Premium industrial metals & minerals company, Rio Tinto plc RIO reported weak results for first-half 2015 (six months ended June 30, 2015). Macroeconomic issues such as recession in China, Greece debt negotiations and weak prices of commodities in the global mining industry were primarily responsible for the dismal results.
Underlying earnings came in at $2.9 billion, down 42.9% from the year-ago tally of $5.1 billion. Underlying earnings per ADR came in at $1.59 compared with $2.77 accrued in the year-ago comparable period.
Sales: Consolidated sales in first-half 2015 fell to $18 billion, $6.4 billion lower than the value generated in first-half 2014. The year-over-year decline was primarily triggered by lower commodity prices in the market.
Costs/Margins: Rio Tinto’s exploration and evaluation costs declined 28.5% year over year to $243 million as of Jun 30, 2015. Operating profit was $3.3 billion compared with $5.6 billion accrued a year ago.
Balance Sheet/Cash Flow: Exiting first six months of 2015, cash and cash equivalents amounted to $11.2 billion, up from $9.6 billion at the end of 2014. Long-term borrowings and other financial liabilities were recorded at $20.9 billion compared with $22.5 billion at 2014-end.
Net cash generated from operating activities in first-half 2015 was $4.4 billion compared with $5.5 billion in the preceding year. Capital expenditure decreased to $2.5 billion from $3.8 billion in first-half 2014.
In first-half 2015, Rio Tinto paid dividends worth $2.2 billion and announced a 12% hike in its interim dividend – to 107.5 cents. The company repurchased shares worth $1 billion in the first half of 2015.
Outlook: Rio Tinto has maintained its latest production guidance for full-year 2015. Notwithstanding the external market adversities, the company expects to improve its margins on the back of greater capital discipline and effective operational strategies, going forward.
Stocks to Consider
Rio Tinto currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Capstone Mining Corp. CSFFF, Solitario Exploration & Royalty Corp. XPL and Zenyatta Ventures Ltd ZENYF. While Capstone Mining Corp. sports a Zacks Rank #1 (Strong Buy), both Solitario Exploration & Royalty Corp. and Zenyatta Ventures Ltd carry a Zacks Rank #2 (Buy).
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