Xstrata Plcannounces preliminary results for year ended 31 Dec’ 2009.
Operating EBITDA of US$7bn despite unprecedented destocking in the first half and lower demand and average prices in 2009 as a result of the global downturn
Rapid and comprehensive response to the downturn delivered real cost savings of US$501mn, representing a 5% reduction in the operating cost base
Accelerated transformation of Xstrata Nickel operations and restructuring and expansion of Xstrata Zinc’s Australian operations reduced average C1 nickel and zinc costs by 33% and 25% respectively
Operational cash flow of over US$5.3bn, with stronger second half cash generation of US$3.7bn
Dividend of 8 cents per share proposed for payment in May 2010, reflecting the Board’s confidence in Xstrata’s near and medium term prospects and financial position
Gearing reduced to 26% from 40%, as a result of robust cash flows and a successful rights issue in the first quarter to repay a net US$3.7bn of debt
Over US$8bn of projects currently in construction, with a further US$9bn of projects due to be approved in 2010, providing Xstrata with significant volume growth to benefit from continued robust demand from Asian and other industrialising economies
Mick Davis, Xstrata plc Chief Executive Officer commented:
“Our businesses’ rapid and comprehensive response to the downturn in the early part of the year enabled a creditable result in extremely challenging markets in 2009. It has been matched by a swift resumption of investment in key growth projects that will drive substantial volume growth and reductions in operating costs, marking the next stage of Xstrata’s transformation.
“In my opinion, the medium term outlook for commodity demand remains very promising, driven by the ongoing urbanisation and industrialisation of high-growth, populous economies, with China and other industrialising countries taking active steps to rebalance their economies towards domestic consumption-led growth over the next decade. There are a number of risks that must be carefully managed on the path to a sustainable OECD recovery. However, many of the short- and medium-term leading indicators we monitor are showing signs of recovery, notwithstanding the fact that credit expansion in OECD economies remains sluggish. In time, the return to a more normalised level of growth of OECD economies will add further impetus to the growth of the global economy and commodity demand.
“Against this background, the shift of emphasis in Xstrata’s strategy to a phase more dominated by organic growth is timely and coincides with our view that the supply of many commodities will struggle to keep pace with demand growth.
“Xstrata has been well positioned over the last few years to benefit in this environment. The investments of recent years have delivered a diversified portfolio with the scale and capabilities to develop major new mines. As we enter into this next phase of Xstrata’s transformation, I am confident that the Group’s prospects remain very encouraging.”