Xstrata Half Year Profits Hit by Low Prices and Demand

4 August 2009 (Last Updated August 4th, 2009 18:30)

Swiss diversified mining group Xstrata reported a $1.6bn operating profit for the first six months of the year, 63% down on the corresponding period in 2008. The company blamed a sharp fall in demand and commodity prices in the second half of 2008 for the decline in its 2009 performance

Swiss diversified mining group Xstrata reported a $1.6bn operating profit for the first six months of the year, 63% down on the corresponding period in 2008.

The company blamed a sharp fall in demand and commodity prices in the second half of 2008 for the decline in its 2009 performance up until 30 June.

Operating EBITDA dropped by 51% to $2.8bn as average London Metal Exchange base metal prices fell by up to 57%, Xstrata said.

Xstrata CEO Mick Davis said the first half earnings reflect the adverse market conditions.

“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,” Davis 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.”

Low volumes as a result of the closure of unprofitable, high-cost operations has been mitigated to a large extent by the strong performance of thermal coal, mined nickel, zinc and copper, the company said.

Unit cost savings of $119m or 1.1% of the operating cost base were achieved in the first half of the year, according to Xstrata.