3rd Aug 2016 06:45
LONDON (Alliance News) - Rio Tinto PLC cut its interim dividend as its reported Wednesday a steep drop in underlying earnings in the first half of 2016, but the company reported a large rise in net earnings in the half and committed to its previous guidance concerning the dividend for the year.
The miner also said production and shipments of iron ore from the Pilbara operation in Australia were both considerably higher in the first half of the year, as was production of a number of other commodities.
The multi-commodity miner reiterated its production guidance for the full year 2016 across all of its divisions, apart from thermal coal which was increased.
Rio Tinto said underlying earnings, which excludes exceptional items, fell 47% in the first half of the year to USD1.56 billion from USD2.92 billion a year earlier, as net cash generated from operating activities fell 27% to USD3.24 billion from USD4.43 billion.
Net earnings more than doubled in the first half to USD1.71 billion from USD806.0 million a year earlier. That was the result of net gains from disposals totalling USD200.0 million, derivative gains of USD600.0 million, and a contract provision of USD500.0 million.
The dividend was slashed by more than half to 45.0 cents per share from 107.5 cents last year. Rio Tinto said its full year dividend will not be less than 100.0 cents per share.
Operating cash cost improvements of USD2.00 billion are expected over 2016 and 2017, in line with previous guidance, and capital expenditure this year will be around USD4.00 billion before rising to USD5.00 billion in 2017 and USD5.50 billion in 2018. Each year has around USD2.00 billion worth of sustaining capital expenditure.
Rio Tinto, like many of its peers, has been restructuring its portfolio to focus on certain commodities and the FTSE 100-listed miner has turned its attention to iron ore, aluminium, copper & diamonds, and energy & minerals.
The company said the Pilbara operation, which is a network of 15 iron ore mines and associated infrastructure, shipped 158.9 million tonnes in the first half of 2016, up 8.0% from the previous year, whilst production was up 10% to 160.8 million tonnes.
Aluminium production was 10% higher in the first half of the year at 1.8 million tonnes, mined copper production came in 1.0% higher at 282,300 tonnes, and bauxite production was 9.0% higher in the first half at 23.2 million tonnes.
Hard coking coal production, however, was down 8.0% year-on-year to 3.8 million tonnes whilst semi-soft and thermal coal production was flat at 10.7 million tonnes. Production of titanium dioxide slag suffered the steepest fall in the first half, down 23% to 481,000 tonnes.
Production of iron ore from Pilbara, bauxite and aluminium was all higher in the second quarter than the first quarter of 2016, with mined copper production remaining flat whilst coal production declined. Production of all commodities was higher in the second quarter than one year earlier, apart from coking coal and titanium dioxide slag.
All guidance for the full year was left unchanged by Rio Tinto on Wednesday, apart from thermal coal which was increased to 17.0 to 18.0 million tonnes from the previous guidance of 16.0 to 17.0 million tonnes.
By Joshua Warner; [email protected]; @JoshAlliance
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