Welcome to the new Independent website. We hope you enjoy it and we value your feedback. Please contact us here.

Rio Tinto posts big profit drop but pays down debt

Rio Tinto unveiled a record 64 per cent drop in first-half profits yesterday, saying it was "cautious" about the short-term outlook for commodities.

A slump in demand and depressed prices took a toll on the world's second-largest mining group, pushing revenues down by 31 per cent to $27.2bn (£16.5bn) and pre-tax profits down 55 per cent to $4.39bn. There will be no interim dividend, as announced in June.

Rio's aluminium business has been hit hard, losing $206m before interest, tax, depreciation and amortisation, compared with earnings of $2.38bn in the period last year. Earnings at its iron ore division fell $1.5bn to $3.2bn.

The company's new chairman, Jan du Plessis, said: "We remain cautious about the recent price rally. However, expectation that development in emerging markets will generate underlying strength in metals and minerals de-mand long term is broadly unchanged."

Rio's first-half performance is broadly in line with those of its peers, and the Anglo-Australian group has made progress in paying down its problematic $38bn debt. This week Rio announced the sale of parts of its Alcan packaging business to Amcor for $2bn, hot on the heels of the sale of the US packaging division to Bemis for $1.2bn. This year the company has sold its interest in the Ningxia aluminium smelter for $125m, its potash and Brazilian iron ore assets for $1.6bn, and a US coal mine for $761m.

The $3.7bn list of divestments is crucial to help Rio Tinto to pay down the debt accrued with its top-of-the-market purchase of the aluminium giant Alcan in 2007. With $8.9bn of repayments this year, and another $10bn next, the company's management brokered a $19.5bn tie-up with China's state-owned Chinalco. But the deal soured in favour of last month's $15.2bn rights issue, alongside plans for an operational tie-up with arch-rival BHP Billiton at the companies' iron ore mines in Pilbara in Australia. Cost-cutting, including 16,000 job losses, will improve second-half performance, the chief executive, Tom Albanese, said.