Commodities slump to hit Rio Tinto

RIO Tinto's first half earnings are expected to plunge 51 per cent due to a slump in commodity prices, when the mining giant reveals its results this week. The consensus forecast of 14 analyst projections shows underlying earnings are expected to come in at $US2.681 billion ($3.19 billion), down 51 per cent from $US5.474 billion ($6.5 billion) in the first half of 2008. The expected earnings fall will follow a decline in major metals prices in the past year, which has savaged some of Rio Tinto's key divisions, including iron ore and aluminium. ABN Amro resources analyst Warren Edney has forecast underlying earnings of $US2.681 billion ($3.19 billion) for the half - in line with consensus. "If it comes in at $US2.6 billion ($3.09 billion), no one will be surprised, and it will come down to whether there are big differences at a divisional level," he said. Mr Edney said investors will be watching to see if the company flags new asset sales and for any news on a potential sale of Rio Tinto's Alcan packaging assets to Amcor. Bell Potter Securities is forecasting interim underlying earnings of $US2.756 billion ($3.27 billion), and earnings before interest and tax (EBIT) at $US4.118 billion ($4.89 billion). The figure includes the $US800 million ($A950.57 million) sale of key potash assets to Brazilian miner Vale. Of Rio Tinto's key divisions Bell Potter expects only aluminium to post an EBIT loss in the first half of 2009, of $US1.266 billion ($1.5 billion). It predicts the iron ore division's first half EBIT will come in at $US3.41 billion ($4.05 billion), energy and minerals at $US1.398 billion ($1.66 billion), and copper and diamonds $US576 million ($A684.41 million). Bell Potter Securities client adviser Chris Kimber said Rio Tinto might disclose more planned asset sales, and that overall he expects next week's results to be positive. "They have been under a lot of pressure to provide guidance and I would imagine they would be more likely to report in line or above expectations," Mr Kimber said. In the past 18 months, Rio Tinto management has come under scrutiny for the way it dealt with an attempted takeover by BHP Billiton and a failed $US19.5 billion ($23.17 billion) investment deal with a Chinese state-owned company. Rio Tinto will reveal its half year results on Thursday.