Rio Tinto posts 43% jump in first-half earnings as data centre boom boosts copper

By Melanie Burton and Roshan Thomas

July 29 (Reuters) - Rio Tinto posted a 43% jump in half-year underlying earnings on Wednesday, the highest in four years, as energy-linked outperformance from its copper and aluminium units outshone profits from mainstay iron ore for the first time.

The world's largest iron ore miner is now deriving around 56% of its profit from copper and aluminium combined, boosted by electrification and AI megatrends as CEO Simon Trott executes on a simpler and sharper strategy in his first year in the job.

It joins BHP in reaping gains from stronger copper demand, with the peer company reporting in February it gained more profit in the half-year ending in December from the red metal than from iron ore.

Rio reported underlying earnings of $6.85 billion for the six months ended June 30, up 43% from $4.81 billion a year earlier and broadly in line with a Visible Alpha consensus estimate of $6.80 billion.

While the result met analysts' expectations and delivered on productivity promises, the company fell short of any major announcements related to optimising its portfolio of assets and infrastructure, said Andy Forster, a stock portfolio manager at Argo Investments in Sydney. 

"It was an in-line result," Forster said, adding the lack of news around plans to optimise the assets was "slightly disappointing."

In December, Rio said it could unlock $5 billion to $10 billion in cash through portfolio management and infrastructure initiatives. On Wednesday it said it expects to achieve half of that by the end of the year.

Part of that will be through the agreed sale of its share of a seawater desalination plant in Dampier in Western Australia, Trott told a media call on Wednesday, but Rio did not disclose the sale amount. 

Trott said the miner had delivered a "step-change in performance" in the first half, helped by higher commodity prices, rising copper output and productivity gains across the business.

"We are seeing shifts really across all of our commodities in terms of underlying demand," he said, flagging growing data centre and grid storage battery demand for copper and lithium.

Rio shares closed up 3.7% at A$165.39, while the benchmark index gained 1%. In London, Rio traded up 2.2% at 7,015 pence at 0953 GMT.

PRODUCTIVITY MOMENTUM

Productivity growth delivered $870 million in benefits in the first half despite headwinds from high diesel prices and the strengthening Australian dollar, and Rio said it was on track to generate annualised gains of $1.8 billion by year-end.

"That was a very strong performance, and there's a lot more to come," CFO Peter Cunningham told Reuters.

Major miners and their lobbyists have asked Canberra for help in pushing back against China’s efforts to extract better terms for their iron ore, including raising the prospect of a single selling desk for Australia’s most valuable commodity export.

Asked about whether Rio would support such an effort, Trott said that Rio's focus would be "solely" on its own business and "capturing synergies with adjacent producers in ways we probably haven't done before."

The company flagged challenges to its goal to cut emissions by 50% from 2018 levels by 2030, warning that it depended on the timely delivery of third-party renewable energy projects and commercial agreements that could not be guaranteed.

Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) surged 84% to $5.7 billion for its copper division, while iron ore generated underlying EBITDA of $6.8 billion, down 1% from a year earlier.

The miner declared its highest interim dividend in four years at $2.11 per share, compared with $1.48 per share a year earlier. It kept its 2026 production and sales forecasts unchanged.

(Reporting by Roshan Thomas and Sneha Kumar in Bengaluru, Melanie Burton in Melbourne; Editing by Sriraj Kalluvila, Lincoln Feast and Christian Schmollinger)