Sydney: Mining giant Rio Tinto yesterday reported a 82 percent drop in its first-half net profit as a supply glut and slowing demand in key market China sent iron ore prices plunging.
The Anglo-Australian firm, which reports in US dollars, said net profit was $806m in the six months to June 30 from $4.4bn in the same period last year.
Its underlying profit, the measure preferred by the company, was down 43 percent to $2.9bn. “This is a robust set of results, given the tough operating environment,” Rio Tinto chief executive Sam Walsh said in a statement.
Walsh said the miner’s focus on cost-cutting had reaped savings of $641m in the six months, and it was now increasing its target to $1bn. The world’s second-largest miner is heavily reliant on iron ore, a crucial steel-making component, and added that it was expecting capital expenditure to decline to about $5.5bn this year and be around $6bn in 2016.
It cut capital expenditure by $1.4bn for the first half to $2.5bn.
Rio declared an interim dividend of 107.5 cents, a 12 percent increase from 2014. Its shares closed 1.08 percent higher at Aus$53.55 ahead of the results.
The company’s underlying earnings for iron ore slumped 55 percent to $2.1bn from $4.7bn. Copper earnings sank 40 percent to $393m while aluminium soared 113 percent to $793m.
Diamonds and other minerals were broadly unchanged, slipping one percent to $75m.
“It’s definitely strong all round and ahead of expectations on all key metrics,” CLSA’s head of resources research Andrew Driscoll said of the results, despite the profit slump.
“But it hasn’t delivered the same surprise perhaps that the full-year result did as the market has become more expecting of increases in cost-out targets and reductions in (capital expenditure).”
AFP
