Cost-Cutting Doubles Rio Tinto’s 1st Half Underlying Profit to $5.1 Billion
By Vittorio Hernandez | August 8, 2014 8:46 AM EST
Mining giant Rio Tinto (ASX: RIO) reported on Thursday first half underlying profit of $5.1 billion despite falling iron ore prices by about 30 per cent. It is up 21 per cent compared to the same period in 2013. The boost in profit was the result of cost-cutting measures applied on capital projects and operating cost.
The H1 result beat analysts' estimates of $4.55 billion. Net profit was $4.4 billion, more than double the $1.72 billion the previous year.
Sam Walsh, Rio chief executive, said that the company expected to have $3 billion cost reductions by December 2013 since 2012, but disclosed that the amount had reached $3.2 billion. The miner is expecting another $1 billion cost reductions within the next year and a half.
With the large net profit, shareholders would receive an interim dividend of 96 cents under Rio's policy of paying out 50 per cent of the previous year's full-year dividend every August.
Other contributors to the profit were the axing of 2,200 positions, lower spending on exploration and lower tax rate of 30 per cent compared to the 38 per cent for the first half of 2013.
In a statement to the ASX, Rio said, "A strong foundation is in place for material increases in cash returns to shareholders following a reduction in net debt of $US6 billion over the past year."
Michael Evans, CIMB analyst, forecast that if iron ore prices would hold up, chances of special returns to shareholders in February, when Rio reports its full-year earning, would be high.
Rio Tinto earned $4.7 billion for H1 for its iron ore operations, $594 million for its copper operations, but suffered $19 million loss from coal and uranium operations.
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