Rio Tinto H1 Profit Plunges On Charges, Lower Prices; Hikes Dividend

(RTTNews) - Anglo-Australian mining giant Rio Tinto Plc (RTNTF.PK, RIO, RIO.L, RTPPF.PK) reported Thursday a sharp decline in the fist-half profit, reflecting significantly higher charges. Underlying earnings declined on lower average market prices and higher tax rate. The company, however, declared a higher dividend.

Chief Executive Sam Walsh said, "We are seeing good early results of our business performance initiatives in our pursuit of greater value for shareholders. Capital expenditure has been reduced, approved growth projects are on track and operations are performing well." The company said its cost saving program is gathering momentum and that it has more than 1,500 separate initiatives that are helping to reduce costs and preserve margins, despite lower prices.

Looking ahead, Walsh added, "The medium-term economic outlook remains volatile with a broader range of outcomes now possible. Chinese economic growth has decelerated so far this year and is unlikely to recover significantly in the second half, but we do not expect a hard landing."

For 2013, Rio Tinto expects to produce approximately 265 million tonnes of iron ore, on a 100 percent basis, from its global operations in Australia and Canada, subject to weather constraints.

The company also said that the divestment of Pacific Aluminium is not possible in the current economic environment, following a comprehensive review. It will now be reintegrated into Rio Tinto Alcan during the second half.

For the first half, profit before taxation plunged to $3.21 billion from $6.75 billion in the prior year. Profit attributable to owners of the company fell 71 percent to $1.72 billion, with earnings per share declining to 92.6 cents from 315.7 cents last year. The company said its prior-year results have been restated to reflect a number of new accounting standards.

The latest-quarter results included non-cash exchange losses of $1.9 billion primarily on US dollar debt in non-US dollar functional currency companies, and a $0.3 billion write-off of waste stripping costs and damaged equipment at Kennecott Utah Copper.

Underlying earnings, which excluded items, declined about 18 percent to $4.23 billion from last year's 5.15 billion, reflecting lower average market prices and a higher effective tax rate. Underlying earnings per share were 228.9 US cents, lower than last year's 278.3 US cents.

Consolidated sales revenue from continuing operations declined to $24.51 billion from $25.32 billion in the prior year period, reflecting lower revenues in iron ore, copper and energy segments, partly offset by improved performance at aluminium and diamond segments.

Iron ore production, Rio Tinto share, however, grew 6 percent to 100.1 million tonnes. Good production growth in the Pilbara mine was driven by sustained productivity improvements. In Iron Ore, sales volumes rose 4 percent due to increased capacity at the Pilbara ports.

Meanwhile, average prices declined for nearly all of Rio Tinto's major commodities, with the exception of diamonds.

The company declared an interim dividend equivalent to 83.5 cents per share, a 15 percent increase from last year's 72.5 cents per share.

In London, Rio Tinto shares are currently trading at 2,985 pence, up 31.50 pence or 1.07 percent.

In Australia, shares closed today's trading at A$59.48, up A$0.88 or 1.50 percent.

In pre-market activity on the NYSE, shares increased $0.46 or 1 percent, and are currently at $43.41.