Glencore Xstrata Plc (GLEN), the global commodity trader and metals producer run by billionaire Ivan Glasenberg, said profit advanced 20 percent last year after copper output increased and costs fell.
Adjusted net income rose to $3.67 billion, from $3.06 billion, the Baar, Switzerland-based company said today. It reported a 23 percent drop in pro-forma adjusted net income of $4.58 billion, described by Citigroup Inc. as an “exceptionally strong” result, exceeding its $4.01 billion estimate.
Glasenberg, the company’s largest shareholder, completed the $29 billion takeover of Xstrata Plc in May last year to add coal, copper, zinc and nickel mines to Glencore’s trading empire. The transaction is expected to generate cost savings of as much as $2.4 billion this year, Glencore said today. That compares with an estimate of $2 billion in September.
“A very strong set of results and a strong delivery on costs coupled with the potential delivery for more synergies to be realized during 2014 is likely to be well received by the market,” Heath Jansen and Jatinder Goel, analysts at Citigroup who have a buy rating and a 370 pence price estimate, wrote today in a report.
The stock rose for the first time in nine days in London trading, advancing as much as 3.5 percent, and was 2.2 percent higher at 333.55 pence at 9:21 a.m. The FTSE 350 Mining Index gained 0.9 percent.
“We continue to see healthy demand growth in all our key commodities, underpinned by the long-term trend of urbanization in emerging markets and parts of the developed world returning to trend growth,” Glasenberg, who owns an 8.3 percent stake, said in a statement.
Glencore reported a full-year dividend of 16.5 cents a share, 4.8 percent higher than 2012. Net debt increased 22 percent to $35.8 billion.
Copper production climbed 26 percent to 1.5 million metric tons last year, with gains recorded in Africa and Chile, the statement shows. Higher output and “improved cost management” mitigated the effect of weaker commodity prices, it said.
The world’s biggest exporter of power-station coal wrote down the value of assets acquired in the Xstrata takeover by $7.7 billion in August to reflect “the broader negative mining-industry environment.” It reported a full-year net loss of $7.4 billion on the writedowns.
“2014 will be the year for the company to deliver targeted cost savings, improve the balance sheet and prove the returns-focused approach,” Credit Suisse Group AG wrote in a Feb. 27 report. “Successful execution here will allow the company to increase cash returns and capitalize on growth opportunities further down the line.”
The world’s biggest mining companies including BHP Billiton Ltd. and Rio Tinto Group are reining in spending. A decade-long boom in metal prices has waned after producers boosted supply and China’s economy expanded more slowly, prompting the companies to cancel projects and curb expansions.
Glencore reduced its capital-spending budget for the three years through 2015 by $3.5 billion from $29 billion, it said in September. “Sustaining” annual spending is then estimated at $4 billion, compared with an earlier forecast of $4 billion to $5 billion, it said at the time.
Analysts expect China, the mining industry’s biggest customer, to grow at the slowest pace in 24 years in 2014. The ruling Communist Party is trying to balance restraining a credit boom while maintaining expansion above Premier Li Keqiang’s 7 percent “bottom line” to sustain employment.
Glencore is about 25 percent owned by management. Glasenberg reaped a $173 million dividend for 2012 and a $182 million payout for last year.
Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director of Glencore Xstrata.
To contact the reporter on this story: Jesse Riseborough in London at firstname.lastname@example.org
To contact the editor responsible for this story: John Viljoen at email@example.com