Commodities slump slams Rio Tinto earnings

Rio Tinto plc (Rio Tinto) is a global mining company. That beat analyst expectations, which were expecting earnings to come in at around USD2.43 billion, according to a consensus provided by the company.

But now that deflating cost structures are better understood, the sensitivity of companies net present values (NPVs) to plausible price outcomes “is a more reliable marker of value”.

In July, Rio said its iron ore production expansion strategy is continuing to deliver high-margin growth that reinforces its position as a low-cost producer.

Despite the dramatic fall in earnings, Rio Tinto stuck with its progressive dividend policy, increasing the interim dividend by 12% to 107.5 cents per share from 96.0 cents per share.

Rio’s half year underlying earnings were $US5.1 billion in 2014, and Thursday’s result in the weakest since the $US2.6 billion result in 2010.

Cost-cutting initiatives continued to progress, with the miner raising its target for annual cost-cutting to $US1 billion, from $US750 million previously.

Rio has cut spending and costs to mitigate what Chief Executive Officer Sam Walsh predicted in February would be a “tough year” for the industry as China’s economy expands at the slowest pace in a quarter of a century.

The miner’s break-even price for iron ore – which has accounted for around 90 per cent of revenue in recent years – is around $US31 a tonne, making it one of the lowest in the sector.

Rio Tinto is slashing another $US2.5 billion from its capital spend over two years. Its price to earnings ratio (P/E) ended at 19.58 and its earnings per share (EPS) was $1.97.

Rio’s net debt increased $1.2 billion to $13.7 billion.

Eversource Energy (NYSE:ES) reported the upsurge of 1.95% to close at $49.72 with the overall traded volume of 2.00 million shares. Capital expenditure for 2017 is expected to remain at USD7.0 billion.