The share price of Rio Tinto (LSE: RIO) (NYSE: RIO.US) was broadly flat during early trading this morning, losing 0.5% to 3,488p, despite the miner announcing an increase in underlying earnings by 10% to £6bn, after higher iron ore prices and cost cutting helped turn around fortunes. The stock has dropped 6% over the last 12 months.
The London-based company exceeded or met all targets, adding that it is on track to cut nearly £2bn of operating costs this year, while the balance sheet has been strengthened by a 26% reduction in capital spending. Net debt reduced by £3bn to nearly £11bn and further efficiencies are a priority in the year ahead.
The world’s second largest miner saw cash flow boosted 22% to £13bn, which enabled the firm to increase its full year dividend by 15%. As such, it views the growth of the business as sustainable.
The chief executive, Sam Walsh, commented:
“These strong results reflect the progress we are making to transform our business and demonstrate how we are fulfilling our commitments to improve performance, strengthen the balance sheet and deliver greater value for shareholders.
“We have achieved underlying earnings of $10.2 billion, exceeded our cost reduction targets and set production records. In turn, this has enhanced our cash flow generation and lowered net debt. The 15 per cent increase in our dividend reflects our confidence in the business and its attractive prospects.”
Rio Tinto reported earnings per share of 332p, which will fund a dividend of 115p. After this morning’s price reaction the shares may therefore trade on a P/E of 11 and offer a possible income of 3.3%.
The decision to ‘buy’ — based on those ratings, todays results and the wider prospects for the mining sector — is, of course, entirely your decision.
