Highlights
¡ Despite economic downturn, EBITDA was $9.7 billion, 11% lower than the record profitability achieved in 2007
¡ Record annual production of platinum, coking coal, thermal coal, mined nickel, zinc in concentrate and lead in concentrate
¡ Record thermal and coking coal and ferrochrome contracts settled during 2008
¡ Real cost savings of $184 million achieved from productivity improvements, despite ongoing cost pressures
¡ Successful commissioning and ramp up of new, lower cost production and integration of Resource Pacific, Jubilee and Tahmoor acquisitions
¡ Refinancing of $5.5 billion of debt means no significant refinancing requirements until 2011
¡ Pro-active and decisive response to financial crisis: curtailment or suspension of marginal operations; substantial reductions in capital expenditure; and significant operating cost savings
Mick Davis, chief executive officer commented:
“Despite the sudden and severe impact of a global banking crisis that dramatically slowed economic growth from the third quarter and led to a precipitous fall in commodity prices, Xstrata’s businesses achieved a highly creditable result in 2008, generating EBITDA of $9.7 billion, 11% lower than the record profitability achieved in 2007. Earnings per share of $4.90 were 13% lower than the prior year. The impact of markedly lower commodity prices in the final quarter was largely offset by the benefit of record thermal and coking coal and ferrochrome contracts settled during the year, together with robust copper prices for the majority of 2008.
“A strong operating performance at Xstrata’s coal, alloys, nickel and zinc operations, the successful integration of the acquired Tahmoor and Resource Pacific coal operations and Jubilee nickel assets, the commissioning of the Perseverance zinc mine and Elandsfontein PGM operations led to record production across a number of the Group’s key commodities. Copper volumes increased by 16% in the second half compared to the first half, when lower grades and a number of one-off operational difficulties reduced volumes.
“Our businesses have acted promptly and decisively in response to sudden lower demand for key commodities and conserve cash during a period of heightened uncertainty by:
suspending or closing higher cost or unprofitable production;
aligning production with reduced demand;
redoubling efforts to drive down operating costs and tightly control working capital; and
substantially reducing discretionary sustaining and expansionary capital expenditure.
“The financial crisis has produced a marked lack of visibility into short term economic activity, and as such, the outlook for 2009 is uncertain. Investment in infrastructure is set to increase during 2009 and 2010, reflecting the significant stimulus packages announced by many major governments which prioritise commodity-intensive investment in many cases.
“Xstrata continues to operate a suite of cash generative operations across a broad range of geographies, with excellent growth potential and a strong competitive position in each of its key commodity markets. Against a background of strong medium to longer term fundamentals for the Group’s products and near-term actions to secure Xstrata’s financial position, I am confident that the prospects for Xstrata remain very encouraging.”
¡ Despite economic downturn, EBITDA was $9.7 billion, 11% lower than the record profitability achieved in 2007
¡ Record annual production of platinum, coking coal, thermal coal, mined nickel, zinc in concentrate and lead in concentrate
¡ Record thermal and coking coal and ferrochrome contracts settled during 2008
¡ Real cost savings of $184 million achieved from productivity improvements, despite ongoing cost pressures
¡ Successful commissioning and ramp up of new, lower cost production and integration of Resource Pacific, Jubilee and Tahmoor acquisitions
¡ Refinancing of $5.5 billion of debt means no significant refinancing requirements until 2011
¡ Pro-active and decisive response to financial crisis: curtailment or suspension of marginal operations; substantial reductions in capital expenditure; and significant operating cost savings
Mick Davis, chief executive officer commented:
“Despite the sudden and severe impact of a global banking crisis that dramatically slowed economic growth from the third quarter and led to a precipitous fall in commodity prices, Xstrata’s businesses achieved a highly creditable result in 2008, generating EBITDA of $9.7 billion, 11% lower than the record profitability achieved in 2007. Earnings per share of $4.90 were 13% lower than the prior year. The impact of markedly lower commodity prices in the final quarter was largely offset by the benefit of record thermal and coking coal and ferrochrome contracts settled during the year, together with robust copper prices for the majority of 2008.
“A strong operating performance at Xstrata’s coal, alloys, nickel and zinc operations, the successful integration of the acquired Tahmoor and Resource Pacific coal operations and Jubilee nickel assets, the commissioning of the Perseverance zinc mine and Elandsfontein PGM operations led to record production across a number of the Group’s key commodities. Copper volumes increased by 16% in the second half compared to the first half, when lower grades and a number of one-off operational difficulties reduced volumes.
“Our businesses have acted promptly and decisively in response to sudden lower demand for key commodities and conserve cash during a period of heightened uncertainty by:
suspending or closing higher cost or unprofitable production;
aligning production with reduced demand;
redoubling efforts to drive down operating costs and tightly control working capital; and
substantially reducing discretionary sustaining and expansionary capital expenditure.
“The financial crisis has produced a marked lack of visibility into short term economic activity, and as such, the outlook for 2009 is uncertain. Investment in infrastructure is set to increase during 2009 and 2010, reflecting the significant stimulus packages announced by many major governments which prioritise commodity-intensive investment in many cases.
“Xstrata continues to operate a suite of cash generative operations across a broad range of geographies, with excellent growth potential and a strong competitive position in each of its key commodity markets. Against a background of strong medium to longer term fundamentals for the Group’s products and near-term actions to secure Xstrata’s financial position, I am confident that the prospects for Xstrata remain very encouraging.”
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