Rio Tinto 1st Half Net Profit More Than Doubles
03 August 2016 - 04:56PM
Dow Jones News
By Rhiannon Hoyle
SYDNEY--Rio Tinto PLC (RIO.AU) said its first-half net profit
more than doubled on a year ago when write-downs and exchange rate
and derivative losses hurt its bottom line.
Weak prices for metals and bulk commodities pressured margins
for the Anglo-Australian mining company, though, and it reported a
47% fall in underlying earnings and a 58% decline in its interim
dividend.
In February, as the miner reported an annual loss for 2015, Rio
Tinto abandoned a policy of keeping investor payouts stable or
rising, saying it could no longer justify the commitment when the
outlook for the global economy was worsening and that future
dividends would be more closely linked to market conditions.
On Wednesday, Rio Tinto said it would pay shareholders a
dividend of US$0.45 per share, down from US$1.075 a year
earlier.
The miner reported a net profit of US$1.71 billion versus a
profit of US$806 million in the same period of 2015--when it posted
noncash exchange-rate and derivative losses of US$1.3 billion--and
underlying earnings of US$1.56 billion down from US$2.92 billion.
That was in line with the median forecast of seven analysts
surveyed by The Wall Street Journal.
Rio Tinto said net debt fell 6% to US$12.9 billion compared to
the end of December.
Global miners including Rio Tinto have been racing to reduce
spending and borrowings accumulated amid a China-led commodities
boom after prices plunged to multiyear lows. While prices for mined
commodities including iron ore, coal and copper improved during the
early months of 2016, executives have projected markets could
remain depressed and volatile for years to come.
"Growth in China has stabilized, but it is on a long transition
path of slower and less commodity-intensive growth," said Chief
Executive Jean-Sébastien Jacques, who took the helm of the miner in
early July. "Meanwhile the global economy seems stuck in a subdued
low-productivity growth pattern which would indicate that continued
caution is required for the second half of 2016."
Rio Tinto has been doubling down on its push to cut costs in the
business that has included increasing utilization of trucks and
plant, reworking deals with suppliers and a freeze on wages. The
company reduced annual operating costs by US$600 million in the
first half, it said.
Rio Tinto previously said it aimed to reduce costs by a further
US$1 billion in 2016, followed by a similar level in 2017. The
miner drove down annual costs by US$1.3 billion in 2015. Former
Chief Executive Sam Walsh earlier this year described the targets
for this year and next as ambitious, but achievable.
Earnings in its biggest division, iron ore, fell by 17% amid a
downturn in prices for the steelmaking commodity, underpinned by a
rise in global mine supplies.
Rio Tinto, one of the world's top iron-ore suppliers alongside
Brazil's Vale SA, increased its own shipments of iron ore from
Australia by 8% on-year during the period. The company has spent
billions of dollars expanding its iron-ore mines and infrastructure
in Australia in recent years.
Amid the slump in markets, Rio Tinto has become somewhat of an
outlier in its pursuit of production growth, with projects
including an underground copper mine in Mongolia and a bauxite mine
in Australia under way. On Wednesday, it reiterated a forecast that
it will spend about US$4 billion on major projects in 2016.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
August 03, 2016 02:41 ET (06:41 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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