STELLAR RESULT: Rio Tinto Posts First Half Underlying Earnings Of $5.1 Billion

Rio Tinto CEO Sam Walsh. Getty/ Brendon Thorne

Rio Tinto’s half-yearly results have just been released and underlying earnings are up 21 per cent to $5.1 Billion.

Rio CEO Sam Walsh said the company has increased its operating cash flow by eight per cent to $8.7 billion and has cut operating cash costs by $3.2 billion since 2012.

“We have decreased net debt by $6.0 billion compared with this time last year, through our stronger operating cash flows, sharply reduced capital spend and proceeds from divestments,” he said.

“We have delivered what we said we would, exceeding our $3 billion operating cash cost reduction target six months ahead of schedule while producing record volumes and driving productivity improvements across all our businesses.”

The miner has been working to reduce capital expenditure since Walsh took on the top job over a year ago. First half results show Rio has reduced capital expenditure to $3.6 billion – 2014 capex is now expected to be around $9 billion, about $2 billion below previous guidance.

It is also forecasting capital spend to fall by $1 billion and remain flat at $8 billion from 2015.

Rio has also allocated a dividend of $0.96 per share fully franked.

Here are the important half yearly numbers.

The strong half yearly results demonstrate diversified miners, who have the ability to make volume plays across a number of commodities, can still generate positive results – even in a depressed commodity price environment.

CMC Markets Chief Market Analyst Ric Spooner said it is, “A strong result which the market which should please the market.”

A surprise in the miner’s interim results was the EBITDA of $1.1 billion for its aluminium business, up 26 per cent compared to the same period last year. Rio’s aluminium arm struggled after under former CEO Tom Albanese, the company outbid Alcoa by $10 billion to buy Alcan for $US38 billion – assets which at the time of his resignation in June 2013 had been written down by about $25 billion.

“The beat on aluminium was a feature of the result but probably as far as the medium term view on Rio I think the things that will please investors is the good job they’ve done on cost control $3.2 billion on cash cost savings,” Spooner said.

“That, I think will heighten expectations that the time when the big mining companies will be able to move to some form of capital management and returning funds to shareholders is getting closer, which will encourage investors.”

Reporting season got under way at the end of July, however, Rio’s interim results are regarded by many analysts as this year’s official launch and can be taken as a good benchmark.

Rio’s underlying earnings for the year to December 2013 was $10.2 billion, up 10% on the previous 12 months.

The miner’s shares closed up 0.76% on the ASX at $66.32.

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