SYDNEY—Rio Tinto PLC said its first-half net profit more than doubled from a year earlier, when write-downs and exchange-rate and derivative losses hurt its bottom line.

Weak prices for metals and bulk commodities pressured margins, though, and the Anglo-Australian mining company reported a 47% fall in underlying earnings. It cut its interim dividend by 58%.

In February, as the miner reported an annual loss for 2015, Rio Tinto abandoned a policy of stable or rising dividends, saying it could no longer justify the commitment, given the worsening outlook for the global economy. Future dividends, it said, would be more closely linked to market conditions.

On Wednesday, Rio Tinto said it would pay shareholders US$0.45 a share, down from $1.075 a year earlier.

The miner reported a first-half net profit of US$1.71 billion, up from $806 million a year earlier—when it posted noncash exchange-rate and derivative losses of $1.3 billion—and underlying earnings of $1.56 billion, down from $2.92 billion. That was in line with the median forecast of seven analysts surveyed by The Wall Street Journal.

Rio Tinto said net debt fell 6% during the half, to $12.9 billion.

As commodity prices plunged to multiyear lows, Rio Tinto and other global miners have been reducing spending and paying off debt accumulated during a China-led boom. While prices for mined commodities including iron ore, coal and copper improved during the early months of 2016, executives have projected markets could remain depressed and volatile for years to come.

"Growth in China has stabilized, but it is on a long transition path of slower and less commodity-intensive growth," said Rio Tinto Chief Executive Jean-Sé bastien Jacques, who took the helm in early July. "Meanwhile the global economy seems stuck in a subdued low-productivity growth pattern which would indicate that continued caution is required for the second half of 2016."

Rio Tinto has been doubling down its cost-cutting, which has included increasing utilization of trucks and plant, reworking deals with suppliers and freezing on wages. The company reduced annual operating costs by $600 million in the first half, it said.

Rio Tinto previously said it aimed to reduce costs by a further $1 billion in 2016, and by a similar amount in 2017. The miner drove down annual costs by US$1.3 billion in 2015. Former Chief Executive Sam Walsh earlier this year described the targets for this year and next as ambitious, but achievable.

Earnings in the company's biggest division, iron ore, fell by 17% as prices for the steelmaking commodity turned down, a trend underpinned by rising supplies.

Rio Tinto, one of the world's top iron-ore suppliers alongside Brazil's Vale SA, increased its own first-half shipments of iron ore from Australia by 8% from a year earlier. The company has spent billions of dollars expanding its iron-ore mines and infrastructure in Australia in recent years.

Rio Tinto has become something of an outlier in its pursuit of production growth as markets slump, with projects including an underground copper mine in Mongolia and a bauxite mine in Australia under way. On Wednesday, it reiterated a forecast that it will spend about US$4 billion on major projects in 2016.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

 

(END) Dow Jones Newswires

August 03, 2016 04:55 ET (08:55 GMT)

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