RIO TINTO’S chief executive yesterday said that China’s economy is unlikely to recover significantly this year but he does not expect “a hard landing”, as falling commodity prices led to a 71 per cent drop in first-half net profits.
“China is best described as ‘steady as it goes’,” chief executive Sam Walsh told City A.M. “We’ve seen a slowdown but we’re still expecting around 7.5 per cent growth this year. I believe that over time we will see growth slow as China moves from being a developing country to a developed country but it still has a way to go.”
He added that future opportunities would come from India, south east Asia and Africa, which would all need raw materials to support growth.
The FTSE 100-listed miner – which has implemented a $5bn (£3.2bn) cost-cutting strategy to offset falling prices – also said that it had scrapped the sale of its loss-making Pacific Aluminium business after failing to find a buyer. “Negotiations haven’t gone as smoothly as we’d wanted,” said Walsh. “We had an advisory board for PacAl which we will be winding up now.”
Net earnings fell to $1.7bn, with underlying earnings for iron ore – Rio’s core business – down 14 per cent.
However, the miner is still on track to expand its Pilbara iron ore mine this year, despite Walsh’s admission that investor opinion is split on the move.
Shares closed 2.1 per cent higher.