Rio Tinto 1st Half Net Profit, Dividends Sharply Higher -- Update
July 28 2021 - 03:17AM
Dow Jones News
By Rhiannon Hoyle
SYDNEY--Rio Tinto PLC notched a record first-half net profit and
more than tripled its midyear payout to shareholders, benefiting
from a bull run in commodity prices that has stoked inflation
expectations around the world.
The world's second-biggest mining company by market value on
Wednesday reported a net profit of $12.31 billion for the six
months through June, up from $3.32 billion a year ago.
First-half underlying earnings, which strip out some one-off
items, more than doubled to $12.17 billion, beating the $12.01
billion consensus estimate compiled by Vuma from 14 analyst
forecasts.
"Government stimulus in response to ongoing Covid-19 pressures
has driven strong demand for our products at a time of constrained
supply resulting in a significant spike in most prices," said Chief
Executive Jakob Stausholm.
The boom in profits translated into big returns for
shareholders. Directors declared an ordinary dividend of $3.76 a
share, up from $1.55 a share at the same time last year. They also
unveiled a special dividend worth $1.85 a share.
Rio Tinto is benefiting from elevated commodity prices, which
have stirred debate about whether markets are entering an extended
boom and have added to fears that inflation in many economies could
become more persistent.
Iron-ore prices hit a record high in May, largely because of
red-hot Chinese steel output. China produced 12% more steel in the
first half of this year than last amid strong demand for the
material for new buildings and cars.
Meantime, supply from major iron-ore producers worldwide has
been lagging expectations, with shipments from smaller, high-cost
mines filling the gap and keeping prices raised.
The commodity's benchmark price climbed as high as $233 a metric
ton in May, according to S&P Global Platts, which publishes
market prices. It recently pulled back to roughly $200 a ton, but
remains above the peak of the last boom in prices, around $193 a
ton in early 2011.
The average price Rio Tinto earned for the iron ore it digs up
at its massive Australian mining hub doubled in the first half of
2021 versus a year earlier, to $168.40 a ton.
Prices for other commodities Rio Tinto produces, including
copper and aluminum, also rose sharply.
Some analysts believe large iron-ore producers such as Rio Tinto
might be enjoying a peak in earnings and investor payouts,
forecasting that prices will soon retreat. Morgan Stanley estimates
iron ore will fetch an average $160 a ton in the fourth quarter of
this year, and $118 a ton in 2022.
That risks cooling Rio Tinto's profit engine: Iron ore accounted
for more than 80% of Rio Tinto's earnings during the first half of
this year.
Still, Rio Tinto should generate solid margins on its iron ore
even at sharply reduced prices. The company said it cost about
$17.90 a ton during the first half of 2021 to mine the commodity,
although that doesn't include costs such as shipping, royalties or
spending on projects.
High prices for the material masked what was a soft operational
performance for Rio Tinto, which has been grappling with challenges
ranging from the pandemic-related restrictions to above-average
rainfall. The miner recently said it expects iron-ore shipments
from its Australian mining operations this year to be at the low
end of an earlier estimate of between 325 million and 340 million
tons. First-half shipments from its Pilbara iron-ore operations
were down 3% year-on-year.
The Anglo-Australian miner also expects annual copper output to
be at the low end of an earlier projection after recording an 11%
year-on-year slide in first-half output.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
July 28, 2021 03:14 ET (07:14 GMT)
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