Iron ore smashes Rio Tinto's first half results

Rio Tinto chief executive Sam Walsh. Photo: Dan Kitwood/Getty Images

Rio Tinto posted a better than expected first half underlying earnings of $2.9 billion.

The result is 43% less than the $US5.19 billion for the same period a year ago, driven down by falling iron ore prices. Analysts had been expecting $US2.4 billion.

Net profit was down 82% to $US806 million.

The big miner has been cutting costs, increasing ore output, pulling back on capital spending and cutting debt in response to falling commodity prices. A strengthening US dollar and falling oil prices is helping the process.

CEO Sam Walsh says the result is robust given the tough operating environment.

“A continued focus on financial and operating discipline delivered first half cost savings of $641 million, representing 85% of our original full year target, which we have now increased to $1 billion,” he says.

“We continue to invest in growth, and have reached key milestones in three of our growth projects with the expansion of our Pilbara iron ore infrastructure, first production from our expanded Kitimat aluminium smelter and an agreement to progress the development of the Oyu Tolgoi underground copper mine.”

The results in detail:

Walsh says $3.2 billion was returned to shareholders in the first half through dividends and the share buy-back program.

Earnings from iron ore were down 49% to $US4.09 billion. This was driven by the impact of lower prices, down 46% on average.

Rio says expects cost improvements for the full year of $1.0 billion, up from previous expectations $750 million.

Capital spending is expected to decline to $5.5 billion in 2015 and less than $6.0 billion in 2016. Guidance for 2017 remains at $7 billion.

The share buy-back program continues with $1 billion of Rio Tinto shares expected to be purchased in the second half of 2015.

A full franked dividend of 144.91 Australian cents was declared, a rise of 12%.

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