Rio Tinto (RTP), the world’s second-largest mining group, which is currently fighting a $147 billion hostile takeover bid by BHP Billiton (NYSE:BHP), on Tuesday reported a record ‘08 first-half profit. The company’s net income more than doubled in the January-June period to $6.9 billion, from $3.3 billion a year earlier, and revenue rose to $27.2 billion from $12.1 billion.
The company attributed the solid results, besides strategy and execution, to unprecedented demand for minerals and metals as its iron ore division posted an increase of 162% in the first half to $2.8 billion.
Unquestionably, and despite two weeks of self-imposed slowdown during the Olympics, China remains Rio’s biggest customer. In fact, according to Times Online, Rio Tinto expects a post-Olympic Chinese boom with the fastest growth areas in China moving from the eastern big cities such as Beijing, Tianjin and Shanghai to inland provinces. Tom Albanese, chief executive of Rio Tinto, said:
There are provinces with populations larger than most European countries that are only now beginning to see rapid development.
Rio Tinto said it expected an even stronger second half after inking an agreement with China’s largest iron and steel maker, Baosteel, which represented China’s steel industry at the negotiations at the end of June. Baosteel agreed to a 96.5% price increase for iron ore for 2008. Japanese and Korean steel makers have also agreed for an 86% increase in the price of iron ore. Tom Albanese emphasized that growth will continue, while stressing his position that Rio’s strong growth is evidence that a $147 billion bid by rival BHP Billiton undervalues the company.
Rio has committed itself to at least a 20% full-year increase this year and next.