Glencore Xstrata's Profits Hit By Massive Write-Off

Michael Teague |

This past May, Swiss companies Glencore and Xstrata merged operations to become the largest commodities trading/mining company in the world, Glencore Xstrata Plc ($GLNCY).

But weaker commodity prices over the last quarter have taken a large bite out of the company’s profits, as was on display on Tuesday when Glencore released its first-half earnings. Excluding exceptional items, the company saw profits fall to $2.04 billion, from the prior year period during which net income was $3.36 billion. Not excluding one-time items, however, the company reported a staggering loss of $8.47 billion, compared to the prior-year’s profit of $2.3 billion.

Glencore’s acquisition of Xstrata added metals and minerals such as coal, zinc, nickel, and copper to what was already the world’s largest commodity trading company, and came with a price tag of $29 billion. The company cited the “broader negative mining industry environment” as well as weaker commodity prices for the disastrous numbers.

Indeed, a number of the world’s biggest mining concerns such as Rio Tinto Plc (RIO) and BHP Billiton (BHP) have had to sell-off costly and/or underperforming assets in order to save cash. But Glencore’s write-offs are huge; while analysts had expected the company to write-down the value of recently acquired Xstrata assets by $7 billion, when all was said and done the figure ended up at $7.66 billion.

That said, the company still had greatly improved output numbers to point to as an offset for the massive write-offs, in particular a 20 percent increase in copper production through various mines in Africa and South America.

Shares were down over 2.5 percent to $9.31 heading towards the closing bell.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
BHP BHP Billiton Limited 34.65 -0.60 -1.70 3,462,731
RINIY Rinnai Corp ADR n/a n/a n/a 0
RIO Rio Tinto Plc 34.24 0.03 0.09 2,666,500


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