Mining giant Rio Tinto has reported pre-tax profits were more or less flat in the first half of the year and a 71 per cent fall in basic earnings per share (EPS).
Its chief executive Sam Walsh warned against global economic volatility, but does not think China is headed for a hard landing.
Pre-tax profits rose by 0.2 per cent to $6.77bn, while basic EPS from continuing operations fell to 93.1 cents from 317.6 cents the year before. Underlying earnings fell 18 per cent to $4.2bn.
Chairman Jan du Plessis said the business had “demonstrated considerable resilience against a backdrop of continuing market volatility” and that the group’s strategy to “ invest in and operate large, long-life, low-cost, expandable operations” will remain unchanged.
Rio Tinto has been embarking on a cost cutting programme, having achieved $1.5bn of savings in the firs half - $977m of which came from operating cost savings and $483m from lower exploration and evaluation spend.
Commenting, Walsh said:
Across the group, we are focused on improving performance at every location. Our cost saving programme is gathering momentum and we have more than 1,500 separate initiatives that are helping us reduce costs and preserve margins, even in a climate of lower prices. We have driven down our unit costs by more than nine per cent compared with the first half of 2012.
The medium-term economic outlook remains volatile with a broader range of outcomes now possible. Chinese economic growth has decelerated so far this year and is unlikely to recover significantly in the second half, but we do not expect a hard landing.
This global economic volatility only serves to highlight the need to build a stronger and more resilient business. I have reinforced our capital allocation processes to ensure that we are only investing in the best opportunities. We have reduced capital expenditure from the peak level of last year and we expect it to be 20 per cent lower in 2013.
The group has decided to cancel the divestment of Pacific Aluminium given the current environment, and will reintegrate back into the Rio Tinto Alcan Group.
Rio Tinto announced a 15 per cent increase in its interim dividend to 83.5 cents per share.