Anglo-Australian mining giant Rio Tinto blamed falling commodity prices Wednesday for a 22 percent slide in net profit for the first half to US$5.9 billion on-year, but was upbeat about long-term demand.
Underlying earnings, Rio's preferred indicator, slipped 34 percent to US$5.2 billion from a year earlier with the global miner saying prices were lower for nearly all major commodities, with gold a notable exception.
The underlying results beat analyst expectations and the company was upbeat on the strength of long-term demand and Chinese growth, while it has not cut back on US$16 billion in planned capital expenditure for 2012.
"We continue to generate strong margins despite falling prices, reflecting the low cost nature of our businesses and our first-rate operational performance," chief executive Tom Albanese said.
"We have been signalling for some time that markets would remain volatile and we have seen challenging conditions in the first half."
Rio said while there were short-term uncertainties, it remained convinced of the strength in the long-term demand outlook despite global concerns about China, a major consumer of Australian commodities.
China's top leaders have warned of continued downward pressure on the world's second-largest economy after it recorded six straight quarters of slowing growth.
Albanese said sentiment was negative in Europe and the US recovery was still fragile, but the company's order books were full and Chinese economic growth was expected to be around 8.0 percent in 2012.
"We expect to see signs of improvements in Chinese economic activity by the end of the year, with growth picking up more strongly as government stimulus measures announced in the second quarter begin to flow through to infrastructure investment," he said.
Rio, which has previously downplayed concerns about a China slowdown, said expansions to its iron ore operations in Western Australia's Pilbara region were on track.
It expects to produce about 250 million tonnes of iron ore from its global operations in Australia and Canada in 2012, subject to weather conditions.
Iron ore recorded underlying earnings of US$4.75 billion, down 20 percent for the previous first half due to lower prices, it said, although this was partly offset by higher volumes.
For copper, underlying earnings were down 55 percent at US$556 million due to lower prices and reduced volume, while Rio's energy sector slid 18 percent to US$307 million due to cost inflation and lower prices for coking coal and uranium.
The company said capital expenditure for full year 2012 remained at US$16 billion, of which Rio's attributable share was US$13.6 billion.
Ahead of the announcement, Rio's Australia-listed shares closed up 0.1 percent at Aus$54.89.
Albanese said while miners were facing increasing costs, Rio was taking measures to tackle this challenge.
"With our confidence in the long-term outlook, superior assets and high quality growth pipeline, we remain well-positioned to deliver shareholder value over the long term," he said.
Chairman Jan du Plessis added: "Whilst we are mindful of short-term uncertainties we remain convinced of the strength of the long-term demand outlook."
"We have taken a considered approach to investment, committing capital only to projects that will deliver value for shareholders under any probable macroeconomic conditions," he said.