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)

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