Glencore Xstrata writes down £4.9bn in assets
FTSE 100-listed Glencore Xstrata yesterday revealed that it had taken a $7.7bn (£4.9bn) writedown on Xstrata’s mining assets, as it posted a nine per cent fall in half-year earnings to $6bn, due to low commodity prices that continue to weigh down on the sector.
The miner trader attributed a large part of the writedown to the Glencore share price on 3 May when the two companies officially merged, which was higher than it is now.
“We just had to value the business with a blank sheet of paper,” chief financial officer Steven Kalmin said. He added that the writedown could have been much smaller at around $2.5bn if the deal had taken place a month later.
However, chief executive Ivan Glasenberg said that he was happy with the deal and believed they would make the value back in the future.
The company – which yesterday unveiled its first results since the merger – did not disclose more details of the writedown but said that it was “more cautious” on valuing early stage and greenfield assets.
Glencore’s net debt fell 19 per cent to $34.8bn over the period, which was higher than Deutsche Bank’s estimate of $33.1bn. Revenue fell two per cent to $121.39bn.
The firm said that cost savings from integrating Xstrata into the business would now “be materially in excess of previous guidance of $500m”, due to synergies of marketing, including cutting offices, which were not previously included in the forecast.
The company is still in the process of finding a new chairman, with former BP boss Tony Hayward currently holding the role on an interim basis. Glasenberg insisted he was “not in a major rush” to find a permanent chairman and that Hayward was a candidate.
Shares closed 1.6 per cent lower at 297.15p.