Synergies boost Glencore Xstrata

Global mining and futures commodity company Glencore Xstrata has updated markets on the benefits of the combined organisation following its first year since amalgamation.

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.

Glencore Xstrata plc (DFB) chart

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