WEAKER growth in China’s powerhouse economy and higher risks around big projects have forced Glencore Xstrata to take a near-£5 billion hit on its commodities and mining mega-merger.
Metals prices fell 15 per cent on average during the first six months of the year on global oversupply, the company said, as it booked a $7.7bn (£4.9bn) impairment charge on the goodwill in Xstrata’s mining business.
But the group, which combined Xstrata’s mining operations with Glencore’s commodity trading expertise in May, said the global economy is making “slow but steady progress”, while it continues to slash costs.
Commodity price “pessimism” drove underlying earnings in its mining business 39 per cent lower to $2bn during the first six months of the year, but its trading arm saw profits before tax and interest increase 6 per cent year-on-year to $1.2bn.
Across the group, underlying earnings dived 28 per cent to $3.2bn from $4.4bn a year earlier.
The merger aimed to provide a buffer against volatile commodity prices through its trading business, but revenues dipped 2 per cent to $121.4bn.
Worries over slowing growth in emerging economies such as China and Brazil have weighed heavily on commodity prices in recent months as traders fret over weaker demand.