Rio Tinto, the mining and resources giant, on Wednesday blamed lower commodity prices in iron ore for 34% drop in its underlying first half profit to $5.2 billion (£3.33 billion).
The net profit of the Anglo-Australian group for the half year was down by 22% to $5.9 billion (£3.77 billion), including a $1 billion (£640.4 million) deferred tax asset after the introduction of the Minerals Resource Rent Tax (MRRT) in Australia.
Rio, despite the drop, plans to stick to its $16 billion (£10.24 billion) capital spending plan for this year. “We continue to generate strong margins despite falling prices, reflecting the low cost nature of our businesses and our first-rate operational performance,” chief executive Tom Albanese said.
“We have been signalling for some time that markets would remain volatile and we have seen challenging conditions in the first half,” he added. Albanese added that he expected to see a pickup in Chinese economic activity by the end of the year as government stimulus measures begin to filter through to new infrastructure projects.
Rio expects China’s GDP to be around 8% this year, which is a more optimistic outlook than the government’s own growth target of 7.5%. Outlook of Rio is uncertain as it is juggling bumper capital expenditure plans with volatile markets. However, while some rivals have begun to signal they could cut back, Rio has stayed firm on its own plans to date.
After the announcement of drop in half-year profit, the shares in Rio were trading 0.85% higher in London at 3,154 pence at 0730 GMT, against a 0.5% drop in the broader mining sector.