Rio Tinto’s earnings broadly in line with expectations
The Rio Tinto numbers are distorted by several one off factors so our main focus was the EBITDA level where the final print is $10.1bn – slightly ahead of market expectations of around $9.6bn. All figures are in US$ unless otherwise stated. The bottom line net profit after tax on a statutory basis contains several non recurring items, so this isn’t the best number to use. At the operating level, Rio Tinto will probably please the market.
Iron Ore remains the powerhouse and main growth engine for this business but earnings were down on the same period last year – no doubt impacted by a lower iron ore pricing environment. Rio Tinto will take encouragement from an improved position in its Aluminium operations and copper. The worst performing part of the result is the Energy division (thermal coal) which has seen operating earnings halve.
Bottom line: It’s a messy result that we will probably be working through until the late hours of tonight Sydney time, but on the face of it, investors should be pretty happy. Rio continues to cut cost and guide to lower capital expenditure, as expected. It spent 20% less on capital projects during the period compared to the peak in 2012. A 15% increase in the interim dividend to 83.5 cents per share is perhaps a sign of more things to come – bunkering down, saving money, spending less and looking at passing on more cahflows to shareholders who have been somewhat bruised over the past few years.