Xstrata profits slump

Xstrata's first half profits have fallen by 77%.

Profits for mining company Xstrata fell by 77% in the first half of the year, the company announced yesterday in its half yearly results.

According to the statement, Xstrata’s first half profits were US$643 million, compared to US$2.77 billion at the same time last year.

Xstrata chief executive officer Mick Davis attributed the steep decline to the global financial downturn.

“The financial crisis and ensuing global economic slowdown, coupled with enormous uncertainty fundamentally changed our operating environment in a very short space of time in the latter part of 2008,” he said.

“As last year drew to a close, it was apparent that demand had collapsed and commodity prices were near all-time lows in real terms.

“Xstrata’s first half earnings reflect these adverse market conditions.”

Despite the fall in profits, Xstrata intends to move ahead with its proposed “merger of equals” with Anglo American, believing it will benefit shareholders from each company and allow the new entity to compete with larger industry rivals.

“The value proposition of putting these two companies together is highly compelling and I continue to believe that it is in the best interests of Xstrata and Anglo American shareholders to examine the potential to create the value we have identified,” Davis said.

“The combination would create a new major diversified mining powerhouse, able to compete more effectively with our larger peers including BHP Billiton, Rio Tinto and Vale.”

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