Rio Tinto Posts Disappointing Earnings on Higher Costs

Rio Tinto, the third-largest mining company in the world, posted a greater-than-expected 14% drop in H1 net income Thursday on declines in Australian coal revenue and copper output. Net income fell to $3.25 billion ($2.51/share) for the period from $3.8 billion ($2.82) a year ago, shy of the $3.7 billion expected by analysts. Revenue was up 15% to $13.93 billion, reflecting a $314 million impairment charge on the company's Argyle diamond mine. Increased demand among Chinese steelmakers has pushed the price of iron ore up to record levels. Mining companies have been trying to boost production to achieve maximum gain from those prices, but gains have been dampened by high equipment and labor costs. As Bloomberg notes, the slipping U.S. dollar is also denting earnings for those miners that pay costs in local currencies. Australian coal producer Coal & Allied Industries Ltd., which is run by Rio Tinto, suffered a 53% drop in H1 profit resulting from flooding and rail congestion. Rio Tinto's interim dividend will be $0.52 per share, up from $0.40. The company recently agreed to pay $38.1 billion for Alcan, the aluminum manufacturer.

Sources: MarketWatch, Wall Street Journal, Bloomberg, Reuters
Commentary: Rio Tinto Trumps Alcoa with $38.1 Billion Offer for Alcan • What Does Rio Tinto's Takeover of Alcan Mean for the Rest of the Industry? • Rio Tinto: Pricey 'Defensive' Move With Alcan Threatens Credit Profile
Stocks/ETFs to watch: RTP. Competitors: RIO, AAUKD. ETFs: SLX, XLB, IYM, VAW

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