Rio Tinto H1 profit dips amid darkening conditions for mining sector

Rio Tinto’s profit in the first half of 2022 dropped to US$8.6 billion – compared with a record $12.2 billion last year – and the Anglo-Australian firm more than halved its dividend payment, in a clear sign of dark clouds forming in the global mining industry.

Rio, which became the first of the mining majors to report its half-year results this morning, said it would pay a dividend of $4.3 billion, or 50% of underlying earnings. While still in line with its policy, the dividend is significantly lower than last year’s $9.1 billion payment and below analyst expectations.

The LSE and ASX-listed company’s weaker performance was a symptom of falling commodities prices in the last three months of the half-year, based on the growing likelihood of a demand-sapping global recession.

An enveloping crisis in the property sector of key commodity consuming nation China has further exacerbated fears about demand for a range of metals across the mining sector.

Chief executive Jakob Stausholm defended the dividend payout of 276 cents per share, pointing to the falling iron ore price, which ‘was more than twice as high as it is today’ a year ago. Rio is the world’s largest producer of the steelmaking ingredient.

“You also have to look at the absolute number — $4.3 billion is a staggering amount,” he said. “We are very proud of what we are paying out.”

Rio’s lower profits for the six months to June was predominantly driven by a weaker performance from its iron ore unit, where underlying earnings dropped 37% to $6.5 billion.