Rio Tinto Plc (NYSE:RIO) (LON:RIO) reported an 18% decline in its H1 2013 earnings. The world’s second largest mining firm said that its net profit for six months ending June 30 declined 71% from $5.88 billion to $1.72 billion, mainly due to non-cash exchange losses of $1.85 billion and $300 million write down related to its Utah copper mine landslide, reports Jesse Riseborough of Bloomberg. Underlying profits were down 18% to $4.23 billion as revenue declined 3% to $24.51 billion.
Rio Tinto Cuts operating costs
Despite disappointing results, Rio Tinto Plc (NYSE:RIO) (LON:RIO) CEO Sam Walsh said that he expects strong demand for commodities. He believes the slowing Chinese economy won’t have much impact. He said the Anglo-Australian company will keep cutting costs to boost declining profits. Though economists are worried about China, the country reported an 11% increase in imports in July, and iron ore imports were up 26.4%. The latest China data prove to some analysts that concerns about its economic health are overblown.
Mr. Walsh said that demand for iron ore and other commodities will remain strong as long as developing countries continue to urbanize and industrialize. Rio Tinto Plc (NYSE:RIO) (LON:RIO) reduced its operating costs by $977 million in the first half of 2013. The company said it’s on track to reach $5 billion costs savings by 2014.
Sam Walsh took over as the chief executive of Rio Tinto Plc (NYSE:RIO) (LON:RIO) in January. Former CEO Tom Albanese was fired after massive impairment charges related to the company’s coal assets in Mozambique and aluminum division.
Rio Tinto Plc. (NYSE:RIO) (LON:RIO) not selling aluminum business anytime soon
However, Rio Tinto Plc. (NYSE:RIO) (LON:RIO) has decided not to sell its Pacific Aluminum business due to weak market conditions. The company has eliminated 2,200 jobs since June 2012. Rio Tinto Plc (NYSE:RIO) (LON:RIO) plans to lower CapEx by 20% this year to $14 billion. The company is offloading smaller assets to reduce its debt burden, which currently stands at $22.1 billion. Rio Tinto Plc. (NYSE:RIO) (LON:RIO) also announced an interim dividend of 83.5 cents a share.
Canaccord Genuity analyst Peter Mallin Jones said in a research note that the company’s aluminum and energy units strengthened during the period. However, the company’s capital expenditure of $7 billion was well above his estimate of $6.4 billion. Canaccord Genuity said that Rio Tinto Plc (NYSE:RIO) (LON:RIO)’s financial discipline and cost cutting are much more important than results.
American shares of Rio Tinto Plc. (NYSE:RIO) (LON:RIO) were up 1.70% to $46.78 at 11:00 AM EAT.