Here's Why Rio Tinto's Latest Earnings Are Driving a Boost
On Wednesday, $Rio Tinto (RIO.US)$ reported half-year underlying earnings growth in line with market estimates, as gains in its copper and aluminum businesses offset lower iron ore prices.
The company's shares gained attention after releasing half-year results, rising 2.5% to $117.48 yesterday. Amid escalating geopolitical tensions following Hamas' leader's assassination, resource stocks surged, with Rio Tinto increasing nearly 2% today.
H1 Profit Surge from Copper Boom
Rio Tinto reported a net profit of $5.8 billion for H1 2024, up from $5.1 billion the previous year, driven by higher copper production and prices despite lower iron ore prices. Consolidated sales revenue slightly increased to $26.8 billion. Profit after tax reached $5.9 billion, including $100 million from non-controlling interests, compared to $4.9 billion with a $200 million loss in H1 2023. Underlying EBITDA rose 3% to $12.93 billion, while free cash flow dropped 25% to $2.84 billion. Net debt stood at $5.07 billion. Operating activities generated $7.1 billion in net cash, up 1%. CEO Jakob Stausholm highlighted a projected 2% growth in copper production this year and a 3% annual growth target from 2024 to 2028.
Our overall copper equivalent production is on track to grow by around 2% this year, and our ambition is to deliver around 3% of compound annual growth from 2024 to 2028 from existing operations and projects," Rio Tinto CEO Jakob Stausholm said.
Rio Tinto announced it is open to major copper acquisitions if they provide exceptional value, despite the high costs in the current market. The company is focusing on expanding its copper business to meet strong anticipated demand. The company is particularly counting on the Oyu Tolgoi underground mine in Mongolia to become the world’s fourth-largest copper operation by 2020.
Copper and Lithium Growth: An Emerging Strategic Focus
Analysts at Macquarie anticipate that Rio Tinto's growth in copper and lithium will become a strategic focus for investors. CEO Stausholm noted the company's copper equivalent production is on track to increase by about 2% this year, with an ambition for a 3% compound annual growth rate from 2024 to 2028. Rio Tinto recently regained its license to develop the Jadar lithium project in Serbia, which could meet 90% of Europe's current lithium needs and position the company as a leading lithium producer. The company reported net debt of $5.1 billion and free cash flow of $2.8 billion, and expects capital investment in the Simandou iron ore mine to accelerate in the latter half of the year.
Goldman Sachs Bullish on Rio Tinto's Positive Production Growth Outlook
Goldman Sachs is optimistic about Rio Tinto's shares continuing to rise, primarily due to the company's positive production growth outlook.
The broker was pleased with Rio Tinto's 1H24 performance, reporting underlying EBITDA/NPAT of $12.1bn/$5.8bn, which was in line with expectations and showed year-over-year growth. Key projects like Simandou, Pilbara, and Oyu Tolgoi are on track, with an expected copper equivalent production growth of around 3% CAGR from 2024-2028. Additionally, Rio Tinto has several high-quality projects ready to proceed pending government approvals and opportunities to improve underperforming assets.
Strong Demand Expectations in China
Iron ore prices fell by about 15% in the first half of the year due to China's weak economic growth from a prolonged property crisis. However, Rio Tinto remains optimistic, stating that the outlook in China should support solid demand for commodities.
We see the Chinese economy growing plus or minus 5 percent and that is very good for commodity markets. You also see the US growing. Not fantastic, but absolutely underpinning good markets and good demand for our products," CEO Jakob Stausholm told a media call.
Rio Tinto's Diavik Mine Incurs a Loss
Rio Tinto reported a downturn in its Diavik diamond mine in Canada, which incurred a $65 million loss in the first half of the year, contrasting with a $44 million profit during the same period in 2023. While the company saw a 15% overall profit increase to $5.8 billion, diamond sales revenue fell 40%, and production dropped 25%. The decline in Diavik's performance was attributed to lower diamond volumes, a transition to underground operations, and a plane crash in January that killed six people.
Source: Rio Tinto, Yahoo Finance, MINING.COM, The Motley Fool
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
Read more
Comment
Sign in to post a comment
Moomoo News Official Account
Australian stock market news that is available at your fingertips
4368Followers
6Following
135KVisitors
Follow