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In the initial assessment of cost-cutting and synergies between Glencore and Xstrata, it was hoped that the two companies combined would be able to save around $500 million on an annual basis. This has now been revised to in excess of $2 billion, with $450 million saved in marketing, $175 million from financing and $1.4 billion from cost savings. Traders and investors had certainly not factored in that savings would end up being four times the original $500 million estimate.
Today’s news will give the company a boost early in its 2014 accounting year and with plans further down the road to cut expenditure in 2015 by $3.5 billion, Glencore Xstrata will hope to turn around market pessimism following the $7.7 billion write-down of Xstrata assets.
Since the early July lows around 256p the company has seen a return to form and the shares have climbed back above the 200-day moving average. The miner will need to add almost another 20% to challenge the year’s highs, but today’s move is a step in the right direction.