Rio Tinto (NYSE: RIO) said on Wednesday it saw a sharp V-shaped recovery in China as stimulus spurred industrial activity, helping its first-half profit handily beat market expectations.<\/p>\n
“We believe that China has enjoyed a very steep V-shaped recovery,” CEO Jean-S\u00e9bastien Jacques said in a call.<\/p>\n
“Today we see it as that the demand for steel and iron ore in China is very, very strong and order books are full,” Jacques said.<\/p>\n
That rebound helped it report half-year underlying earnings of $4.75 billion, beating a consensus of $4.36 billion from 16 analysts compiled by Vuma.<\/p>\n Free cash flow tumbled 28% as the miner spent more on development projects and tax payments<\/p>\n<\/blockquote>\n<\/figure>\n The world’s largest iron ore miner declared an interim dividend <\/a>of $2.5 billion, equivalent to $1.55 per share, up from $1.51 last year, and reconfirmed 2020 production guidance across all commodities. <\/p>\n Rio 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.<\/p>\n The company’s iron-ore exports rose 1% in the three months through June and it continues to forecast annual shipments of between 324 million tonnes and 334 million tonnes.<\/p>\n “Big questions remain over the trajectory of consumer spending globally in the face of significant levels of unemployment,” Jacques said.<\/p>\n Rio said in its earnings statement that it had taken a $1 billion impairment charge, largely related to four of its aluminium smelters as well as its Diavik diamond mine in Canada.<\/p>\n High power prices forced Rio to close its New Zealand smelter this year and to ask Icelandic regulators to address what it called discriminatory power pricing for its ISAL smelter.<\/p>\n Its Australian aluminium businesses remain under review.<\/p>\n Free cash flow tumbled 28% as the miner spent more on development projects and tax payments, but analysts at Jefferies remained upbeat about its prospects.<\/p>\n Higher metal prices and relatively stable unit costs should help free cash flow improve sequentially in the second half, they said, and suggested Rio could pay a special dividend with its full-year results.<\/p>\n “We have continued to pay the same level of taxes, same level of employment, the same dividend,” Chief Financial Officer Jakob Stausholm told Reuters.<\/em><\/p>\n “But for a special dividend, it\u2019s better to wait a moment to make such considerations.”<\/p>\n The company said is working with partners to “reduce capital intensity, lower operating costs and shorten the timetable for development” of the high-grade Simandou iron ore project in Guinea<\/a>. Fieldwork involving geotechnical investigation and surveying will start in Guinea this half.<\/p>\n\n