Rio Tinto (RIO) reported a 41 per cent decline in operating profit for the first six months of the year, while a $1.4bn (£897m) charge on US dollar-denominated debt fed through into earnings of $799m, against $4.29bn for the 2014 half year. Rio's share price was largely unmoved, however, as the market had already priced in the implications of the existing glut in world iron markets.
Rio Tinto has continued to drive up capacity in Australia's Pilbara region despite growing evidence of an industrial slowdown in China. Global production of 154m tonnes was 11 per cent up on the 2014 half year. Rio, along with Anglo-Australian rival BHP, has attracted criticism from Australian politicians for forcing lower-margin producers out of business.
It's certainly true that the step-up in production has enabled Rio to insulate its margins partially against the 46 per cent drop in iron-ore prices. But the general pullback in commodity prices since midway through last year still hit the group's underlying earnings to the tune of $3.6bn.
Rio confirmed that it expects to return more than $6bn to shareholders this year. Management has deferred spending on certain projects, while operating costs have been reduced by more than $500m. The good news is that post-tax cash flows proved sufficient to cover the group's capital expenditure and dividend commitments - a key concern for shareholders.
Broker Investec Securities gives adjusted EPS of 306¢, against 493¢ in 2014.
| RIO TINTO (RIO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,579p | MARKET VALUE: | £36bn | |
| TOUCH: | 2,577-2,579p | 12-MONTH HIGH: | 3,531p | LOW: 2,373p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 3,053¢ | NET DEBT: | 27% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2014 | 24.3 | 6.1 | 238 | 96.0 |
| 2015 | 18.0 | 1.7 | 43.8 | 107.5 |
| % change | -26 | -71 | -82 | +12 |
Ex-div: 13 Aug Payment: 10 Sep £1=$1.56 | ||||
