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.