Xstrata profits down 33%, defers $1 bn investments

Swiss mining giant Xstrata reported Tuesday a 33 percent drop in first half-year net profit to $1.9 billion (1.5 billion euros), owing mainly to a downturn in commodity prices. Operating profit slumped 43 percent to $2.4 billion while sales dropped 7.0 percent to $15.6 billion from January to June, the company said in a statement. "Our financial performance in the first half of the year reflected a cyclical downturn in commodity prices and the transition to our next generation of lower cost mines," Xstrata chief executive Mick Davis said. In addition, Davis pointed to rising costs associated with older mines, although the group reduced spending by $105 million in the first half of the year and anticipates making total savings of $390 million by the end of 2012. The group, which is to merge with commodities trader Glencore before the year is out, also announced that it was deferring investments totalling $1.0 billion to next year. "Just as in the previous cyclical downturn of late 2008 and early 2009, we are once again taking pre-emptive action to ensure our business remains competitive and to defend margins," Davis said. The Xstrata chief announced "significant reductions in real unit costs in every commodity" and said the company was well-placed to benefit from rising demand for commodities in emerging economies.