The Week Ahead: Rio Tinto mines rich seam as commodities surge

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The Independent Online

The bull market for commodity stocks shows no sign of slowing down. Almost every mining-related stock is trading at or around an all-time high with a rash of brokers expecting more of the same in the near future.

On Thursday Rio Tinto becomes the first of the large cap commodities stocks to report full-year figures for 2005, and brokers have hardly a bad word to say about a company whose market capitalisation has more than doubled in the last 12 months to almost £32bn. Despite its meteoric rise, no analyst is recommending selling the stock.

Consensus analyst forecasts are looking for pre-tax profits of £4.04bn from Rio, although both joint house brokers Credit Suisse and JP Morgan Cazenove declined to say what they are expecting Rio to report. Anything below £4bn could send the shares tumbling, although most analysts think a major shortfall extremely unlikely. Underlying commodity prices remain strong and global demand, from China particularly, is still a long way from being matched by supply.

Analyst Paul Singer at Barclays Stockbrokers says: "Rio's 2005 results will be very strong and the outlook statement should also be encouraging. The results will reflect the recently released fourth-quarter production data, which were strong across most of the major product groups."

Oil will also be in the spotlight on Thursday as Royal Dutch Shell also reports its first set of full-year numbers since the company became solely listed in London. With oil trading at around $70 a barrel, most dealers and analysts are expecting a bumper year. As the sole blot on Shell's landscape is the situation in Nigeria, most are expecting the company to report record profits, although since the company ended its dual listing no broker forecasts are available.

Rio Tinto and Shell may be making hay while the sun is shining, but the same cannot be said for BSkyB, due to report interim results on Wednesday. The broadcaster is seen by many analysts to have entered a phase of consolidation and increasing competition, and the market will be looking for signs that the company may have gone ex-growth. Since the company updated the market in December about hitting its subscriber targets, no surprises are expected there, although it should provide an update on the integration of Easynet, acquired in autumn last year.

Broker Numis Securities is expecting pre-tax profits of £370m, a rise of 8 per cent on the same period last year. In a pre-results note to clients it said: "We have become progressively more cautious on BSkyB and our current hold recommendation is driven by our top-down concerns over consumer-facing UK media, combined with increasing competition from Freeview, cable and (soon) BT."

TODAY: Interest in information technology hardware manufacturer Filtronic has waned since the heady days of the late 1990's to such an extent that the most recent analyst note on the company, from broker JP Morgan Cazenove, dates back to August 2005. Then, the shares were trading at 231p and have done little since to close last week at 247p. Consensus forecasts for 2005 year indicate that the market is looking for pre-tax profits of £10.1m

Results: Full year - Amino Technology; First Artist Corporation. Half year - Filtronic.

TOMORROW: Like Filtronic, ARM Holdings was once among the stars of the dot-com boom. Like the others, its fall from grace has been spectacular. The final ignominy for the company came in late 2002 when the shares fell to below 50p. Since then the shares have risen steadily, closing at 138p on Friday last week. Graeme Neale, head of research at broker Killik & Co, expects the company to report a good final quarter, showing integration with Artisan making good progress. "We believe that much of the integration with Artisan is now behind them and the outlook for royalty and license revenues is good. We are optimistic about these results and the shares should react well to good numbers."

Results: Full year - ARM Holdings; Kensington Group. Second quarter - Surfcontrol.

WEDNESDAY: AstraZeneca concludes the biggest reporting day of the year so far by announcing its full year numbers for 2005, the first set to be presented by the new chief executive, David Brennan. Its shares have risen by more than 50 per cent in the past 12 months but the company will need to deliver a stellar set of numbers if that is to continue. Analysts are looking for pre-tax profit growth in low double digits.

Results: Full year - Astrazeneca; Rio Tinto; Royal Dutch Shell; Wolfson Microelectronics; Belgravium Technology. Half year - BSkyB; Caffe Nero.

THURSDAY: Results: Third quarter - British Airways.

FRIDAY: Results: None expected.

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