Metals slump hits Xstrata

4th Aug 2009 07:17

Miner Xstrata reaffirmed its belief in a merger with rival Anglo American as it revealed a steep drop in sales and earnings in the first half."The combination would create a new major diversified mining powerhouse, able to compete more effectively with our larger peers including BHP Billiton, Rio Tinto and Vale," said Xstrata chief executive Mick Davis.Operating profit at the diversified miner in the six months to June 30 fell to $1.67bn from $4.50bn over the same period the previous year as revenue slid to $9.87bn from $16.09bn.Xstrata said continuing strong coal prices helped to mitigate the impact of lower metals prices, demonstrating the positive benefits of its diversified portfolio. It will not pay a dividend at the interim period, but will resume payments 'at the earliest opportunity', the firm said.Davis remains cautious on the outlook for commodities.'As stock markets rebound and achieve significant gains, it would be tempting to believe that the world is returning to pre-financial crisis conditions,' he said.'However, until US consumers emerge from the current deep recession to resume expenditure and consumption in any meaningful way or domestic consumption in China of similar power emerges, I fear that this belief is somewhat premature.'