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Glencore to Cough Up Over $1.2B for a Clean Record

Story Highlights

Glencore’s move to settle its legal disputes in three countries is strategic for its operational efficiency.

Anglo-Swiss commodity trading and mining major Glencore plc (GLNCY) recently revealed that it will pay at least $1.2 billion to resolve criminal probes that the company has been facing for years.

Glencore will pay about $700 million to the U.S. Justice Department to resolve a foreign-bribery investigation and $485 million to settle U.S. criminal and civil investigations into the manipulation of fuel-oil prices. The company said that it has also pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act.

Further, the company will pay $39.6 million to settle bribery charges in Brazil.

Moreover, Britain’s Serious Fraud Office has charged another unit of the company, Glencore Energy UK Ltd., with seven counts of bribery in relation to payments of $24 million for preferential access to oil in Africa.

As a precaution, the company disclosed that it has set aside a corpus of $1.5 billion to settle the disputes in these countries.

Management’s Take

In an e-mail to the staff, the CEO of Glencore, Gary Nagle, said, “The consequences of such conduct are damaging and costly, not only financially, but also for our reputation.”

Stock Rating

The stock has a Moderate Buy consensus rating based on one Buy. Shares of the company have gained 55.1% over the past year.

Bloggers’ Take

TipRanks data shows that financial bloggers are 100% Bullish on GLNCY, compared to the sector average of 78%.

Risk Factors

According to the TipRanks Risk Factors tool, Glencore’s top three risk categories are Macro & Political, Finance & Corporate and Legal & Regulatory, contributing 36%, 18% and 18%, respectively, to the total 11 risks identified for the stock.

Under its Legal & Regulatory risk category, the company has disclosed that it is exposed to extensive laws, including bribery and corruption, sanctions and taxation. The company notes that dispute resolution mechanisms may be uncertain in some countries in which it operates.

Conclusion

Glencore has been on an impressive growth trajectory over the past year. Now, with the impending settlement of a sizeable portion of its legal disputes, the company’s upside can continue with renewed vigor.

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