REPORTING SEASON: Rio Tinto Limited (RIO)

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Figure 1: Rio Tinto Limited 12 month chart

 

Rio Tinto Limited (RIO) HY15 tough half but cost control helped RIO beat expectations

– RIO posted a 43% fall in HY profit to US$2.9billion ahead of market expectations. The result was impacted by lower commodity prices (down US$3.6billion over the year) but partly offset by favourable exchange rates, lower energy costs and higher sales volumes. RIO confirmed its view that global growth is set to continue because although China’s transitioning into a major stgeloped economy has slowed, it is occurring off a higher base.

– RIO’s iron ore division earnings fell 55% to US$2.1billion even though their production of 154 million tonnes was 11% higher than this time last year on the ramp up in the Pilbara. RIO’s low-cost advantage helped the company withstand the iron ore price slide – 1H15 cash unit cost was $16.2/t (21% lower than $20.4/t in 1H14). RIO’s bauxite and aluminium business did well with aluminium earnings up 67% and diamonds & minerals delivering strong margins despite challenging market conditions.

– RIO’s focus on financial and operating discipline helped deliver first half cost savings of $641million. By delivering a CAPEX lower than the market had expected, RIO helped to improve their balance sheet in the short term, but in the long term they do need to ramp up spending on projects to boost future output and returns.

– RIO’s dividend was in line with market expectations of USc107.5 and will be paid out on 10 September 2015

 

You can see all of CommSec’s reporting season analysis by clicking here.

Juliana Roadley, Market Analyst,