Glencore offers no Xstrata clues

2012-08-21 08:43

London - Trader Glencore stuck to its guns on a $30bn bid for miner Xstrata as it reported a smaller than expected drop in first-half profit on Tuesday, with the impact of weaker prices tempered by resilience in metals and agricultural trading.

Glencore, the world’s largest diversified commodities trader, said net profit fell to $1.81bn, down from $2.44bn a year ago and marginally above analysts’ expectations of $1.6bn.

Its operating profit fell 24% to almost $2.51bn, again topping forecasts, as the trader and miner warned of tough conditions continuing for the sector.

“Looking forward, we neither anticipate nor assume any material improvement in overall market or economic conditions in the near term,” Chief Executive Ivan Glasenberg said.

Operating profit for Glencore’s marketing businesses fell 11%, dented by tough comparisons with a strong first-half for energy trading last year, while its industrial businesses saw operating profit fall 32%.

Miners have had a torrid earnings period, reporting their first profit falls since 2009, as margins become squeezed by stubbornly high costs and weaker prices for key commodities.

Xstrata’s core profit fell by almost a third as the miner, one of the world’s largest producers of thermal coal and copper, was hit along with its peers by falling commodity markets against a backdrop of stubbornly high wages and inflation. It was partly shielded from tumbling thermal coal prices by higher-priced contracts.

Glencore, already the single largest shareholder in Xstrata with a 34% stake, announced in February it would bid for the stock it does not already own, offering 2.8 new shares for every Xstrata share held. It has met with resistance, however, from Qatar Holding, Xstrata’s second-largest investor, which in June demanded a ratio of 3.25.

It gave no update on the merger or talks with Qatar in Tuesday’s announcement.

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