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RESULTS: Xstrata
Johannesburg, Feb 8 (I-Net Bridge) Global resources group Xstrata plc on Monday reported a 62% decline in basic earnings per share to US$1.05 for the year ended December 2009 from $2.77 a year ago.
The group’s revenue was 16% lower at $23.53 billion, while operating profit was 38% lower at $4.476 billion.
A dividend of 8 cents per share has been proposed for payment in May 2010, reflecting the Board’s confidence in Xstrata’s near and medium term prospects and financial position, it said.
The group has over $8 billion of projects currently in construction, with a further $9 billion of projects due to be approved in 2010, providing Xstrata with significant volume growth to benefit from continued robust demand from Asian and other industrialising economies, it added.
The group reported operating earnings before interest, tax, depreciation and amortisation (EBITDA) of $7.046 billion down 27% on a year ago, despite unprecedented destocking in the first half and lower demand and average prices in 2009 as a result of the global downturn, it said.
Its rapid and comprehensive response to the downturn delivered real cost savings of $501 million, representing a 5% reduction in the operating cost base, it added.
Accelerated transformation of Xstrata Nickel operations and restructuring and expansion of Xstrata Zinc’s Australian operations reduced average C1 nickel and zinc costs by 33% and 25% respectively.
The group reported operational cash flow of over $5.3 billion, with stronger second half cash generation of $3.7 billion.
Gearing was reduced to 26% from 40%, as a result of robust cash flows and a successful rights issue in the first quarter to repay a net $3.7 billion of debt.
Xstrata’s CEO Mick Davis said the businesses’ rapid and comprehensive response to the downturn in the early part of the year enabled a creditable result in extremely challenging markets in 2009.
“It has been matched by a swift resumption of investment in key growth projects that will drive substantial volume growth and reductions in operating costs, marking the next stage of Xstrata’s transformation,” he said.
“In my opinion, the medium term outlook for commodity demand remains very promising, driven by the ongoing urbanisation and industrialisation of high-growth, populous economies, with China and other industrialising countries taking active steps to rebalance their economies towards domestic consumption-led growth over the next decade.”
He added, however, that there are a number of risks that must be carefully managed on the path to a sustainable OECD recovery.
“However, many of the short- and medium-term leading indicators we monitor are showing signs of recovery, notwithstanding the fact that credit expansion in OECD economies remains sluggish. In time, the return to a more normalised level of growth of OECD economies will add further impetus to the growth of the global economy and commodity demand.
“Against this background, the shift of emphasis in Xstrata’s strategy to a phase more dominated by organic growth is timely and coincides with our view that the supply of many commodities will struggle to keep pace with demand growth.
“Xstrata has been well positioned over the last few years to benefit in this environment. The investments of recent years have delivered a diversified portfolio with the scale and capabilities to develop major new mines. As we enter into this next phase of Xstrata’s transformation, I am confident that the Group’s prospects remain very encouraging,” he concluded.
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