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Glencore Annual Profit Plunges Amid Hefty Impairment

Swiss commodities trader Glencore International plc (GLEN.L,GLNCY.PK,GLCNF.PK), which has agreed to merge with Xstrata Plc. ((XTA.L, XSRAY.PK, XSRAF.PK), Tuesday reported a sharp decline in annual profit, amid a lower share of income from associates and jointly controlled entities as well as higher items and increased costs.

Net income attributable to equity holders plunged to $1.00 billion or $0.14 per share from $4.05 billion or $0.69 per share in the prior year.

In 2012, Glencore recognised $2.06 billion of significant expenses, which comprised primarily impairment charges of $1.65 billion and its share of Xstrata's exceptional items of $875 million. This was offset by a $497 million accounting gain on the revaluation of previously held interests in subsidiaries acquired during the year.

The impairment mainly comprises $1.2 billion of previously recognised negative fair value adjustments reclassified in respect of Glencore's interest in UC Rusal. Impairment charges were $32 million in 2011.

Net income attributable to equity holders before items was $3.06 billion, while it stood at $4.06 billion in the previous year.

Income before income taxes decreased to $1.08 billion from $4.00 billion last year.

Share of income from associates and jointly controlled entities plunged 81 percent in the year to $367 million from $1.972 billion in 2011. This reflects reduced earnings flow-through from Xstrata primarily due to lower commodity prices and various impairment charges.

Glencore also reported a loss on disposal of investments of $128 million in 2012, compared to a gain of $ 9 million in 2011.

The company incurred 16 percent higher costs of goods due to higher oil volumes while selling and administrative expenses increased 16 percent due to higher employee compensation charges. Revenue climbed 15 percent to $214.44 billion from $186.15 billion, primarily due to a 39 percent higher oil volumes handled, partially offset by lower period-on-period metals prices.

Revenue from Metals and minerals climbed to $56.674 billion from last year's $51.984 billion, amid lower metals prices, with gold that increased by 6 percent being the main exception.

Energy products brought in $136.937 billion in 2012, compared to $117.065 billion last year. Revenue from Agricultural products increased to $20.825 billion from $17.103 billion in 2011.

The Directors proposed a final dividend of $0.1035 per share, bringing the total dividend for the year to $0.1575 per share, which is up 5 percent from 2011.

Glencore's Chief Executive Officer, Ivan Glasenberg, said, "2012 was a year of significant achievement for Glencore. Despite the challenging environment faced by the mining industry, Glencore delivered organic growth in its industrial businesses which complemented a robust performance in its marketing operations.''

The company noted that the Xstrata merger long stop date has been extended to April 16, with the consent of Xstrata and the panel.

Meanwhile, Anglo-Swiss miner Xstrata said its 2012 attributable profit plummeted to $1.18 billion from $5.71 billion. Pre-tax profit plunged to $2.0 billion from $8.15 billion. Revenue dropped 7 percent to $31.62 billion in 2012.

GLEN.L is currently trading up 2.18 percent in early morning trading at 378 pence.

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by RTT Staff Writer

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