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Glencore to cut more debt as 2015 profit falls 32 percent

LONDON (Reuters) - Glencore GLEN.L stepped up its debt reduction plan on Tuesday by promising to offload more assets to shore up its finances to cope with a commodities rout that wiped around a third off its 2015 profit.

The logo of commodities trader Glencore is pictured in front of the company's headquarters in Baar, Switzerland, September 30, 2015. REUTERS/Arnd Wiegmann

The Swiss mining and trading house aims to slash net debt to $17-$18 billion by the end of 2016, $1 billion more than previously planned. That burden had reached a peak of $30 billion last year, one of the highest levels in the sector.

“That (debt) structure would allow for the resumption of dividends in 2017 on the basis of what we know today,” Chief Financial Officer Steven Kalmin said.

Glencore suspended its dividend last year after a slump in the prices of products such as oil and copper took its toll.

BHP Billiton BHP.AXBLT.L and Rio Tinto RIO.AXRIO.L cut shareholder payouts last month as they braced for the worst commodities downturn in a generation.

The slide in prices was largely behind a 32 percent fall in group adjusted earnings before interest, tax, depreciation and amortization (EBITDA) to $8.7 billion, in line with analysts’ expectations.

Glencore differs from other mining groups by having a large and growing marketing division which is more resilient during commodity downturns.

Core profit from its trading arm fell only 11 percent while profit from its mining and industrial business slid 38 percent.

CHINA STEADY

Chief Executive Ivan Glasenberg said the company was prepared for further potential drops in commodity markets, but noted that despite a slowdown in growth in top raw materials consumer China, Glencore’s business was holding up well.

Business in China is rebounding after a campaign against corruption delayed infrastructure projects last year, he said.

“Our order book in China is good. I think our copper sales into China are one of the best years we’ve seen.”

Investors concerned about the prospects for a prolonged period of low prices put pressure on Glencore last year to slash net debt, resulting in a series of measures including a capital raising and asset sales. Debt fell to $25.9 billion at the end of 2015.

Glencore lifted its target for disposals by $1 billion to $4-5 billion and said it aims to finalize the sale of a minority stake in its agriculture business in the second quarter.

The shares, which had shot up by about 50 percent this year, fell 3.5 percent to 129.80 pence by 1356 GMT (06:56 EST), underperforming a 1.4 percent rise in the UK mining index .FTNMX1770.

“I believe the market was looking for more impetus and more progress particularly with respect to the agricultural stakes than has been announced this morning,” said Ken Odeluga, market analyst at City Index.

Additional reporting by Dmitry Zhannikov, Kit Rees and Sudip Kar-Gupta.; Editing by Mark Potter and Louise Heavens

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