Glencore slashes Xstrata buy
Swiss-based Glencore Xstrata's first-half profit slid 39 per cent as the world's biggest exporter of power station coal wrote down the value of assets acquired in the recent Xstrata takeover by $US7.7 billion ($8493 million).
Its underlying profit fell to $US2.04 billion from $US3.36 billion a year earlier, Glencore said. Including the write-downs, the Switzerland-based Glencore reported a net loss of $US8.9 billion.
The write-down on Xstrata's "goodwill", reflected the fall in commodity prices seen in recent months as the Chinese economy has cooled.
The impairments reflect "the broader negative mining industry environment and sentiment which prevailed during the first half of 2013 and the heightened risks associated with greenfield and large-scale expansion projects", Glencore said.
Some investors may find the figure on the Xstrata write-down "somewhat jarring, especially given management rhetoric on capital allocation", Bank of America Merrill Lynch analyst Jason Fairclough said in a note to clients.
The $US29 billion all-share purchase of Xstrata created the fourth-biggest miner and added coal, nickel, zinc and copper output to Glencore's global commodity trading empire. BHP Billiton, Rio Tinto Group and Glencore are among producers cutting costs, selling assets, revaluing mines and reducing spending.
Glencore also posted a $US1.2 billion accounting loss on revaluing its 34 per cent interest in Xstrata at the time the transaction was completed, as well as a $US452 million impairment charge at its Murrin Murrin nickel operation in Australia and a $US324 million charge on its investment in United Co. Rusal.
The combined group has interests in about 35 coal mines in Colombia, Africa and Australia, accounting for about 10 per cent of global seaborne supplies of the fuel. It's the fourth-biggest producer of mined copper and third-largest in nickel. It employs about 190,000 people in more than 50 countries.
Glencore fell 1.6 per cent in early trade in London.