Rio Tinto comes close to doubling their existing first-half profitAugust 4, 2017
Rio Tinto have come close to doubling their first-half profit thanks to a resurgence in demand from China. Despite this positive development, the market has still been left somewhat disappointed.
The multinational mining group announced an interim underlying profit of $US3.94 billion, which is a $2.01 billion increase from last year. However, this increase did not meet the market consensus forecast of $2.15 billion.
Rio Tinto were able to exceed expectations in other areas by delivering a stronger flow of dividends. The interim dividend jumped to a record 110 US cents per share, compared to last year’s 45 US cents paid.
They also expanded their existing $628 million share buy-back by $1.25 billion.
However, investors were left unimpressed when Rio’s shares fell 2.6 per cent in early London trade, making them the second biggest fall among stocks in the FTSE 1000.
Rio Tinto looked to the success of their various divisions to help redeem themselves.
Iron ore, Rio’s biggest division, boasted underlying earnings of $4.1 billion. This was an increase of almost 90 per cent.
Their once-struggling aluminium division made a considerable contribution as well, with earnings doubling to $950 million.
However, Rio’s clear standout performer was the coal-dominated energy and minerals business. These earnings increased by almost 700 per cent to $820 million.
Unfortunately, not all of Rio Tinto’s divisions proved to be as successful.
Rio’s copper and diamonds division disappointed for the second year in a row. Poor prices paired with extended industrial action at Rio’s giant Escondida mine in Chile sealed the division’s fate. It consequently experienced a further 23 per cent down from last year’s effort.
Through this adversity, Rio Tinto remains optimistic. They have hit their target of cutting costs by $2.6 billion six months ahead of schedule, and their net debt was lowered by $2.5 billion. Shareholders can also expect a higher level of return in the coming six months. Rio is skewing its dividend payouts to full-year results and are expecting the inclusion of the $3.4 billion proceeds from Hunter Valley Coal and Allied assets.