MINING titan Rio Tinto has delivered a robust result, more than doubling its first-half net profit on the back of record iron ore shipments and a deep cost-cutting program.
The resources giant posted a net profit of $US4.4 billion ($4.75 billion) for the six months to June, up from $US1.7 billion a year earlier.
It has also lifted underlying earnings before interest, tax, depreciation and amortisation by 21 per cent to $US5.1 billion, boosted by stronger returns from its aluminium and copper divisions.
The profit spikes came despite a dip in group revenue, down 0.7 per cent to $US24.3 billion.
Rio chief Sam Walsh said the company was reaping the rewards of a major cost-cutting drive, having cut net debt to $US16.1 billion — a reduction of $US6 billion compared with the same time last year.
It also dramatically reduced its capital investment, by 48 per cent to $US3.6 billion.
“We’ve delivered on what we’ve promised ... against a backdrop of considerable market uncertainty. We’ve emerged a simpler, much more focused and leaner business,” Mr Walsh said.
Rio’s ramp-up in iron ore output to a rate of 290 tonnes a year and its low-cost production model were helping it combat the steep drop in the price of the key steelmaking ingredient, he said.
The iron ore price has tumbled more than 30 per cent since the start of the year. Mr Walsh said China, the biggest buyer of Australian iron ore, was seeking to reduce its pollution and pursuing the highest-quality grade available, putting Rio in the box seat.
“China’s going up-market in the quality of their iron ore blend as it reduces the amount of slag (residue) it produces and improves pollution output from their factories, hence the price discounting you’re seeing from the junior iron ore producers,” he said.
Rio, which shed 2200 jobs in the half, had no immediate takeover targets and would pursue “only the highest calibre opportunities”, Mr Walsh said.
He defended the rock-bottom $US50 million sale last month of the group’s failed Mozambique coal assets bought in 2011 as part of its ill-fated $US4 billion takeover of Riversdale Mining.
While iron ore returns were up marginally, Rio lifted earnings in its copper division by 31 per cent for the half thanks to improved grades at its Utah copper mine.
“It’s a world-class result. Rio’s now in a position where they may almost be able to insulate themselves to the price pressures around the globe,” IG Markets analyst Evan Lucas said.
Source: The Herad Sun
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