ZUG (dpa-AFX) - Swiss mining company Xstrata Plc (XTA.L, XSRAY.PK, XSRAF.PK) reported Tuesday 33 percent decline in first-half profit, reflecting lower commodity prices.
The company noted that a cyclical downturn in commodity prices and transition to its next generation of lower cost mines impacted its first-half results. Commodity prices fell significantly from last year, particularly nickel and zinc.
EBITDA, a key earnings measure, was 31 percent lower than last year.
Mick Davis, chief executive officer of the company said, '2012 is a landmark year for Xstrata and marks the tipping point of the strategy to transform our portfolio through organic growth that we have consistently pursued for the past five years.'
Xstrata stated that its businesses cut unit costs in real terms by a net $105 million in the first six months of the year, led by the nickel and zinc business units. In addition, improvement in second-quarter volumes provides good momentum for stronger second half production, benefited by commissioning of new projects, the company said. By the end of the year, a total of ten major projects is expected to reach commissioning.
In the first half, profit attributable to equity holders of the parent declined to $1.94 billion or $0.65 per share from $2.92 billion or $0.98 per share reported last year.
Before exceptional items, profit attributable to equity holders of the parent fell to $2.19 billion or $0.74 per share from $2.87 billion or $0.96 per share in the prior year.
Pre-tax profit dropped to $1.53 billion from $4.1 billion in the same period last year. Before exceptional items, pre-tax profit was $2.37 billion, significantly lower than $4.04 billion a year ago.
Half-yearly revenues declined 7 percent to $15.55 billion.
During the first half, the company incurred costs of $21 million related to the recommended merger with Glencore International Plc (GLEN.L, GLNCY.PK, GLCNF.PK).
For the year, the company now plans net real cost saving of around $390 million, which it called a creditable cost performance against a very complex operating environment, compounded by the transition phase of growth strategy and the potential risk of distraction arising from the proposed merger with Glencore.
The company expects to close the Glencore transaction in the fourth quarter.
In addition, the directors have proposed an interim dividend of 14 cents per share, up 8 percent from last year, which will be paid on September 13, 2012.
Separately, Xstrata said it approved a $360 million investment in Xstrata Zinc's McArthur River Mine in the Northern Territory, intended to more than double capacity from 2.5 million tonnes of ore to 5.5 million tonnes per annum from 2014.
According to the company, the Phase 3 development project will increase annual zinc production to 380,000 tonnes and lead production to 93,000 tonnes.
In London, Xstrata shares are currently trading at 902 pence, up 19 pence or 2.15 percent, on a volume of 5.02 million shares.
Copyright RTT News/dpa-AFX
© 2012 AFX News
