What To Expect From Rio Tinto’s H1 2018 Results
Rio Tinto (NYSE: RIO) will release its half-year 2018 results and conduct a conference call with analysts on 1st August 2018. The company is expected to report a substantial increase in its top-line, whereas its bottom line is expected to be weighed down due to cost headwinds. The below graph highlights our expectations of the company’s full-year 2018 results.
Rio Tinto reported a substantial increase in its Pilbara iron ore shipments in the first half of the year as outlined in the company’s second-quarter production release. The company’s iron ore shipments in H1 grew by 9% year-on-year (y-o-y), largely reflecting improved productivity across its system of mines, rail and port facilities. Favorable weather conditions in comparison to the same period last year also aided the company’s volume growth. Additionally, Rio’s other commodity shipments across its product mix was substantially higher year-on-year. In particular, mined copper volumes were almost 42% higher reflecting the company’s more stable operation at Escondida, following a labor union strike experienced in H1 2017.
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Average realized prices for iron ore, however, remained relatively flat at $63.00 per dry metric ton in H1 in comparison to an average price of $64.80 per dry metric ton realized a year ago. Global trade war concerns, especially those impacting China, kept iron ore prices subdued over the second quarter. China accounts for more than half of the global steel output and concerns over the country’s steel export sustainability has deterred the confidence in the country’s steel production. Since iron ore is used as a primary raw material in steel production, a pessimistic outlook on steel has, in turn, negatively impacted iron ore prices as well.
Furthermore, Rio hinted towards lower margins for the year due to rising raw material costs, especially for its aluminum production. Alumina prices have been soaring recently due to the supply disruption faced at the world’s largest alumina refinery, Alunorte. The company faced additional cost headwinds due to operational disruptions faced at two of its production facilities, including, Iron Ore Company of Canada (IOC) and Richard’s Bay Minerals (RBM).
Our base case estimates for the company’s full-year 2018 results are highlighted in our interactive dashboard analysis. You can modify our assumptions to arrive at your own fair price estimate for the company using our interactive platform.
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