to leave in recent years. Among the departures: Alex Beard, who retired as head of its oil division in June; and Telis Mistakidis, head of Glencore’s copper division, and Stuart Cutler, head of ferroalloys trading, who both retired at the end of 2018.

“[There are] not many of us old guys left,” Glasenberg said during the investor day. “The old guys will be leaving. How soon? We’re reviewing it right now. I would imagine it would occur next year.”

Glasenberg, an accountant, joined Glencore in April 1984 and is the company’s third CEO.

The company’s founder, Marc Rich, was indicted for tax evasion, among other crimes, and fled the U.S. in 1983. Former U.S. president Bill Clinton pardoned him in 2001.