Glencore Xstrata to pay dividend despite loss

Newly merged Swiss mining giant Glencore Xstrata on Tuesday reported a massive net loss of $8.9 billion for the first six months of 2013 owing to merger write-downs, but signalled it would pay an interim dividend.

Glencore Xstrata to pay dividend despite loss
Photo: AFP/Getty Images

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 the canton of Zug, 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.

One side benefit of the write-downs is that the company will pay no income taxes for the first half of the year and will receive a tax credit of $163 million, Tages Anzeiger reported.
Glencore Xtrata's revenues rose on a comparable basis by four percent to $112 billion.
However, on a pro forma or nominal basis, sales fell by two percent to $121 billion.
Managing director Ivan Glasenberg said that the first half of the year had been a period of transformation for the group which had made excellent progress in integrating the activities of the two component parts.
And he said that the benefits and economies of the merger would be much greater than the initial forecast of $500 million per year.
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.

Analyst Mike McCudden at online brokerage Interactive Investor was not convinced.
"The huge write-down of Xstrata's assets amidst a tough market, while they 
seek some stability in the board, is doing nothing to instill any confidence from investors," he told AFP.
"Glencore still has a lot of work to do in integrating Xstrata, and after a 
run of disappointments recently, today's attempts to reassure investors will do little to stop them heading for the exits," he added.
Ute Haibach, an analyst with J. Safra Sarasin, meanwhile said that while 
observers had expected to see write-downs, the ones announced on Tuesday "look high at the first glance."
Glencore Xstrata is listed on the London Stock Exchange, where its shares 
were down 2.77 percent in midday trading at 293.60 pence, having opened at 297.00 pence.
The group's stock had closed at 301.95 pence 
on Monday.
The share began life at about 331.15 pence on 
May 3rd, and has since fallen by about 11.3 percent.
The long-awaited merger between Swiss commodities trader Glencore and 
mining giant Xstrata, which is also based in the Alpine country, came on May 2nd.
The new group took the stage alongside leading global commodities companies 
such as BHP Billiton, Vale and Rio Tinto.

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Glencore in black despite low commodity prices

Swiss mining and commodities giant Glencore was back in the black in 2014, posting a $2.3 billion net profit, but took a $1.1 billion impairment charge on dwindling commodity prices, it said on Tuesday.

Glencore in black despite low commodity prices
Photo: AFP

The healthy profit comes after the Swiss company suffered an $8 billion loss a year earlier.
However, taking into account the group's absorption of another Swiss mining giant Xstrata, the company saw its results on a comparable pro forma basis slip seven percent from the year before.
The merger with Xstrata and integration of Canadian company Viterra meanwhile helped boost Glencore's trade, and the company said its adjusted earnings before interest, taxes, depreciation and amortisation, swelled 18 percent to $2.8 billion.
But Glencore, headquartered in Baar in the canton of Zug, took a $1.1 billion impairment charge amid plunging commodity prices, especially in the energy sector.

The company warned last month that because of "volatile" market conditions, it aimed to slash its spending this year to $6.5-6.8 billion, down from the $7.9 billion announced to investors in early December.
Glencore, which has a heavy footprint in copper, coal and oil, as well as in the agriculture commodities sectors, also said it aimed to reduce its coal mine activities in South Africa and in Australia.
"Our ultimate goal remains to grow our free cash flow and return excess capital in the most sustainable and efficient manner," Glencore chief
executive Ivan Glasenberg said in the earnings statement.
"As the most diversified raw material producer and marketer, Glencore is well positioned to react to and benefit from changes in commodity
fundamentals," he added.
The company's board aims to propose hiking the dividend paid to shareholders by nine percent to 18 cents a share, the company said.