Rio Tinto has provided a bullish outlook for China predicting a quick recovery in its pace of growth, after the miner’s profits fell due in part to weaker demand from the Asian giant.
Rio, which is the world’s second largest iron ore miner, posted a first half underlying profit that fell 34 per cent to $US5.2 billion ($A4.95 billion).
The result beat market expectations of about $US4.94 billion ($A4.70 billion).
Net profit for the half year to June 30 was down 22 per cent to $US5.9 billion ($A5.61 billion), including a non-cash $US1 billion ($A951.07 million) deferred tax asset related to the mining tax, which it is due to start paying in October.
Lower iron ore and other commodity prices were blamed for $US1.94 billion ($A1.85 billion) of the $US2.6 billion ($A2.47 billion) profit drop.
Increased operating costs and weaker production output were the other major contributors.
Economic growth in China has dropped to below eight per cent for the first time in years and is the reason less iron ore is being bought to make steel.
Mr Albanese predicted China’s pace of growth would return to above eight per cent by the end of 2012 even though Europe and the US’s woes were creating anxiety among the major miners because of their implications for the wider world economy and demand for resources.
“We do remain confident in the long-term growth story in China and other emerging markets and plan to position ourselves to capture the opportunities this presents,” Mr Albanese told reporters in a teleconference from London.
He said nearly 500 government-driven economic stimulus programs were in place in China to stimulate investment in energy and infrastructure projects.
Rio’s own order book was full and it was selling full volumes.
However, Mr Albanese lamented that Australia had moved from being one of Rio’s lower-cost operating venues in the world five years ago to one of its highest.
Weaker economic conditions meant earnings from all of its business divisions – excluding the small diamonds and minerals area – were down.
Rio also announced on Wednesday that it would cut 140 jobs from its Blair Athol Mine central Queensland where another mine was under review.
The quality of the thermal coal has dropped but weaker coal prices hastened the decision.
The aluminium division’s earnings – many of which are for sale – dropped from $US344 million ($A327.17 million) to $US24 million ($A22.83 million).
Earlier this year the company wrote down the assets of the division by $US8.9 billion ($A8.46 billion) in relation to their potential sale.
Mr Albanese said the company was continuing to look for a buyer.
Net debt was higher than expected, increasing to $US13.2 billion ($A12.55 billion) from $US8.5 billion ($A8.08 billion), driven by $US7.6 billion ($A7.23 billion) spent on capital expenditure in the Pilbara in WA and its Mongolian copper mine and aluminium assets.
Rio Tinto will press ahead with its plans to increase iron ore production by 50 million tonnes to 283 million tonnes a year by the end of 2013.
Morningstar resources analyst Mark Taylor described the result a solid but weighed down by aluminium.
He said Mr Albanese had “come out fighting” about China, far more bullishly than his mining peers.
The interim dividend was increased by 34 per cent, as expected, to 72.5 US cents a share.
