RIO Sales Up, Misses Estimate (BHP) (RIO) (VALE)

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Rio Tinto plc. (RIO) has reported financial results for the first half of 2011. Net earnings attributable to ADR holders of Rio Tinto during the period were $7,587 million, up 30% year over year from $5,845 million reported in the first half of 2010.

Earnings per ADR were $3.87, up from $2.97 recorded in the previous year. The recorded earnings were marginally below the Zacks Consensus Estimate of $3.90.

The increase was due to favorable market condition worldwide fuelled by strong Asian demand and rise in prices of metals and minerals. Average copper and aluminum prices increased 31% and 20%, respectively and average molybdenum prices went up by 13%. Gold prices also moved up by 26%.

Gross sales during the first half of 2011, moved up by 21% to $31,764 million from $26,246 million in the prior year, driven by high-performing operations coupled with higher sales prices of the products.

Operating profit in the reported period was recorded at $11,056 million compared with $8,023 million in the year-ago comparable period. Operating margin improved to 34.8% from 30.6% in the same period of the previous year. Underlying EBITDA grew 27% year over year to $14,253 million from $11,256 million.

Capital expenditure was recorded at $5.1 billion in the reported period compared to $1.8 billion in the first half of 2010, reflecting Rio’s investment in growth assets.

Net cash generated from operating activities was recorded at $8,656 million compared with $7,175 million in the year-ago period. Net decrease in cash and cash equivalents was reported at $2,464 million compared to a decrease of $837 million a year ago.

Cash flow from operations was up 31% year over year to $12.9 billion in the first half of 2011.

During the reported period, the company completed Pilbara iron ore expansion program and Riversdale acquisition. The company’s share buy-back increased to $7 billion and is expected to be completed by the end of the first quarter of 2012. Rio declared an interim dividend of 54 cents per share, in line with the previous guidance.

The company remains positive for fiscal 2011 based on the global market growth and rising Chinese GDP.

Headquartered in London, UK, Rio Tinto plc is engaged in exploring, mining, and processing the earth's mineral resources, producing a broad range of metals and minerals. Rio Tinto competes against global mining giants like BHP Billiton Ltd (BHP) and Vale S.A (VALE).

We currently have a Neutral recommendation on the stock. Rio Tinto has a Zacks #2 Rank, which implies a short-term (1-3 months) Buy rating.

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