Rio Tinto says HY profit down 6%

Rio Tinto Limited (RIO) reported a 6% decline in underlying first-half profit to US$3.53 billion, coming in short of broader market expectations of US$3.7 billion. The company said that increasing costs and unfavourable exchange rates outweighed the benefits of higher prices for its copper, iron ore, and other industrial commodities. Chairman Paul Skinner said the outlook for Rio's products remains positive although the supply response to growing Chinese demand is likely to remain constrained. "While there are concerns about the state of the credit markets, particularly in the U.S., we do not anticipate that these will have a material short-term impact on our markets," he said. Gross revenue for the half was US$13.93 billion, up from US$12.11 billion in the previous corresponding period. Rio said its copper and iron ore divisions remained the biggest income earners in the half year, thanks to strong market prices. In the first half, Rio saw a 13% rise in copper prices versus first half 2006, while aluminium showed a 10% gain. With $38.1 billion takeover of Alcan nearly complete, Rio will become the world's biggest aluminium maker. Chief executive Tom Albanese said that operationally, the first six months of 2007 were demanding. He said that mine labour and equipment costs, notably in Australia, are rising, reducing underlying earnings by $503 million. A weaker U.S. dollar cut a further $118 million in underlying earnings, the group advised. The company also said that there were no abnormal boosts to earnings, unlike in the first half of last year when Rio recognised $211 million in tax benefits. On balance, all our businesses have performed well, but we are alert to continuing industry-wide cost pressures, notably in Western Australia and Queensland," Mr Albanese said. The global mining giant posted an interim dividend of 52c per share, in line with expectations and up from the 40c it paid last year. Shares in Rio Tinto finished $2.48 lower at $88.72.