Weaker growth in China sees Glencore take £5bn Xstrata hit
Weaker growth in China's powerhouse economy and higher risks around big projects have forced Glencore Xstrata to take a £4.9bn hit on its commodities and mining mega-merger.
Metals prices fell 15% on average during the first six months of the year on global oversupply, the company said, as it booked a $7.7bn impairment charge on the goodwill in Xstrata's mining business.
But the group, which combined Xstrata's mining operations with Glencore's commodity trading expertise in May, said the global economy is making "slow but steady progress", while it continues to slash costs.
Commodity price "pessimism" drove underlying earnings in its mining business 39% lower to $2bn (£1.3bn) during the first six months of the year, but its trading arm saw profits before tax and interest increase 6% year-on-year to $1.2bn (£757m). Across the group, underlying earnings dived 28% to $3.2bn (£2bn) from $4.4bn (£2.8bn) a year earlier. Shares fell more than 3%.
The merger aimed to provide a buffer against volatile commodity prices through its trading business, but revenues dipped 2% to $121.4bn (£775bn).
Worries over slowing growth in emerging economies such as China and Brazil have weighed heavily on commodity prices in recent months.
Rival BHP Billiton also revealed a 22% slump in underlying annual profits, which fell to $21.1bn (£13.5bn) during the year to the end of June.