27th Jul 2022 09:08
(Alliance News) - Rio Tinto PLC on Wednesday cut its interim dividend following a sharp fall in first-half profit, as the world's largest iron ore producer hurt by weaker prices in key commodities and higher operating costs.
The Anglo-Australian miner said it saw "significant movement" in the pricing for commodities in the half amid growing recession fears and a decline in consumer confidence.
Iron ore prices experienced a drop in demand demand in recent months amid ongoing woes in major steel producer China. The world's second largest economy has seen lockdowns related to its zero-Covid policy reduce economic activity and this has weighed on iron ore markets.
For the six months to June 30, revenue fell by 10% to USD29.78 billion from USD33.08 billion last year, and pretax profit slumped by 32% to USD12.32 billion from USD18.05 billion.
The miner declared an interim dividend of 267.0 US cents, down 29% from 376.0 cents last year. This is still Rio's second-highest interim payout, but it falls short of last years payout when the company benefited from a surge in commodity prices.
Average iron ore prices fell by 28% to USD110.9 per wet metric tonne on an FOB basis, from USD154.9 in 2021.
During the period, Rio said USD10.5 billion in net cash was generated from operating activities, 23% lower than the 2021 first half - primarily driven by downward price movements for major commodities.
In June, Rio aid it made a USD1.1 billion final payment to the Australian Taxation Office in respect of 2021 profit. It also experienced a rise in working capital, mainly due to elevated prices for raw materials in aluminium inventory.
The miner also said operations and growth projects continue to be hurt by the "high unplanned absences", tight labour markets, rising input costs and supply chain disruptions. Notably, operating costs climbed 12% to USD17.20 billion, from USD15.32 billion the year before.
Looking ahead, Rio said: "We continue to monitor areas of uncertainty in the short to medium term, namely the evolving situation with the war in Ukraine and potential further Russian sanctions, rising inflation and Covid-19 related disruptions."
Chief Executive Officer Jakob Stausholm added: "We remain focused on delivering on our long-term strategy, with a steady improvement in operating performance and some notable advances in our growth agenda."
Shares in Rio were down 3.6% to 4,651.50 pence each in London on Wednesday morning, the worst performer in the FTSE 100.
By Sophie Rose; [email protected]
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