Mega-Miner Merger Delayed as Profits Slump at Glencore International and Xstrata

LONDON -- Shares of Glencore International  (LSE: GLEN  ) gained 5 pence to 375 pence and the shares of Xstrata  (LSE: XTA  ) gained 20 pence to 1,120 pence during early London trading this morning despite both companies reporting reduced profits for 2012.

The FTSE 100 members, which agreed to merge last year, both suffered from declining commodity prices. Glencore recorded adjusted operating profits down 17% to $4.5 billion while Xstrata revealed adjusted operating profits down 43% to $4.8 billion. However, both firms managed to lift their dividends. Glencore raised its payout by 5% to $0.16 per share while Xstrata hoisted its payout by 14% to $0.40 per share.

Glencore also confirmed the completion of its merger with Xstrata would be delayed by another month. The merger had been expected to complete by the end of 2012, but protracted regulatory processes in South Africa and China have since pushed back the date to April 16. The merger was unveiled in February last year.

Ivan Glasenberg, Glencore's chief executive, said:

2012 was a year of significant achievement for Glencore. Despite the challenging environment faced by the mining industry, Glencore delivered organic growth in its industrial businesses which complemented a robust performance in its marketing operations.

Mick Davies, chief executive of Xstrata, said:

Our businesses faced difficult operating conditions during the year, as the combined impact of falling commodity prices, ongoing inflationary pressure on operating costs and continued strong producer currencies relative to the U.S. dollar put pressure on our margins.

Based on today's figures, both Glencore and Xstrata currently trade at about 13 or 14 times profits.

Of course, whether those P/E ratings, this morning's results, the protracted merger process, and the general outlook for the mining sector all combine to make either Glencore or Xstrata a "buy" remains up to you. However, if you already own Glencore or Xstrata shares and are looking to diversify, this free special report covers a tip-top growth opportunity with operations far removed from the mining sector.

Indeed, the blue chip in question has lifted its earnings per share by 44% since 2009, owns subsidiaries that might carry considerable hidden value, and has just been declared "The Motley Fool's Top Growth Stock for 2013."

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9/23/2016 12:08 PM
GLEN $206.51 Down -1.39 -0.67%
Glencore CAPS Rating: No stars
XTA $0.00 Down +0.00 +0.00%
Xstrata CAPS Rating: No stars