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Rio Has Less-Than-Expected Second-Half Loss, Boosts Dividend

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Rio Tinto’s Second-Half Loss Widens on Aluminum, Coal Writedowns
A visitor walks through the foyer of the Rio Tinto Tower, which houses the offices of Rio Tinto Group, in Brisbane. Photographer: Patrick Hamilton/Bloomberg

Feb. 14 (Bloomberg) -- Rio Tinto Group, the world’s second-largest mining company, had a better-than-expected second-half loss on a $14 billion one-time charge, as earnings at its iron ore unit beat analyst expectations and it lifted its dividend.

The loss was $8.9 billion in the six months ended Dec. 31, from a $1.76 billion loss a year ago, London-based Rio said today in an e-mail. That’s better than the $10 billion median estimate of five analysts surveyed by Bloomberg. The loss, the biggest in at least 15 years, was driven by writedowns on the value of its aluminum and coal businesses and offset by an almost $1 billion gain at its minerals sands operations.

The writedowns saw Sam Walsh last month named as chief executive officer, replacing Tom Albanese who signed off on the $38 billion takeover in 2007 of Alcan Inc. Rio, which reported full-year underlying earnings that beat analyst expectations, said today it boosted its full-year dividend by 15 percent and accelerated expansion at its iron ore mines in Australia.

The increase in the dividend is “a nice surprise,” Glyn Lawcock, head of resources research for UBS AG in Sydney, said in an e-mail. The iron ore expansion running ahead of schedule is “a big positive for Rio, but may make the market more nervous about” iron ore supply in the near-term, he said.

Rio rose 2.3 percent to A$72.07 at the close of trading in Sydney. The key S&P/ASX 200 Index gained 0.7 percent. Rio’s shares rose 9.5 percent last year, compared with a 7.8 percent gain for BHP, the biggest mining company.

‘Positive Momentum’

“We see positive momentum in the fourth quarter last year being sustained into 2013 with Chinese GDP growth returning to above 8 percent in 2013,” Walsh said in a statement. “We expect market uncertainty and price volatility to persist as long as the structural issues in Europe and the United States remain unresolved.”

Full-year underlying earnings of $9.2 billion beat consensus estimates by 2.5 percent, UBS’s Lawcock said. Full-year underlying earnings from iron ore, Rio’s biggest profit contributor, fell 30 percent to $9.2 billion on lower prices, beating consensus estimates of $8.99 billion, according to Bloomberg data.

Iron ore prices averaged 27 percent lower during the six months to Dec. 31 at about $116 a metric ton compared to last year, data from The Steel Index shows. Prices have since recovered from a three-year low in September to a 15-month high of $158.50 a ton last month on signs of economic recovery in China, the biggest consumer of industrial metals.

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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