‘In challenging times, that’s when we thrive,’ Rio Tinto’s chief exec Sam Walsh told MT earlier this year. That’s perhaps just as well, given the Anglo-Australian mining giant’s fortunes of late, as profits have been hit hard by the plummeting price of commodities.
Today the company said its underlying earnings, its preferred performance measure, crashed by 43% to $2.9bn (£1.9bn) in the six months to June, while revenues were down 26.2% to $18bn in the same period.
The mining industry has been hit hard recently by the slowdown of resource-hungry China, whose GDP growth dropped to a healthy but comparatively low 7.4% last year. For Rio that’s led to a 55% decline in its underlying earnings from iron ore, the core of its business (the price of which slumped 48% last year), and a 40% drop for copper and coal.
‘This is a robust set of results, given the tough operating environment,’ said Walsh, who highlighted ‘stable margins’ and $641m of cost savings as signs the company was still performing well. ‘The early and decisive actions we started taking in 2013 provide a strong base for the business.’
There are certainly signs that, despite the difficult market, Rio is making the best of things. Its share price may have slumped by more than 20% over the past year, but that’s substantially up on its key London-listed competitors Anglo-American, BHP Billiton and Glencore Xstrata.
Rio Tinto's share price (blue) versus that of Glencore (red), Anglo-American (green) and BHP Billiton (purple)
That might explain why the latter, which seemed so keen on a merger with Rio last October, has shown few signs of a takeover bid since its opportunity to launch one opened again back in April. Today’s results, which were better than analysts expected, are unlikely to tempt Glencore CEO Ivan Glasenberg to join the fray again just yet.