JOHANNESBURG (miningweekly.com) – Diversified major Glencore Xstrata on Tuesday reported an $8.9-billion interim loss as it booked a $7.7-billion write-down on assets inherited from the merger with Xstrata in May this year.
The newly merged giant stated that the impairment reflected the broader negative mining industry environment, which prevailed during the first half of this year, and the heightened risks associated with greenfield and large-scale expansion projects.
“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. The synergies from the merger will be materially in excess of previous guidance, based on timely preparation and decisive action,” Glencore Xstrata CEO Ivan Glasenberg said.
In addition to the impairment relating to the Xstrata acquisition, the company also saw a $324-million impairment relating to its stake in aluminium company Rusal and a $452-million impairment relating to its Murrin Murrin nickel operation in Australia.
London-based Liberum Capital commented that the magnitude of impairments, which amounted to $8.5-billion in total, was at the top-end of market expectations. It added that the market had anticipated a “wiping clean of the slate” and inevitable associated impairments following commodity price and share price moves over the last year.
Glencore Xstrata reported adjusted pro forma earnings before interest, taxes, depreciation and amortisation of $6-billion, compared to $6.6-billion in the previous year.
Net earnings, before impairment charges and other one-off items, were $2.04-billion, down 39% on the $3.36-billion reported for the previous period.
The company saw a cash flow generation of $4.3-billion, resulting in a rolling 12-months funds from operations/net debt ratio of 28.2%.
“As expected, net debt has increased as the group is executing the final stages of its large growth pipeline; however, pro forma net funding is only up $1.4-billion owing to a substantial working capital release,” Glencore Xstrata said.
Liberum Capital stated that while the net debt remained high, it was manageable.
Further, the Glencore Xstrata board had declared an interim dividend of $0.054 a share, which was in line with that declared in 2012. “This reflects our continued confidence in the prospects for the group and the strength and flexibility of our balance sheet,” the company said.
Glasenberg added that Glencore Xstrata remained focused on the disciplined allocation of capital, as well as robustly scrutinising all pre-existing plans for the enlarged entity.
“We continue to work tirelessly and diligently to maximise returns on our capital and to our stakeholders,” he said.