Rio Tinto has suffered a 29 per cent drop in profits during the first six months of trading this year, amid weaker prices for iron ore as demand eased from top consumer China.
The drop in earnings has caused the multinational miner to slash its dividend in half, with the company also weighed down by higher costs driven by inflation and skilled labour shortages.
The company also cut its capital investment forecast for 2022 by $500m to $7.5bn.
While Rio Tinto has paid out $2.67 per share to investors, its second-highest interim pay-out ever. this is only half the record pay-out dispensed earlier this year, when the company’s profits were powered by booming commodity prices.
In February, Rio Tinto unveiled a £12.4bn dividend for its shareholders, the second largest in the history of the London Stock Exchange.
Since then, iron ore prices have come under immense pressure due to persistent demand worries from China, with the country’s zero-COVID policy curtailing economic activity and hampering ferrous markets.
Chief executive Jakob Stausholm said: “While the pricing environment is becoming more challenging, the demand outlook remains positive. I always said it will take time to build a stronger Rio Tinto. It does,”
Despite the setbacks, Rio Tinto remains one of the world’s top iron ore producers, posted an underlying profit of $8.63bn for the six months ending 30 June.
The drop in profits and dividends sent Rio’s shares tumbling more than three per cent on the London Stock Exchange, however trading later eased with the company closing just 0.74 per cent down on the FTSE 100 at close of play.
Rio Tinto has also been plagued with scandal following its destruction of a sacred Aboriginal cave system last year, which sat on top of around £75m worth of high-grade iron ore.
The cave system, in the Juukan Gorge near Pilbara, had shown signs of continued human occupation for more than 46,000 years, before it was blown up.
A new leadership team was brought in after a severe backlash from shareholders, consumers and politicians, and the company commissioned an internal workplace review into its business culture.
This revealed 21 reports of actual or attempted rape in the past five years alongside widespread bullying and discrimination.