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.
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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.