Coal boosts Xstrata profits

SWISS mining major Xstrata has posted a 2010 operating profit of $US7.65 billion ($A7.54 billion), up 75% on 2009, driven by a strong year of production.
Coal boosts Xstrata profits Coal boosts Xstrata profits Coal boosts Xstrata profits Coal boosts Xstrata profits Coal boosts Xstrata profits

Image courtesy of Xstrata.

Kristie Batten

Operating earnings before interest, tax, depreciation and amortisation were up 53% to $10.38 billion, while revenue increased by 34% to $30.5 billion.

Attributable profit including exceptional items soared 609% to $4.6 billion, while earnings per share jumped 69% to $1.77.

Xstrata achieved real cost savings of $541 million, which was the ninth consecutive year of cost reductions, while total capital expenditure was $6.1 billion.

Gearing reduced to 15% from 26% and net debt by 38% to $7.6 billion.

Xstrata chief executive Mick Davis said the company’s strong operational performance last year, which included record production of mined and refined nickel, coking coal and semi-soft coking coal, had contributed to the strong result.

“The opportunities seized during the difficult market conditions of 2009 to restructure higher cost businesses, improve productivity and strengthen the balance sheet, together with ongoing initiatives to improve the quality and value of our underlying business, positioned Xstrata to benefit from a more favourable operating environment in 2010,” he said.

“Consistent annual cost savings at each reporting period since our IPO nine years ago have transformed the cost competitiveness of our commodity businesses, each of which is now positioned in the lower half of its respective industry cost curve.”

Xstrata was in a growth stage, driven by its pipeline of development projects.

“The scale and number of projects being developed by our teams today represent a step change in our growth strategy and will transform Xstrata’s volumes and unit costs profoundly,” Davis said.

“Our growth plans will see us progressively deliver substantial additional volumes of key commodities into fundamentally constrained commodity markets.”

Davis said the company was confident the US economy would continue its recovery.

“In the eurozone, January data for the manufacturing and services industries reveal the fastest pace of expansion in nine months,” he said.

“Developing economies and China in particular appear set to continue to achieve wholly respectable high single-digit growth rates in 2011, albeit below 2010 levels due to the impacts of inflation and the proactive actions by governments to contain economic growth to within manageable levels.

“The next stage of our transformation is now well underway, to exploit the various options embedded within our portfolio to create value through organic growth.”

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