“Xstrata’s businesses delivered a
robust operating and financial
performance despite challenging
economic conditions.”
Mick Davis
Chief Executive
Key points
- Decisive actions by our commodity businesses saw Xstrata emerge from the recession in a stronger competitive position
- The fundamental restructuring of our nickel and zinc businesses successfully reduced operating costs and established a robust base for further growth
- Our next stage of growth and transformation will be delivered predominantly from the development of our organic growth projects
The dramatic and rapid slowdown in industrial production and destocking which began in late 2008 continued to exert a significant influence over Xstrata’s markets in 2009. From the nadir of the global economic slowdown in March, stimulus initiatives in most major economies, especially China, prompted a resurgence in global markets during the remainder of the year. Improving demand for commodities during 2009 was underpinned by investment in Asian infrastructure, which lessened the impact of a more anaemic response in OECD economies. Nonetheless, despite the improving trend, average commodity prices in 2009 were significantly lower than in 2008. The full benefit of rising prices in the second half was also partially offset by the negative impact of a progressively weaker US dollar in the last three quarters of the year against many producer currencies.
Against this challenging background, Xstrata’s businesses delivered a robust operating and financial performance, with a strong second half production and sales performance as market conditions improved. Overall the Group achieved earnings before interest, tax, depreciation and amortisation (EBITDA) of over $7 billion, net earnings of $2.8 billion, and strong operating cash flows of $5.3 billion. This solid result was achieved despite substantially lower commodity prices, and reflects the rapid and far-reaching actions taken by our commodity business management teams in response to the downturn. Real unit operating costs were reduced by some $501 million in 2009, representing over 5% of Xstrata’s operating cost base.
The Board’s increased confidence in the medium-term outlook for commodities and Xstrata’s encouraging prospects and financial position have enabled the resumption of dividend payments, with a proposed final dividend of 8 cents per share to be paid to shareholders on the record at 23 April 2010.
