Many balance sheets will soon be out of balance
London
THE lesson that too much debt is dangerous has sunk in. But for many companies, the corollary proposition, that too little cash is a killer, seemingly hasn't. If there's one thing investors ought to remember heading into the eighth year since the financial crisis, it's that without healthy cashflows, balance sheets won't stay balanced for long.
Trading house Glencore is a prime example. As commodity prices continued to plunge in 2015, its net debt of around US$30 billion, which investors had previously tolerated, started to look scary. The shares went into free-fall. As cashflows dwindled, so did the amount of debt investors would stomach, forcing boss Ivan Glasenberg to hack the dividend, sell assets, cut production and target reduced borrowings of US$18 billion.
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Companies & Markets
Wall Street Journal moves Asia headquarters from Hong Kong to Singapore
Macquarie sees biggest profit dip in 15 years on commodities downturn
HSBC appoints ex-Citi banker as new Singapore head of global banking
H2G Green chief to stand trial on Aug 5 amid MOM probe
Dasin Retail Trust’s trustee-manager chairman, directors deny allegations of misconduct
Microsoft adds security chiefs to product groups in wake of hacking woes