Rio Tinto’s Full Year 2016 Earnings Preview: Higher Iron Ore Prices And Productivity Improvements To Boost Earnings

by Trefis Team
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Rio Tinto
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Rio Tinto, the world’s second largest producer of iron ore, will report its results for the full year 2016 and conduct a conference call with analysts on February 8. [1] We expect Rio Tinto’s earnings to benefit from a recovery in iron ore prices and the impact of the company’s productivity improvement initiatives. Iron ore prices averaged higher in 2016 after two consecutive years of decline amid a global oversupply situation. Production curtailments by high-cost producers in response to an extended downturn in prices helped restore a more favorable demand supply equation, translating into a recovery in iron ore prices.

Apart from the recovery in iron ore prices, Rio Tinto’s productivity improvement initiatives will help prop up the company’s bottom line. A range of technology driven initiatives targeting productivity improvements through improved reliability and utilization rates are expected to moderate growth in the company’s operating costs. [2] Apart from benefiting Rio’s iron ore mining operations, these productivity improvement initiatives will also help prop up the margins of the company’s copper and aluminum mining operations, which operated under subdued commodity pricing environments in 2016. The following tables summarize our expectations from Rio’s earnings results.

Rio 2016 Earnings Preview

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Rio Tinto

Notes:

  1. Annual Results, Rio Tinto Website []
  2. Rio Tinto Investment Seminar Presentation, Rio Tinto Website []
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