Rio Tinto 1st Half Earnings, Dividend Fall on Weaker Commodity Prices

   By Rhiannon Hoyle 
 

Mining giant Rio Tinto reported a 43% drop in first-half net profit and pared its payout to shareholders, reflecting a fall in commodity prices as China's economic recovery faltered.

The world's second-biggest miner by market value on Wednesday said it made a net profit of $5.12 billion in the six months through June, down from $8.94 billion a year earlier.

Underlying earnings totaled $5.72 billion, compared with $8.66 billion in the first half of 2022, as prices of aluminum, copper and, most importantly, iron ore - which accounts for most of Rio Tinto's profits--declined. Analysts had expected underlying earnings of roughly $5.85 billion, according to 11 forecasts compiled by Visible Alpha.

Directors of Rio Tinto declared an interim dividend of $1.77 a share which the miner said was equal to 50% of underlying earnings, in line with its policy and typical midyear payouts in recent years. A year ago, Rio Tinto paid out $2.67 a share, also 50% of underlying earnings.

A post-pandemic surge in Chinese metals demand predicted by some miners and traders hasn't materialized, as consumers refrain from spending and exports slump.

An ongoing downturn in the country's property sector, a big buyer of industrial metals, has weighed on the economy, which barely grew in the second quarter from the first quarter. Earlier this week, one of China's top decision-making bodies signaled plans to boost the ailing sector, helping to drive up prices of metals and stocks of miners, including Rio Tinto.

The Anglo-Australian miner makes most of its money from the vast iron-ore mining operations it runs in remote northwest Australia. As steel's main ingredient, iron ore is one of the world's most-traded commodities, and Rio Tinto is the top producer alongside Brazil's Vale.

While shipments from those Australian operations were 7% higher in the first half versus a year earlier, the average price Rio Tinto was paid for that iron ore was 11% lower year over year.

In addition to China's sluggish economic growth, global exports of iron ore have been strong, with shipments from dominant global suppliers Australia and Brazil recently estimated to be at or close to all-time highs, Rio Tinto said last week.

Weaker aluminum prices outweighed Rio Tinto's increased output of that commodity, too. While the company produced 9% more aluminum during the period year over year, it was paid 25% less per metric ton.

Write to Rhiannon Hoyle at [e-mail]

(END) Dow Jones Newswires

July 26, 2023 02:51 ET (06:51 GMT)

Copyright (c) 2023 Dow Jones & Company, Inc.