07.08.14 - 10:54 Uhr

Rio Tinto (Price: 3351p | Target: 3220p Under Review | Rec: Hold)

Rio Tinto’s share price has performed well of late, particularly in light of the fall in the iron ore price, which at c.$95/t is at least $10/t below what consensus had forecast over this period. Today’s result demonstrates why the share price has performed well, with earnings ahead of expectations, capex guidance reduced and debt falling rapidly – all pointing to the possibility of increased returns for shareholders from next year. Analyst briefing at 10am.

* Rio delivered underlying earnings of $5.1bn versus Bloomberg consensus of $4.70bn (range $4.31-5.20bn), and our $4.78bn. Net debt has been reduced by a significant $1.9bn to $16.1bn, while capex guidance for FY14E has been reduced by $2bn to $9bn, then $8bn/pa thereafter (as expected).
* The interim dividend was 96cps as expected. EPS was 277cps versus consensus at 249cps (Investec 259cps). This was 21% ahead of 1H13A’s 229cps, but below the 2H13A EPS of 324cps as lower iron ore prices impact margins before they can be offset by higher volumes, from the current half onwards.
* Our forecasts and target price are under review. Our TP is based on an equally-weighted average of five metrics, namely NPV, dividend yield, one-year forward PER, free cash flow yield and a sustainable PER. Rio Tinto appears fully valued on this basis, as it is using peer group multiples against the various commodity divisions. The priority for the company this year is strengthening the balance sheet, rather than shareholder returns, and it is making excellent progress in this regard, which could offer upside potential to future shareholder returns. Key risks remain related to global growth, particularly China, and the ongoing impact on the iron ore price of new supply in the 2H14.

To access the full note please click here<

Analyst: Hunter Hillcoat +44 (0)20 7597 5182

To UNSUBSCRIBE from this email and/or to change your mailing list preferences, please email .


This communication forms part of an electronic communication sent to the intended recipient (or such persons authorised representative) for their sole use and is subject to important legal and regulatory restrictions, qualifications and disclaimers that may be accessed and read in the attached research publication. If you cannot access the disclaimer, please obtain a copy thereof from us by sending an e-mail to in the case of SA or in the case of the UK or Australia:

The disclaimer is deemed to form part of this communication. In the event of a conflict between the disclaimer and this notice, the disclaimer shall take precedence. This communication is confidential for the information of the addressee only (and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, unless permitted pursuant to and in accordance with the disclaimer.
If you are not the intended recipient of this e-mail, then:
(a) please notify the sender of this e-mail immediately by return e-mail, facsimile or telephone and delete this message from your system;
(b) you may not print, store, forward or copy this message or any part thereof or disclose or cause information in this message to be disclosed to any other person.
Nothing in this message constitutes an offer, warranty or representation from us. None of our employees or representatives are permitted to send unsolicited messages ("spam") and our company cannot be held liable therefore. If you regard this message as spam, please inform us immediately by sending an e-mail to in the case of SA or in the case of the UK or Australia:
Unless otherwise agreed:
(a) We are only deemed to have received an e-mail once we have confirmed receipt thereof to you;
(b) We are deemed to have sent an e-mail once reflected as “sent” on our e-mail server.
If this message contains offensive, derogatory or defamatory statements or materials, it means the message has been sent outside the sender’s scope of employment with us and only the sender can be held liable in his/her personal capacity. Our corporate information and names of our office bearers can be accessed by sending an e-mail to in the case of SA or in the case of the UK or Australia:
The disclaimer applies to our original message, any attachments and all subsequent messages or attachments we may send.


Investec Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Registered in England and Wales (No. 489604). Registered office at 2 Gresham St, London EC2V 7QP.

Investec Asset Finance plc is authorised and regulated by the Financial Conduct Authority for credit-related regulated activities (including hiring). Investec Asset Finance plc is also an appointed representative of Investec Bank plc for the purposes of insurance mediation activities. Registered in England and Wales (No. 2179313). Registered office at Reading International Business Park, Reading RG2 6AA.
We may monitor e-mail traffic data and the content of email. Calls may be monitored and recorded.

This email and any files transmitted with it are confidential and intended solely for the use of the individual or entity to whom they are addressed. If you have received this email in error please notify the sender. This e-mail is subject to terms available at the following link: By communicating electronically with us, you consent to these terms.



This email has been scanned by the Symantec Email Security.cloud service.
For more information please visit

Private & Confidential / Disclaimer: This document is private and confidential and remains the property of Bell Pottinger. Its contents may not be copied, forwarded or duplicated in any form or by any means without the permission of Bell Pottinger. Bell Pottinger is made up of Bell Pottinger Private Limited, a limited company registered in England & Wales with registered number 08024999 and Bell Pottinger LLP, a limited liability partnership registered in England & Wales with registered number OC380478, together with their subsidiaries. Our registered office is at 6th Floor, Holborn Gate, London WC1V 7QD. A list of the members of Bell Pottinger LLP is open for inspection at our registered office.

Products & Services | Jobs