Glencore Xstrata posts loss on asset write-downs

Glencore Xstrata posts a first-half loss after having to revalue acquired commodities assets Keystone

Glencore Xstrata posted a first-half net loss of $8.9 billion (CHF8.2 billion) after the world’s biggest shipper of thermal coal had to write down the value of assets acquired in the takeover earlier this year.

Pro forma profit – which includes Xstrata earnings but excludes one-off charges – also fell 39 per cent to $2 billion, weighed down by lower commodity prices, said Glencore Xstrata in its first-half report on Tuesday. Combined revenue dropped 1.7 per cent to $121.4 billion.

Swiss-based Glencore Xstrata, which operates more than 150 mining and metallurgical sites, offshore oil production assets and agricultural facilities, said it took a $10.1 billion charge in the first six months of the year to revalue its assets.

This write-down includes an $1.1 billion accounting loss related to the revaluation of Glencore’s initial 34 per cent state in Xstrata and a $7.7 billion impairment of goodwill on the acquisition of Xstrata completed on May 2, the company said.

“We sat down in front of a clean sheet and wrote down the value of what we just acquired,” Xstrata Chief Financial Officer Steven Kalmin told investors.

Price declines

Price declines for nickel and copper have forced commodities companies like BHP Billiton and Glencore Xstrata to revalue their assets. Commodity metal prices fell on average 15 per cent during the first half of 2013, which compared with a 13 per cent rise of the US Standard & Poor’s 500 stock index.

Glencore Xstrata, which produces more than 90 commodities, completed its corporate fusion in May 2013, but Glencore had first started the valuation of the Xstrata mining company in September 2012.

The integration of Xstrata is on track, executives also said on Tuesday. The combined company expects to generate annual cost savings of more than $500 million.

The combined group holds stakes in about 35 coal mines in Colombia, Africa and Australia, representing 10 per cent of global seaborne supplies of the fuel. Glencore Xstrata is the fourth-largest producer of mined copper and third-biggest seller of nickel worldwide.