Xstrata posts 31 percent profits fall
But the fall was less than expected as the miner cut costs to offset weaker prices and reduced production
By CFOWorld staff | CFO UK | Published 12:04, 07 August 12
Xstrata recorded a 31 percent slump in profits for its first six months, but only slightly lower than expected as the miner cut costs to offset weaker prices and reduced production.
The Anglo-Swiss miner, currently undergoing a $26 billion takeover bid from FTSE 100 commodities trader Glencore, took a $514 million hit to write down the value of its almost 25 percent stake in platinum miner Lonmin.
Lohmin has been battered along with the rest of the South African-focused sector by rising costs, weak demand and stoppages.
Xstrata, one of the world's largest producers of thermal coal and copper, agreed earlier this year to be taken over by Glencore, its largest shareholder. But the deal hit trouble in June after the miner's second-largest shareholder, Qatar Holdings, demanded an improved offer.
Xstrata's results had been keenly anticipated for signs of worsening profitability or a deteriorating outlook that could strengthen Glencore's case for keeping the offer as it is - 2.8 new shares for every share.
Analysts see Xstrata's ability to control the cost of producing a tonne of copper or coal as key to its prospects, as the industry battles stubbornly high wages and energy prices.
Xstrata is known for its tight rein on spending, having cut costs at every reporting period since its listing. It said on Tuesday it had lowered unit costs in real terms by $105 million, a drop led by its energy-consuming nickel and zinc arms. Over the year, it plans $390 million of cost savings.
CEO Mick Davis declined to comment on the potential outcome of the Glencore takeover ahead of a shareholder vote scheduled for 7 September, but said Xstrata would not suffer if it was left as a standalone company with two major investors - Glencore and Qatar.
photo credit: Reuters
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