Rio Tinto shareholders gain as miner's profit soars

Mining giant Rio Tinto Wednesday reported a 93 percent jump in first-half net profit on the back of rising commodity prices as it returned a bumper US$3.0 billion to shareholders.

The Anglo-Australian firm said net profit was US$3.31 billion in the six months to June 30, compared to US$1.71 billion in the same period last year.

Underlying profit, the measure preferred by Rio, jumped 152 percent to US$3.94 billion, narrowly missing analysts' estimates.

"These are strong results," chief executive Jean-Sebastien Jacques said in a statement.

"Today we have announced total cash returns to shareholders of $3 billion. By driving performance, focusing on cash and allocating it with discipline we are delivering superior cash returns to our shareholders."

As tipped by analysts, Rio declared a large interim dividend payout of 110 US cents, totalling US$2.0 billion, compared to 45 US cents for the corresponding period last year.

The company also announced an increased buy-back of US$1.0 billion in its London-listed shares by the end of the year, which are in addition to a US$500 million buy-back programme declared in February.

Rio is expected to come into more cash when the sale of most of its Australian coal assets to China-backed Yancoal for US$2.45 billion is completed.

"Overall, it wasn't as good a result as we thought," Fat Prophets resources analyst David Lennox told AFP.

"(But) it's good to have a good, solid first-up company reporting, even if it was under consensus. It sets the bar, we hope, for the rest of the reporting season for resources."

The world's biggest miner BHP reports its annual results later this month.

- Commodity price rebound -

Rio, like other miners, has benefited from the rebound in prices of its main commodity iron ore after a slump brought on by a supply glut and a slowdown in growth in the world's top commodities consumer China.

Underlying profit for iron ore rose by 63 percent and soared 170 percent for the energy and minerals division, which is mostly coal.

The headwinds during the earlier price plunge saw Rio tighten its belt, with continued cost-cutting leading the miner to reach its reduction target of US$2 billion for 2016 and 2017 six months early.

Net debt also fell 21 percent to US$7.6 billion as of June 30 from the end of 2016, while capital expenditure is expected to remain at about US$5.0 billion for 2017 and US$5.5 billion for the following two years.

Jacques said Rio was "now shifting gear to focus on the untapped value from our productivity programme" while strengthening its portfolio to grow returns.

While commodity prices look set to remain firm in the second-half, further surges are not expected, Lennox said, with productivity a key focus going forward.

"Overall, they will still have a good full-year result. This first-half has set them up for that, it's just a matter of how much carry-through they get in the second-half," he added.

"That's why they've continued to put cash flow into reducing debt and buying back scrip rather than paying a special dividend."

Shares in Rio closed 0.17 percent down to Aus$65.84 ahead of the result.