By David Winning
SYDNEY--Rio Tinto PLC lifted its mid-year dividend payout despite a 20% fall in its net profit, as it balanced high iron-ore prices with an uncertain global economic outlook.
Rio Tinto on Wednesday reported a net profit of $3.32 billion in the six months through June, down from $4.13 billion in the same period a year earlier when it wrote down its investment in the Oyu Tolgoi copper deposit in Mongolia. Management said the on-year decline in statutory profit reflected higher impairment charges, exchange-rate losses and extra closure costs for some assets.
The company said its first-half underlying earnings fell by 4% to $4.75 billion, beating the $4.09 billion forecast from a Wall Street Journal poll of analysts.
Directors of the world's second-biggest mining company by market value declared an interim dividend of $1.55 a share, up 3% on a payout of $1.51 a year ago.
"Despite the challenging backdrop, we generated underlying earnings before interest, tax, depreciation and amortization of $9.6 billion, with a margin of 47%, driven by our strong and stable operations, with all of our assets continuing to operate throughout the first half," Chief Executive Jean-Sébastien Jacques said.
The global economy suffered a severe contraction in the three months through June, as the U.S. grappled with the spread of the coronavirus and other countries faced second waves of infections that are proving harder to contain than initial outbreaks. Many economies have started to reopen, but pandemic flare-ups have made it a bumpy process and authorities have often had to reverse course and tighten restrictions once again.
Navigating disruptions to commodities supply and demand has been a challenging task for global mining companies, with the potential to create winners and losers depending on where operations are based.
Iron-ore prices this month topped $110 a metric ton as supply from Brazil was disrupted by the spread of the coronavirus at some mine sites run by Vale SA. In contrast, Australia's iron-ore production is in a region largely unaffected by the virus, enabling miners including Rio Tinto and BHP Group Ltd. to continue high shipments of the commodity.
Rio Tinto's iron-ore exports rose 1% in the three months through June and it continues to forecast annual shipments of between 324 million tons and 334 million tons. BHP's iron-ore output rose 11% in its most recent quarter.
A recent strengthening of demand in China, the world's top buyer of iron ore and many other commodities, has provided another boost. China this month said its economy in the second quarter grew 3.2% from a year earlier, helped by an aggressive campaign to eradicate the virus within its borders. Steel utilization rates in the country have improved.
Still, Mr. Jacques has been cautious about the outlook, particularly for copper. The Escondida copper mine in Chile is operating with fewer workers as part of a strategy to limit the risk of the coronavirus spreading. Rio Tinto estimates the pandemic has disrupted 3%-4% of global copper supply, and warns this could increase further.
Rio Tinto said its net debt totaled $4.83 billion at the end of June, down from $12.90 billion four years ago.
Write to David Winning at email@example.com