Glencore Xstrata PLC Drops Merger Name

Glencore has decided to drop Xstrata and is now simply Glencore. It was only in May of last year, 2013, that this trading and mining giant came together through the merger of Glencore and Xstrata.

The decision to execute this change was made by the company’s shareholders during the annual general meeting. The merger was initially set up and portrayed as a “merger of equals”. However, the dropping of Xstrata points to the situation as having been something more similar to a discreet and somewhat gradual takeover.

Of particular interest in regards to the dropping of Xstrata is the dogged pursuit of increasing profitability undertaken by Chief Executive Ivan Glasenberg. Dating back to the merger which equated to a mammoth $US44.6 billion tie-up, Glasenberg has endeavored to drastically reduce spending and temporarily hold off on certain; a majority of which were brought to the table by Xstrata. Coming off the tail end of the global commodities boom has proven to create a modicum of additional pressure to ensure the profitability of the company. What’s of further interest is that the Xstrata component of the company has been the one to suffer from the most cuts. Some analysts believe this to be a result of by Chief Executive Ivan Glasenberg’s coal trading background influencing the decisions behind the way he’s been aggressively remolding company.

“We have reduced a large amount of the costs since acquiring Xstrata,” commented Glasenberg. This was part of a speech to shareholders at which point he outline his success at improving efficiencies that represented $US349 million. “The savings now, we have increased them by another $US349m since our last announcement, and its taking the cost savings in view of the merger, which will all be coming into place by the end of 2014, to an amount of $US2.4bn.”

Glasenberg went on to comment that, “We are not big players in iron ore market ...prices are coming off because we see massive expansions coming there from our major competitors. A large amount of them have these brownfields expansions, they continue to expand ... and put more supply into the market.”

It will be interesting to track Glencore’s progress with their new lighter weight form and steadily improving efficiency and cost cutting.