* Books $8.1 bln in impairments, $7.7 bln of that from
* First-half adjusted EBITDA $6 bln vs analyst consensus
* Metals and energy lift marketing, agricultural disappoints
* Search for chairman continues
* Hopes to secure Las Bambas sale by year-end
By Clara Ferreira-Marques
LONDON, Aug 20 (Reuters) - Glencore Xstrata took a
$7.7 billion hit on mining assets acquired in its takeover of
Xstrata, drastically reducing the value of projects in the early
stages of development.
The diversified trader and miner announced the writedown as
it posted a 9 percent drop in core first-half profit in its
first results since completion of a 16-month acquisition that
coincided with falling commodity prices across the industry.
Miners have been pummelled by billions of dollars in
writedowns since the start of 2013, with cooling mineral prices
and demand prospects denting the value of mining projects and
In absorbing the impact of a weaker market, Glencore wiped
out all the goodwill value it had provisionally allocated to
Xstrata's mines at the time of the merger.
"We just had to value the business with a blank sheet of
paper," Chief Financial Officer Steven Kalmin said, adding that
the group had taken a "fairly conservative approach".
Glencore did not break down the impairment, but much of the
hit is expected have been down to early-stage projects and
so-called greenfield operations - mines built from scratch,
which have long been unpopular with Glencore management. These
include the $5 billion nickel operation Koniambo in New
The company dismissed the idea that the writedown
demonstrated poor timing or an excessive price paid in the
all-paper deal for the Xstrata shares it did not already own.
"We took a decision at the time to pay that ratio based on
what we knew on that day, and we were happy with it," Chief
Executive Ivan Glasenberg said. "We do believe we are going to
get it back in time and we do feel comfortable with the deal."
Glencore itself was not immune to falling nickel prices and
took a $452 million hit on its legacy Murrin Murrin operation in
Australia. Nickel, used in stainless steel, is trading at almost
a quarter of pre-crisis highs hit in 2007.
"Equity markets have already de-rated the value of mining
assets - share prices are down by a lot since last year, and the
book value of Xstrata did not reflect that," Jefferies analyst
Chris LaFemina said.
"Other companies had taken writedowns, but Xstrata had not
done that yet. It is really just catching up with the industry."
Asset sales are also expected to come out of Glencore's
review of Xstrata's assets, but Glasenberg said he was in no
rush to sell even the unpopular greenfield projects.
Glencore has already flagged the start of a sale process for
$5 billion-plus Peruvian copper mine Las Bambas - demanded by
Chinese antitrust regulators - and said on Tuesday that interest
was "very strong", mostly from Chinese suitors.
Glencore hopes to close that sale by the end of the year.
Shares in Glencore were down 1.4 percent at 1340 GMT,
underperforming a 0.8 percent drop in the wider sector, as metal
prices fell and miner BHP Billiton missed its forecasts.
Glencore was hit by weaker prices in the first half, with
adjusted core profit - earnings before interest, tax,
depreciation and amortisation (EBITDA) - down 9 percent at $6
billion, at the higher end of analyst estimates.
Improved output from mining operations in copper and coal
helped to cushion the full impact of weaker prices, which took
$2.2 billion off Glencore's operating profit.
It also benefited from profit from its trading arm, with
adjusted operating profit for marketing alone rising 6 percent
to $1.2 billion as metals and profits from trading oil and coal
offset the impact of a weaker agricultural contribution.
There was a 39 percent drop at its industrial arm, which
includes the group's mines.
Net earnings came in at a little more than $2 billion, down
39 percent on the same period last year.
Glencore's completion of the Xstrata takeover three months
ago ended a marathon deal for Glasenberg, whose team now faces
the challenge of digesting its biggest acquisition.
The company said that progress on integration was exceeding
expectations, with achievable cost savings likely to be
"materially" above previous guidance of $500 million a year.
It is still seeking a new chairman, a role currently held by
former BP boss Tony Hayward in an interim capacity. Glasenberg
said Hayward was a candidate, but Glencore will struggle to
appoint the chief executive of a listed company - Hayward is
head of oil firm Genel - to that full-time role.
Glasenberg brushed off questions over his own future at
Glencore, where he is also the largest single investor, telling
analysts he was "not going anywhere".
Glencore is expected to update the market on the
integration, progress and associated cost-savings on Sept. 10.