Bloomberg News

Xstrata Profit Jumps 12% After Coal, Copper Prices Advanced

February 07, 2012

(Updates with net income in second paragraph.)

Feb. 7 (Bloomberg) -- Xstrata Plc, the Swiss mining company that announced a planned merger with Glencore International Plc today, reported a 12 percent increase in full-year profit after coal and metal prices gained.

Net income before exceptional items rose to $5.79 billion from $5.15 billion a year earlier, Zug-based Xstrata said in a statement. That beat the $5.63 billion average estimate of 12 analysts surveyed by Bloomberg.

“Commodity prices began 2011 strongly, responding well to returning confidence in the U.S., a positive outlook for continued Chinese growth and ongoing supply constraints,” Xstrata said in the statement. “We achieved significant increases in contract prices for both thermal and coking coal.”

The average price of power-station coal at Australia’s Newcastle port, a benchmark for Asia, rose to $120 a metric ton from $99 a year earlier, according to McCloskey Group. Copper averaged $8,826, up 17 percent. Xstrata, seeking to boost total mining output 50 percent through 2014, approved seven projects with a combined investment of $2.6 billion last year.

The company proposed a dividend of 27 cents, bringing the full-year dividend to 40 cents, it said. Sales jumped 11 percent to $33.9 billion.

‘Merger of Equals’

Glencore agreed to buy Xstrata for 39.1 billion pounds ($62 billion) in the biggest mining takeover, according to a separate statement today. The commodities trader, which already holds 34 percent of Xstrata, offered 2.8 new shares for each Xstrata share in a “merger of equals,” the companies said. Xstrata Chief Executive Officer Mick Davis will be CEO of the new group while Glencore chief Ivan Glasenberg will be deputy CEO and president.

“A combination of Glencore and Xstrata represents an outstanding opportunity to create additional value for our shareholders,” Davis said in the earnings statement. “Increased scale will improve our risk profile, enhance access to capital markets and allow us to participate in industry consolidation.”

Xstrata’s thermal-coal production advanced to 72.4 million tons in 2011 from 65.6 million tons, while coking coal, used in steelmaking, held steady at 7.6 million tons. Total coal volumes rose 6.8 percent to 85.3 million tons. Copper output dropped 2.7 percent.

Full-year operating earnings before interest, tax, depreciation and amortization, and before exceptional items, rose to $11.6 billion from 10.4 billion.

--Editors: Amanda Jordan, Claudia Carpenter

To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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