LONDON Xstrata Plcs first-half financial results were hit by lower commodity prices, especially nickel and zinc, it said, noting that 2012 capital spending will be cut by $1 billion.
Operating profit attributable to Zug, Switzerland-based Xstrata totaled $2.34 billion for the six months ended June 30, down 42 percent from $4.04 billion in the same year-ago period, on attributable revenue that fell 6.9 percent to $15.05 billion from $16.16 billion.
Lower prices were "the major contributor to reduced profitability," chief executive officer Michael "Mick" Davis said.
"Inflationary pressures typically lag declining commodity prices, but we expect costs to moderate over time as a number of capital projects are delayed and lower commodity prices start to flow through to key inputs," he said.
Like other major miners, Xstrata is reviewing its spending plans amid uncertainty over the global economy and commodities prices.
"Following a review of our project pipeline, we have re-sequenced capital spending and deferred $1 billion of expenditure originally planned for 2012," the miner said, now pegging 2012 capital spending at $7.2 billion.
"Our 2013 budgeted spending will increase by $400 million, with $600 million deferred beyond that, without affecting the commissioning schedule of any of our approved projects," the company said.
Meanwhile, Xstrata Alloys operating profit fell 54.8-percent to $52 million from $115 million in the same comparison, on revenue that declined 24.1 percent to $753 million from $992 million.
The lower revenue was due to a fall in ferrochrome and platinum group metal prices, as well as lower sales volumes.
"Our operations were impacted by weak commodity demand, lower prices and double-digit inflation in key industry inputs, including energy and raw materials," Rustenburg, South Africa-based Xstrata Alloys said.
Xstrata Alloys, like most major ferrochrome producers, cut first-half capacity sharply and sold the electricity it saved back to state power supplier Eskom Holdings SOC Ltd. Ferrochrome output of 459,000 tonnes was down 21 percent from 581,000 tonnes a year earlier.
Ferrovanadium output fell 7 percent to 1.84 million kilograms from 1.98 million kilograms in the same comparison due to increased vanadium pentoxide demand from the aerospace industry, which left less available for conversion to ferrovanadium, the company said.
Vanadium pentoxide output fell 1.5 percent to 9.95 million pounds during the period from 10.09 million pounds a year earlier.