[miningmx.com] — GLOBAL miner Rio Tinto reported a 35% jump in first-half profit on Thursday, but it missed market expectations and sweetened the result with a $2bn expansion of its existing share buyback programme.
Booming iron ore sales to China helped propel underlying profit to $7.8bn for the six months ended June, a record for the first half but below analysts’ consensus forecast of $8.03bn.
“Their announcement shows they are witnessing quite a lot of cost pressure hit by exchange rates and inflation. But they are also still exuding confidence for strong growth from China,” said Peter Chilton, investment analyst at Constellation Capital Management.
Rio Tinto also boosted its interim dividend to 54 US cents per share from 45 cents a year earlier.
Rio Tinto joins major rivals Anglo-American Plc and Xstrata Plc in overcoming spiralling costs and restive labour unions to report profit growth of a third or more over the past week, thanks to surging commodity prices.
But with the global economy on edge, bedevilled by debt crises in Europe and the United States, the outlook remains uncertain, with investors worried about a return to global financial turmoil and a knock-on effect for commodity prices.
“We remain positive for the remainder of 2011 and into 2012, in CEO Tom Albanese said in the results statement.
“However there are important risks to this outlook related to the pace of credit tightening in developing countries and the threat of financial crises arising from sovereign debt problems in Europe and the United States which could destabilise commodity markets.”
Iron ore net earnings, which accounted for 78% of Rio Tinto’s group profit, surged 44% in the first half, while aluminum profits edged 3.5% higher.
Earnings from the energy division, which includes coal and uranium, tumbled 39%, partly reflecting flooding at its Australian collieries and at the operations of its Australian uranium subsidiary, Energy Resources of Australia .
The strong Australian dollar also weighed heavily on Rio Tinto’s earnings.
