6th Aug 2015 08:36
LONDON (Alliance News) - Rio Tinto PLC Thursday said the fall in world commodity prices caused its earnings to drop by around USD3.60 billion in the first half of 2015, but the miner still reported results that beat analyst expectations.
The FTSE 100-listed miner also continued to slash costs, cutting its capital expenditure budget in 2015 and 2016, alongside increasing its cost-saving target by USD250 million for the 2015 full year.
The company reported a pretax profit of USD1.74 billion in the first half of 2015, less than a third of the USD6.09 billion profit made a year earlier, as revenue fell to USD17.98 billion from USD24.33 billion.
Pretax profit before finance costs came in at USD3.66 billion, also considerably down from the USD5.88 billion profit a year earlier.
Earnings before exceptional items fell to USD2.92 billion in the first half of 2015, compared to USD5.11 billion. That beat analyst expectations, which had earnings coming in around USD2.43 billion, according to a consensus provided by the company.
Rio Tinto said the fall in commodity prices in the first half of 2015 decreased its earnings before exceptional items by USD3.62 billion compared to a year earlier, mainly caused by average iron ore prices falling by 46% year-on-year in the first half, compounded by lower coal, copper and gold prices.
Despite the dramatic fall in earnings, Rio Tinto stuck with its progressive dividend policy, increasing the interim dividend by 12% to 107.5 cents per share from 96.0 cents per share. That also beat analyst expectations for the miner to pay an interim dividend of 1.06 cents per share.
Rio Tinto also said it will progress with its share buy-back programme originally announced in February, and said it will purchase USD1.0 billion of shares in the second half of 2015.
Looking toward the second half of the year, Rio Tinto said it now expects to reduce its operating cash cost for the full year by around USD1.0 billion, compared to its previous guidance of only USD750 million. Rio Tinto revised its cost saving target for the year after saving USD641 million in the first half.
The miner also slashed its capital expenditure budget in 2015 to around USD5.50 billion and said it will be less than USD6.0 billion in 2016. Both those revisions compare to its previous target to spend around USD7.0 billion per year in 2015 and 2016. Capital expenditure for 2017 is expected to remain at USD7.0 billion.
For all three of those years, sustaining capital expenditure is expected to make up around USD2.50 billion of those budgets.
At the end of June, net debt stood at USD13.68 billion, a 10% rise from the USD12.49 billion at the end of June 2014, pushing the company's gearing ratio up to 21% from 19%.
Rio Tinto had already released its production figures for the first half of 2015 earlier in July. The miner reported iron ore production of 154.3 million tonnes on a 100% basis in the first half, up 11% year-on-year, whilst iron ore shipments rose 8% to 153.9 million tonnes.
Iron ore sales accounts for roughly 90% of the Rio Tinto's profit.
However, it said it expects 2015 full year global iron ore shipments of 340 million tonnes from its operations in Australia and Canada, compared to its previous forecast that global shipments would be "approaching" 350 million tonnes for the full year.
In other commodities, Rio Tinto still expects its share of production for the full year to remain unchanged at 43 million tonnes of bauxite, 8.0 million tonnes of alumina and 3.3 million tonnes of aluminium.
Rio Tinto shares were up 0.3% to 2,574.00 pence per share on Thursday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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