LONDON--Commodities titan Glencore International PLC (GLEN.LN)
Tuesday said its projects are ramping up according to plan, but
cautioned that it doesn't expect a material improvement in overall
market conditions in the near term as first-half earnings fell
largely due to lower commodity prices.
The FTSE-100 miner, which is in the midst of a merger of equals
with Anglo-Swiss miner Xstrata PLC (XTA.LN), made no mention of the
terms of the deal, despite pressure from some of Xstrata's largest
shareholders for a improvement in the share-swap ratio.
Glencore's CEO Ivan Glasenberg said: "Glencore has continued to
deliver strong financial results supported by a solid performance
in marketing....Looking forward, we neither anticipate nor assume
any material improvement in overall market or economic conditions
in the near term."
The Switzerland-based company reported a 17% year-on-year rise
in revenue to $108.96 billion for the first half of 2012, but a 24%
drop in earnings before interest, taxes and exceptional items, or
adjusted Ebit, to $2.51 billion. The figure beat analysts'
expectations of $2.40 billion, according to a consensus forecast
complied by the company.
Net income attributable to equity shareholders fell 8%
year-on-year to $2.28 billion.
Earnings dropped largely due to falling commodity prices, which
caused its adjusted Ebit from industrial activities to fall 32% to
$1.39 billion. Adjust Ebit from its marketing activities dropped by
a more muted 11% to $1.12 billion, with metals, minerals and
agricultural segments performing strongly. Energy results fell
below the relatively strong performance in the first half of last
year.
The company declared an 8% rise in its interim dividend to
$0.054 a share, which it said reflected confidence in its commodity
mix, ramp-up of brown field projects and the strength of its
balance sheet.
Glencore is currently in the throes of a merger of equals with
Xstrata to create a diversified mining juggernaut with market
capitalization of $66 billion. The deal, however, is in danger of
collapsing after Xstrata's second largest shareholder, sovereign
wealth fund, Qatar Holding LLC, surprised market participants in
June by calling on Glencore to raise its offer of 2.8 Glencore
shares for every Xstrata share to a ratio of 3.25.
Qatar Holding, alongside another five shareholders who also
believe the current share-swap ratio isn't attractive enough, own a
combined 15.8% of Xstrata's shares. Under the terms of the deal,
just over 16% of Xstrata's shareholder base need to vote against
the deal on Sep 7 in order to block it.
Glencore's shares closed Monday down 0.6% at 354 pence a share,
resulting in a market capitalization of GBP24.49 billion.
Glencore's shares are down nearly 10% since the beginning of the
year.
-Write to Alex MacDonald at alex.macdonald@dowjones.com
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