ZURICH: Mining giant Glencore Xstrata plunged deep into the red yesterday but defended its long-delayed merger three months ago, saying that cost-savings would be higher than expected.
During the first half of the year, the new company posted a net loss of $8.9bn (¤6.6bn), owing to merger write-downs.
The group’s shares have fallen by about 11.0 percent since the merger.
Despite the dramatic switch from the $2.2 net profit the business made a year earlier, on a comparable asset base, it said it expected to pay an interim dividend and said merger benefits would be bigger than expected.
“We continue to work tirelessly and diligently to maximise returns on our capital and to our shareholders,” Glencore Xstrata chief Ivan Glasenberg said in the earnings statement, describing the first half of 2013 as “a transformational period” for the company.
Publishing its first results since the merger, the new group took a charge of $7.6bn to write down goodwill, meaning intangible assets which have a lower book value than the value at which they changed hands.
The group, based in Baar in northern Switzerland, also re-evalued Glencore’s 34-percent holding in Xstrata before the merger, adding another $1.1bn charge to its balance sheet, bringing its total write-down to $7.7bn.
It also saw nearly $800m evaporate from value of its activities in the Australian Murrin Murrin nickel mine and its share in Russian aluminium giant UC Rusal.
The company meanwhile said the write-downs reflected the poor outlook for the mining industry and increased risks for big expansion projects and for the development of new sites.
Glencore Xstrata also saw its gross operating profit shrink 9.0 percent to $6bn, as commodities prices tanked during the first half of the year, with metals prices falling a full 15 percent.
But the company’s sales before interest and taxes nonetheless rose on a comparable basis by 4.0 percent to $112bn, it said.
However, on a pro-forma basis, presented as though the merger had taken place a year earlier and not including the restructuring costs, sales fell by 2.0 percent to $121bn.
Glasenberg, who previously headed Glencore, remained sanguine about the group’s performance.