Rio Tinto Plc. (RTNTF.PK,RIO: Quote,RIO.L,RTPPF.PK) Wednesday reported 22 percent decline in profit for the first half of the year, owing to lower commodity prices. However, the profit was better than what most analysts expected.
Net earnings declined to $5.89 billion from $7.59 billion. Underlying earnings dropped 34 percent to $5.15 billion.
An impairment charge of $115 million was recognized in the just concluded period, relating to the Specialty Alumina and Cable businesses, based on agreed sales values. A deferred tax asset of $1.043 billion was recognized following the introduction of the Minerals Resource Rent Tax on July 1.
Pre-tax profit dropped to $6.77 billion from last year's $11.07 billion.
Consolidated sales revenue fell to $25.34 billion from $29.06 billion in the previous year.
Rio Tinto's Chairman Jan du Plessis said, "Lower prices were the main driver of a reduction in underlying earnings in the first half of 2012, but overall we continue to generate strong earnings and cash flows...Whilst we are mindful of short-term uncertainties we remain convinced of the strength of the long-term demand outlook.''
Rio Tinto's peer Xstrata Plc (XTA.L, XSRAY.PK, XSRAF.PK) reported a 33 percent decline in first-half profit, reflecting lower commodity prices.
Prices declined for nearly all of Rio Tinto's major commodities, except gold, which was up 14 per cent, minerals and thermal coal.
Volume declines lowered earnings by $584 million, driven by copper and gold, with lower grades at Kennecott Utah Copper and no metal share from Grasberg. Higher other cash costs decreased underlying earnings by $388 million.
The Iron Ore group's underlying earnings dropped 20 percent, reflecting lower iron ore prices partly offset by higher volumes. Production grew 4 percent.
In the Aluminium business, Rio Tinto Alcan's underlying earnings plunged 93 percent to $24 million, mainly due to lower prices across the business.
Net debt increased from $8.5 billion at December 31, 2011 to $13.2 billion at June 30, 2012.
The miner declared an interim dividend of 72.5 US cents, up 34 per cent from last year.
Rio Tinto expects to see signs of improvements in Chinese economic activity by the end of the year, as growth picks up more strongly after the government's stimulus measures announced in the second quarter begin to reflect in infrastructure investment. Around 500 of these investment projects are slated to start later this year and next year.
Rio Tinto Coal Australia's Blair Athol Mine, near Clermont in Central Queensland, will complete mining operations this year after almost 30 years of production. Final production from the mine is expected in December.
The stock is up around 1 percent in early morning trade on the LSE at 3,160.50 pence.
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by RTT Staff Writer
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