Glencore Xstrata $7.66 billion charge hits profit
- Article by: JOHN HEILPRIN
- Associated Press
- August 20, 2013 - 12:05 PM
GENEVA — Newly merged commodities and mining group Glencore Xstrata Plc reported a sharp drop in profit Tuesday, while taking a first-half loss of almost $8.5 billion, mainly from the value of the mining assets it acquired.
The Swiss-based company wrote down the value of those assets by a hefty $7.66 billion. The charge was more than the $7 billion expected by most analysts and the company's share price fell 1.6 percent to 297.15 pence in London trading.
Though the merger between Glencore and Xstrata, completed in May, created an industry giant that controls a chain of businesses in mining, refining, storage and shipping of basic commodities like coal, copper and corn, trading conditions have been tough.
The write-down, the Swiss-based company said Tuesday, alongside half-year results, reflected "the broader negative mining industry environment" and the heightened risks of taking on some big projects during the January-to-June period.
Overall, the company said its net income excluding exceptional items fell 39 percent to $2.04 billion from the $3.36 billion it would have made a year earlier. However, when including charges such as the write-down of the mining assets, the company reported a $8.47 billion loss, in contrast to a $2.3 billion profit last year.
The company said it was impacted by weaker prices in core commodities, but that was partially offset by improved production at many of its industrial operations. The rise in output included a 20 percent increase in copper production owing to improvements at some of its African and South American mines.
"We remain positive on the market outlook and continue to see solid end-use demand growth in our major commodities," Chief Executive Ivan Glasenberg said.
Commodities trader Glencore already was the world's largest before it took over Xstrata, the world's biggest exporter of thermal coal. Both were already based in the Swiss canton (state) of Zug, a Zurich-area haven for multinational business drawn by low taxes and high living standards.
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