Rio Tinto Group reported a drop in first-half profit and cut its dividend again as China’s economic slowdown continues to dampen earnings for the world’s biggest mining companies.
(Bloomberg) — Rio Tinto Group reported a drop in first-half profit and cut its dividend again as China’s economic slowdown continues to dampen earnings for the world’s biggest mining companies.
The mining sector was one of the biggest winners from the post-pandemic recovery as pent up demand and supply shortages sent many metals to record highs. That allowed miners such as Rio and larger rival BHP Group to return record dividends to shareholders as profits climbed to all-time highs.
Yet since then, China’s prospects — and with it the miners — have cooled. Economic output in the world’s biggest consumer of commodities is growing more slowly than expected, while data on everything from consumption and trade to the property market is also worsening.
For Rio, that meant softer prices for iron ore, aluminum and copper, its main sources of revenue. Rio reported underlying earnings of $5.7 billion in the first half, down from $8.7 billion last year, but in line with analyst estimates.
It will pay a $2.9 billion dividend compared with $4.3 billion it returned in the same period in 2022. Rio’s payment was in line with its payout policy of 50% of its underlying earnings.
Despite lower earnings and returns, profitability for the biggest miners remains strong by historical standards. Yet there are growing concerns about China’s crucial property sector, and a wider global slowdown, that’s depressing metal prices.
Weaker pricing and lower profits hasn’t stopped the mining industry from starting to pivot toward growth after years of focusing on investor returns.
Rio completed its biggest deal in a decade last year, spending $3.1 billion to gain more control of a giant copper mine in Mongolia. It’s also aiming to build a mine at the world’s biggest untapped iron ore deposit in Guinea and develop a lithium business.
Rio is the first of the major diversified miners to report earnings. Anglo American Plc reports its own first-half results on Thursday, while Glencore Plc will post earnings in the second week of August.
(Updates with payout policy in fifth, investment projects in eighth)
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