Yahoo Finance Rio Tinto boss sees no impact yet from Donald Trump's trade war on China
Mining giant Rio Tinto's boss has seen no impact yet from the escalating trade war between the US and China, despite the company being one of the world's biggest suppliers of metals.
Chief executive Jean-Sébastien ‘J-S’ Jacques said the FTSE 100 company had seen “no effect at this point in time” from the US’s imposition of tariffs on steel and aluminium imports as President Donald Trump ramps up his rhetoric on trade. This is despite Rio producing roughly one-third of all aluminium sold in the US, from its plants in Canada.
“Tariffs are paid by the end customer, so there is no impact on us,” Mr Jacques said. “But there is no doubt trade is the best way to create wealth. Some people feel it is not balanced, but we all want the same thing: to create wealth. We can then argue about how wealth is shared.”
Around 90pc of Rio’s products - from iron ore and copper to diamonds - is transported from one country to another, Mr Jacques noted, with China by far the biggest market for commodities.
The Frenchman, who took up the top job at the Anglo-Australian miner in 2016, insisted demand in China would remain strong even if its economic growth inevitably slows. “If I look at our order books in China, I don’t have any issues,” he said.
Rio vowed to continue rewarding investors with the promise of a record half-year dividend and further share buybacks. The FTSE 100 company will pay out half its underlying earnings in dividends - $2.2bn (£1.7bn) or 127 US cents a share - after posting a rise in profits in the six months to June 30. It also announced a $1bn extension to its share buyback scheme, which began last year.
Pre-tax profits rose 26pc to $6.7bn, while underlying earnings jumped 12pc to $4.4bn.
Revenues climbed 3pc to $19.9bn as higher prices and volumes offset a string of divestments.
The company has sold off $5bn in assets in the first six months of the year, including the last of its coal mines. This, coupled with its stronger profits, has enabled it to return $7.2bn to shareholders so far in 2018. A further $3.5bn will be due once it completes the sale of its stake in copper mine Grasberg in Indonesia later this year.
In common with other mining companies, Rio is keen to show it can reward long-suffering investors after surviving a downturn in commodity prices in 2014-15.
While miners have been working hard to pay down their debt piles racked up earlier this decade, Rio reported a $1.4bn jump in net debt to $5.2bn in the first half of the year.
It blamed this on a 17pc fall in cashflow owing to a $1.2bn tax payment it made to Australia, and a $1.4bn boost in capital expenditure that will go towards automated trains at its iron ore mines, as well as development of a giant copper mine in Mongolia.
Mr Jacques denied Rio was now overly dependent on iron ore, used to make steel, which accounted for 65pc of underlying earnings in the first half. “Do we believe in diversification? Yes - but not at any cost; it’s all about value. I don’t know what our portfolio will look like in 10 years. We want to be more diversified but not for sake of it.”
Shares in Rio Tinto slumped 4.5pc in lunchtime trade at £40.06 as traders noted the miner had missed a number of City forecasts.
