* Core profit at $13.1 bln beats consensus of $12.3 bln
* Minmetals is preferred bidder for Las Bambas copper mine
* Could covert loan to Russneft into equity stake
* New chairman to be appointed by end of May
* Shares up more than 2 pct
By Silvia Antonioli
LONDON, March 4 Commodities trader and mining
group Glencore Xstrata Plc has raised its estimate of
the savings it expects following last year's Xstrata
acquisition, as it focuses on cost-cutting and targets higher
returns for shareholders.
After being hammered by billion of dollars in writedowns as
falling metal prices dented their assets' value, miners have
worked to trim costs and tidy their balance sheets.
The group, which completed the record-breaking acquisition
of Xstrata in May, was also victim of souring sentiment in the
mining sector and in August announced a $7.5 billion impairment
on the assets it inherited from the miner.
But the company, whose interests range from a 44 percent
stake in the Collahuasi mine in Chile, one of the world's
largest copper mines, to a trading hub in its hometown of Baar,
Switzerland, has identified cost and efficiency savings from the
acquisition of more than $2.4 billion.
That compares with guidance of $2 billion given late last
The full benefit of the savings will be realised this year,
the company said as it posted a forecast-beating core profit in
the first set of annual results since the creation of the
enlarged group in May 2013.
"That's a figure that we will continue to work on," Chief
Executive Ivan Glasenberg said. "We believe there are more cost
savings and synergies to be obtained."
The extra savings are related mainly to reduced costs of
financing, procurement and a further headcount cull.
Glencore said its annual adjusted earnings before interest,
tax, depreciation and amortisation (EBITDA) totalled $13.1
billion, above a company-provided analyst consensus of $12.3
The beat was driven by a solid performance by its trading
arm, offsetting a slight decline at its mining division due to
weaker commodity prices.
Copper was the group's best performing commodity, with
higher volumes and lower costs offseting a 7 percent price fall.
The red metal accounted for 42 percent of Glencore's
earnings before interest and tax (EBIT) in 2013, up from 30
percent in the first half of the year.
"Today's results reinforce our thesis for Glencore Xstrata,
predicated on its high copper exposure and the increasing
benefit of its high grade African copper assets. We reiterate
our 'outperform' rating," Bernstein Research analysts said in a
After the $7.5 billion writedown, Glencore had a net loss of
$7.4 billion. It said it would pay an annual dividend of $0.165,
up 5 percent from a year earlier and ahead of analysts' forecast
of $0.152, according to Thomson Reuters I/B/E/S.
DEAL OR NO DEAL
The company said it had selected China's Minmetals as
preferred bidder for the sale of its Las Bambas copper mine in
Peru, which sources have said could fetch about $5 billion.
Glencore agreed to sell Las Bambas to secure approval from
China's competition authorities for its takeover of Xstrata. But
the sale, initially expected to be concluded by the end on 2013,
has dragged on due to some of the bidders requesting further due
diligence, Glasenberg said.
Now it is all about finding an agreement with the preferred
bidder on price. The company also said it would allocate part
the proceeds of the sale to repay its debt, which stood at $35.8
billion in 2013, against $29.5 billion in 2012.
Another portion could be invested in new assets or returned
to shareholders. "How much that proportion may be will depend on
the investment climate," Chief Financial Officer Steven Kalmin
The group will continue to look for potential acquisitions
but said most of the assets put up for sale by large miners such
as Rio Tinto and BHP Billiton so far did not
meet its return expectations.
"That stuff is not so juicy," Glasenberg said. "The mining
companies are not desperate to sell at the moment."
In the oil sector, Glencore could convert a minimum of $900
million of an outstanding loan to Russneft into an equity stake
in the Russian oil company. Russneft has already repaid $1.2
billion of its debt with Glencore.
Glencore is still looking for a replacement for temporary
chairman and former BP boss Tony Hayward. Glasenberg said
a few candidates have been short-listed a new chairman should be
appointed by the end of May.
Shares in Glencore were up more than 2 percent by 1313 GMT,
outperforming a 0.4 percent rise in the mining sector