Rio Tinto sees H1 profits jump on cost-cutting

7th Aug 2014 08:37

- Underlying earnings up 21%- Cost reduction targets reached ahead of schedule- Operating cash flow rises 8%, dividend up 15%Rio Tinto hailed an "outstanding performance" in the first half as underlying earnings jumped by over a fifth and cash flow generation increased, with the miner topping its cash cost reduction target ahead of schedule.The company said it now expects to spend $9bn on projects this year, $2bn below previous guidance, before falling to $8bn from 2015 onwards.Underlying earnings totalled $5.12bn in the first half of 2014, up 21% on the same period of 2013, with all but one of its product groups seeing an improvement year-on-year.The group registered a 10% increase in underlying earnings in iron ore, its largest division, to $4.68bn, as shipping volumes and production hit record highs.Aluminium earnings grew 74% and copper rose 71%, while losses were trimmed in energy as well as 'other operations' which include the Gove alumina refinery. However, profits from the diamonds and minerals division slipped 17% on last year.Rio said it has now achieved $3.2bn of sustainable operating cash cost improvements since 2012, exceeding the $3bn reduction targeted for the end of 2014. The company said it now expects to realise a further $1bn in savings by the end of 2015.Cash flows from operations rose by 8% year-on-year to $8.7bn, as cost reductions and strong volume growth compensated for lower commodity prices.Increased cash flows, along with sharply reduced capital spend and proceeds from divestments, helped net debt to fall by $1.9bn over the six months to $16.1bn.Rio increased its interim dividend by 15% to 96 cents per share."Our outstanding half year performance reflects the quality of our world-class assets, our programme of operational excellence and our ability to drive performance during a period of weaker prices," said chief executive Sam Walsh. "These results show that our current strategic and management focus is making a meaningful contribution to cash flow generation."The stock was up nearly 3% at 3,488p in early trading on Thursday.BC