Rio Tinto half-year profit surges to US$6.9b
28-AUG-2008 Intellasia | AFP
Aug 28, 2008 - 7:00:00 AM
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Mining giant Rio Tinto said Tuesday it had more than doubled first-half net profit to a record US$6.91 billion (3.76 billion pounds) as it continues to fend off a hostile takeover bid by rival BHP Billiton.
Rio, the world's third largest miner, said that underlying earnings rose 55% to US$5.47 billion for the six months to June 30 against a year earlier.
Consolidated sales revenue for the half year hit US$27.2 billion, more than double the US$12.1 billion from the same period in 2007.
The results were slightly above market forecasts and could help the Anglo-Australian miner battle the unsolicited 150 billion-dollar takeover bid from bigger rival BHP.
Rio has said BHP's offer of 3.4 shares for every Rio share significantly undervalues the firm. It said its latest results reflected higher prices and record iron ore, bauxite, alumina, aluminium and thermal coal output.
"The group's performance in the first half, together with our growth potential, supports the board's view that Rio Tinto presents a very strong stand-alone value proposition for shareholders," chair Paul Skinner said.
Amid concerns that the commodities boom may have started waning, Skinner said that prices remained high thanks in part to Asian demand.
"The driver of demand for our products is urbanisation and industrialisation in heavily populated countries like China and India, and these economies continue to grow strongly," he said.
Low inventory levels and supply side constraints could also support prices, he said, adding in a conference call that he expected prices for Rio's major commodities to remain "substantially above the long-run trend in 2009."
"The outlook for iron ore remains excellent," he said, adding that Chinese demand for aluminium continued to grow strongly and that the outlook for coal demand in Asia was "excellent."
Rio said its integration with aluminium firm Alcan was on track to deliver US$1.1 billion of after-tax benefits from the end of 2009.
The half-year results come just days after the Australian government cleared the way for China-owned Chinalco to increase its stake in the group to 11%.
The Chinese aluminium firm took a nine% stake in Rio in February in a move widely interpreted as seeking to block BHP's proposed merger.
China has expressed concerns that the deal would create a behemoth with too much control over world iron ore markets.
Analyst Gavin Wendt, from independent research house Fat Prophets, commended the results, saying they kept up the pressure on BHP in its chase for Rio.
"The only black spot was that copper earnings were down slightly after they had some mining issues during the year," he told national news agency AAP.
Earnings from the copper and diamonds division fell to US$1.69 billion from US$1.91 billion the same time last year.
Last week BHP, the world's biggest miner, announced record annual net profits of US$15.39 billion, driven by soaring commodity prices and strong Asian demand.
The firm has said investors are sitting on the sidelines as they wait for BHP to overcome regulatory hurdles in its takeover bid.
Rio Tinto shares closed up 1.4% at 124.06 Australian dollars ahead of the announcement, while BHP Billiton shares gained 1.9% to US$40.75.
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