Zurich, Canton of Zurich: Newly merged mining giant Glencore Xstrata reported a switch into a first-half net loss of $8.9 billion (Dh32.7 billion) on Tuesday owing to merger write-downs, but signalled it would pay an interim dividend.
At the same time last year and on a comparable asset base, the business made a net profit of $2.2 billion.
The expected dividend was a sign of confidence in the future, the group said, forecasting bigger-than-expected economies of scale.
Publishing its first results since the merger, the new group took a charge of $7.6 billion to write down goodwill, meaning intangible assets which have a lower book value than the market value when they changed hands.
The group, based in Switzerland, said that the write-down reflected the poor outlook for the mining industry and increased risks for big expansion projects and for the development of new sites.
But sales rose on a comparable basis by 4 per cent to $112 billion. However, on a pro forma or nominal basis, sales fell by 2 per cent to $121 billion.
Glencore Xstrata’s chief executive Ivan Glasenberg was sanguine about the group’s performance, however.
“The first half of 2013 has been a transformational period for Glencore. We completed the merger with Xstrata and have made excellent progress integrating the businesses,” Glasenberg said in a statement.
He underlined that the benefits and economies of the merger would be much greater than the initial forecast of $500 million per year.
“As we look ahead, we remain focused on the disciplined allocation of capital as well as robustly scrutinising all pre-existing capital plans of the enlarged entity. We continue to work tirelessly and diligently to maximise returns on our capital and to our shareholders,” he added.
Interim dividend
The group said that it expected to pay an interim dividend of $0.054 per share. It said that this was a sign of its confidence in its prospects and in the strength and flexibility of its balance sheet.
Glencore Xstrata is listed on the London Stock Exchange, where its shares were down 3.18 per cent in mid-morning trading at 292.40 pence, having opened at 297.00 pence.
The group’s stock had closed at 301.95 pence on Monday.
The long-awaited merger between Swiss commodities trader Glencore and mining giant Xstrata, which is also based in the Alpine country, came on May 2.
The new group took the stage alongside leading global commodities companies such as BHP Billiton, Vale and Rio Tinto.
Merger delays
Glencore and Xstrata’s shareholders had voted in favour of the merger last November, with a view to sealing the deal by the end of 2012. That target was pushed back to March, before again being shifted due to delays in approval by Chinese regulators.
China finally gave a green light in April on condition that once the merger was completed, the combined group would sell its interest in the Las Bambas copper mine project in Peru to Chinese-approved players.
Xstrata’s chief executive Mick Davis had been due to take the helm of the combined operation for six months, but his Glencore opposite number Glasenberg instead assumed the role, and other members of Xstrata’s management team also left the new group.
