RIO TINTO, the global mining giant, reported record half year profits yesterday, but material costs and harsher exchange rates left the company trailing behind market expectations.
Pre-tax profits rose by 26 per cent to $11.01bn (£6.77bn) compared with $8.81bn in 2010, while underlying earnings increased by 35 per cent to $7.8bn. The boost was due to high commodity prices and strong demand from the Asian market, which offset weaker production volumes.
But Rio’s booming profits missed analyst expectations, and warnings on costs and risks helped send Rio’s shares down by 3.6 per cent.
A weak US dollar – the currency of its earnings – and strong Australian and Canadian dollars reduced its underlying earnings by $810m in the first half.
The company also said first half net profits would have been $1.23bn more had it not been for costs related to weather disruption in Queensland.
Rio Tinto joins major rivals Anglo-American and Xstrata in reporting first-half profit growth of a third or more while struggling to overcome spiralling costs and restive labour unions.
The group also said it is raising its share buyback from $5bn to $7bn.
Rio’s chief economist Vivek Tulpulé also warned yesterday of risks of monetary tightening in emerging markets and sovereign debt fears in the West were threatening to destabilise commodity markets.
Earlier this month the miner said it will spend £418m to speed up its iron ore expansion plans in western Australia.