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Rio Tinto beats interim debt and payout forecasts

Half-year results for the diversified miner were predictably weak, although an "unrelenting" focus on earnings has helped the cash position.
August 3, 2016

The large miners do a fairly good job of managing expectations ahead of financial results, so disappointing half-year numbers from Rio Tinto (RIO) brought no great surprises. That's despite posting the lowest first-half earnings in more than a decade and a 58 per cent cut in the half-year dividend, although the latter was less than consensus forecasts had suggested.

IC TIP: Hold at 2424p

Newly installed chief executive Jean-Sébastien Jacques (or "J-S Jacques" as he is referred to in Rio's corporate literature) pledged to keep an "unrelenting" focus on shareholder value, a commitment most apparent in the period in the $0.6bn (£0.45bn) improvement in sustainable operating cash costs. That failed to halt the damaging effect of lower prices, which shaved 51 and 36 per cent from the underlying cash profit of the copper & diamonds and aluminium divisions. The core iron ore division fared slightly better, dropping $572m from 2015's already subdued contribution of $4.01bn. Despite this volatility, Rio managed to generate $3.2bn in operating cash, although a drop in net debt beyond consensus forecasts caused the cash position to thin by $1.1bn.

Analysts at Investec are guiding for normalised pre-tax profit of $4.83bn and EPS of 177.5¢ a share for the December year-end, against $6.17bn and 245.1¢ in 2015.

RIO TINTO (RIO)

ORD PRICE:2,424pMARKET VALUE:£45.2bn*
TOUCH:2,423.5-2,424p12-MONTH HIGH:2,641pLOW: 1,557p
DIVIDEND YIELD:4.7%PE RATIO:808
NET ASSET VALUE:2,727¢NET DEBT:29%

Half-year to 30 JunTurnover ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
201517.981.7543.8108
201615.502.1095.345.0
% change-14+20+118-58

Ex-div: 11 Aug

Payment: 22 Sep

*Includes UK and Australian shares £1=US$1.33, £1=Aus$1.76