Mining firm Xstrata Plc (XTA.L,XSRAY.PK,XSRAF.PK) announced Monday preliminary results for the year ended December 31, 2009, reporting a sharp drop in profit, as revenues declined from the prior year due to continued slowdown in industrial production and destocking. The company noted that average commodity prices during the year were significantly lower than last year. Xstrata also reinstated its dividend payments, stating that robust economic growth and demand for commodities from industrializing nations is likely to continue.
The Switzerland-based company's profit before tax plunged to US$1.53 billion from US$5.17 billion in the year earlier. Before exceptional items, pre-tax profit was US$3.97 billion, compared to a profit of US$6.6 billion last year. Profit for the full year attributable to equity holders of the parent dropped to US$661 million or US$0.25 per share from $3.59 billion or US$2.09 per share in the previous year. Results for the year include exceptional items totaling US$2.11 billion or US$0.78 per share, up from US$1.1 billion or US$0.64 per share in the year earlier. Excluding exceptional items, profit attributable to equity holders were US$2.77 billion or US$1.03 per share, compared to a profit of US$4.7 billion or US$2.73 per share in the prior year. The company noted that the comparatives have been adjusted to disclose them on the same basis as the current period figures for the impact of the rights issue bonus factor of 0.57.
Revenues for the year dropped to US$22.73 billion from US$27.95 billion in the preceding year.
The company's business is organized into five global commodity businesses and a technology business. Revenues from coal declined to US$6.75 billion from US$7.94 billion in the prior year. Ferroalloys posted revenues of US$1.1 billion, down from US$1.73 billion a year ago. Revenues from Platinum decreased to US$200 million from US$269 million last year. The company's copper business generated revenues of US$9.22 billion, compared to US$11.46 billion in the previous year. Revenues from Nickel dropped to US$1.89 billion from US$3.1 billion a year ago, while Zinc Lead revenues increased to US$3.45 billion from US$3.2 billion in the prior year.
Revenues from Xstrata's Technology business were US$114 million, compared to US$235 million in the year 2008.
Operating profit declined to US$2.2 billion from US$6.08 billion reported a year ago. According to the company, the net impact of lower commodity prices reduced operating profit by US$2.7 billion, with a particularly significant impact of US$1.2 billion from lower coal prices. Average nickel, copper and zinc prices were 30%, 26% and 11% lower than 2008, despite the recovery in exchange traded metal prices during 2009. Xstrata chief executive officer commented, "Improving demand for commodities during 2009 was underpinned by investment in Asian infrastructure, which lessened the impact of a more anaemic response in OECD economies. Nonetheless, despite the improving trend, average commodity prices in 2009 were significantly lower than in 2008. The full benefit of rising prices in the second half was also partially offset by the negative impact of a progressively weaker US dollar in the last three quarters of the year against many producer currencies."
In January, the company announced a pre-emptive major rights issue to further bolster Xstrata's financial position. Xstrata noted that the Prodeco operations in Colombia were acquired as part of the rights issue transaction for a net sum of US$2 billion. Capital expenditure for the full year was US$3.62 billion, compared to US$5.12 billion in the prior year.
The company has proposed a final dividend of 8 cents per share for fiscal 2009, to shareholders of record on April 23 2010, payable on May 14. "The Board's increased confidence in the medium term outlook for commodities and Xstrata's encouraging prospects and financial position have enabled the resumption of dividend payments," the company added. Among peers, British miner Rio Tinto, which combines Rio Tinto Plc (RTP, RIO.L) and Rio Tinto Ltd. (RIO.AX), had said in mid-January that it sees recovery across most of its key commodities, although it remained cautious about the global economy as stimulus packages start to wind down. XTA.L is currently trading at 985.2 pence, up 35.2 pence or 3.71%, on a volume of 7.33 million shares. In the past 52 weeks, the shares have been trading in a range of 288.75 pence to 1,302.5 pence on the LSE.
XSRAY.PK closed Friday's regular trading at $2.95 on the OTC, while XSRAF.PK ended at $14.69.
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