UK Markets open in 6 hrs 38 mins

Olympic Medal Maker Sees Profit Dented

(c) Sky News 2012

Mining (Euronext: SMI.NX - news) giant Rio Tinto (Berlin: CRA1.BE - news) , the official supplier of the metals for the medals at the London Olympics, has blamed a fall in commodity prices for a sharp drop in revenue.

The Anglo-Australian miner said net profit dropped 22% for the first half of 2012, with a slide to $5.9bn (£3.77bn) year-on-year.

Underlying earnings, the company's preferred indicator, slipped 34% to $5.2bn (£3.32bn) from a year earlier with the global miner saying prices were lower for nearly all major commodities, with gold a notable exception.

The underlying results beat analyst expectations and the company remained upbeat on the strength of long-term demand and Chinese growth, a major consumer of its Australian commodities.

It has decided not to cut back on $16bn (£10.23bn) in planned capital expenditure for 2012.

"We continue to generate strong margins despite falling prices, reflecting the low cost nature of our businesses and our first-rate operational performance," chief executive Tom Albanese said.

"We have been signalling for some time that markets would remain volatile and we have seen challenging conditions in the first half."

China's top leaders have warned of continued downward pressure on the world's second-largest economy after it recorded six straight quarters of slowing growth.

Mr Albanese said sentiment was negative in Europe (Chicago Options: ^REURUSD - news) and the US recovery was still fragile, but the company's order books were full and Chinese economic growth was expected to be around 8% in 2012.

"We expect to see signs of improvements in Chinese economic activity by the end of the year," he said.

"With growth picking up more strongly as government stimulus measures announced in the second quarter begin to flow through to infrastructure investment."

Rio Tinto, which has previously downplayed concerns about a China slowdown, said expansions to its iron ore operations in Western Australia's Pilbara region were on track.

It expects to produce about 250 million tonnes of iron ore from its global operations in Australia and Canada in 2012, subject to weather conditions.