Rio Tinto announces a 21 per cent increase in first half underlying earnings to $5.1 billion

Rio Tinto chief executive Sam Walsh said “Our outstanding half year performance reflects the quality of our world-class assets, our programme of operational excellence and our ability to drive performance during a period of weaker prices. These results show that our current strategic and management focus is making a meaningful contribution to cash flow generation.

“During the first half we have increased underlying earnings by 21 per cent to $5.1 billion and enhanced operating cash flow by eight per cent. We delivered what we said we would, exceeding our $3 billion operating cash cost reduction target six months ahead of schedule while producing record volumes and driving productivity improvements across all our businesses.

“We have decreased net debt by $6.0 billion compared with this time last year, through our stronger operating cash flows, sharply reduced capital spend and proceeds from divestments. We are confident Rio Tinto’s low cost, diversified portfolio will continue to generate strong and sustainable cash flows over the coming years. This solid foundation for growth will result in materially increased cash returns to shareholders, underscoring our commitment to deliver greater value.”

First half results demonstrate the strength of our business

• Increased underlying earnings by 21 per cent to $5.1 billion. Underlying earnings per share rose to 276.8 US cents.
• Achieved $3.2 billion of sustainable operating cash cost improvements since 2012, exceeding the $3 billion reduction target six months ahead of schedule. Momentum in cost reductions is now expected to realise a further $1 billion of savings by the end of 2015.
• Shipped record iron ore volumes, set production records for iron ore and thermal coal and delivered a strong operational performance in copper.
• Increased cash flows from operations by eight per cent to $8.7 billion.
• Reduced capital expenditure to $3.6 billion in the first half. 2014 capex is now expected to be around $9 billion, $2 billion below previous guidance, and around $8 billion each year from 2015.
• Decreased net debt by $1.9 billion in the first half to $16.1 billion at 30 June 2014. This compares with $22.1 billion at 30 June 2013. Reduced adjusted total borrowings by $2.5 billion in the first half to $25.7 billion at 30 June 2014.
• Achieved EBITDA of $1.1 billion in Aluminium, up 26 per cent on 2013 first half, despite London Metal Exchange (LME) aluminium prices averaging nine per cent lower.
• Completed the review of the Kitimat Modernisation Project: total approved capital now stands at $4.8 billion. Net earnings of $4.4 billion reflect $0.8 billion of further impairments related to Kitimat, non-cash exchange rate gains of $0.6 billion and other excluded charges of $0.5 billion.
• Increased interim dividend by 15 per cent to 96 US cents per share.

The financial results are prepared in accordance with IFRS and are unaudited. ¹Underlying earnings is the key financial performance indicator which management uses internally to assess performance. It is presented here to provide greater understanding of the underlying business performance of the Group’s operations attributable to the owners of Rio Tinto. Net and underlying earnings relate to profit attributable to owners of Rio Tinto. Underlying earnings is defined and reconciled to net earnings on page 49.