Freezing orders filed on two of Glencore PLC’s (LON:GLEN) Democratic Republic of Congo (DRC) subsidiaries and Russian tensions will be talking points when the miner reports its first quarter update on Thursday.
Israeli billionaire Dan Gertler served the freezing orders on Friday for US$3bn of damages for alleged unpaid royalty agreements in the DRC.
Glencore had to freeze certain bank accounts, assets and mining titles in the DRC.
RBC Capital analyst Tyler Broda said the freezing of DRC assets “complicates the picture for Glencore” and cut its price target to 410p from 460p.
“Although we reduce recommendation and target price, our analysis suggests there is already a substantial amount of DRC risk in the price,” Broda added.
“Volatility is likely to remain high but we remain confident with an ‘outperform’ recommendation.”
Glencore also faces risks arising from fresh US sanctions against Russia given its long history of trading with the Eastern European nation, Broda said in a separate note.
“The revised Russian sanctions represent another headline risk but with a minor tangible impact,” Broda said.
Low expectations for Smith & Nephew’s first quarter
Artificial hips and knee maker Smith & Nephew PLC’s (LON:SN. is expected to report a slowdown in quarterly revenue growth.
The market has pencilled in US$1.22bn of revenues in the first quarter and underlying year-on-year revenue growth of 1.6%.
In the fourth quarter, the group reported fourth quarter revenues of US$1.27bn and underlying revenue growth of 2%.
“Following a strong fourth quarter, there is likely to a bit of a ‘hangover’ in Q1,” said JPMorgan Cazenove.
“Furthermore, the company faces one fewer trading day and an Easter effect.”
The trading update comes against a backdrop of takeover speculation and reports of pressure to break up the firm from activist investor Elliott Advisors.
The company has launched a major cost-cutting programme in an effort to get Elliott Advisors off its back.
In February, outgoing chief executive Olivier Bohuon said the plan – which aims to deliver cost savings of US$160mln a year by 2022 – would help improve earnings after posting a 3% decline in net profits in 2017.
Significant events expected on May 3:
Trading updates: Glencore PLC (LON:GLEN), Smith & Nephew PLC (LON:SN.), IMI PLC (LON:IMI), Trinity Mirror PLC (LON:TNI), Eqiniti Group PLC (LON:EQN), James Fisher & Sons plc (LON:FSJ)
Interims: Centamin PLC (LON:CEY), esure group PLC (LON:ESUR), Lancashire Holdings PLC (Q1) (LON:LRE)
Finals: Elektron Technology PLC (LON:EKT)
Ex-dividends: To clip 4.73 points off FTSE 100 index – G4S PLC (LON:GFS), Kingfisher PLC (LON:KGF), London Stock Exchange Group PLC (LON:LSE), Mondi Plc (LON:MNDI), Unilever plc (LON:ULVR)
Economic data: UK services PMI; US Challenger jobs cuts; US services PMI; US weekly jobless claims; US international trade; US ISM non-manufacturing; US factory orders