Falling commodity prices and weak global economic trends have created a very challenging environment for commodity producers. Many metals and mining stocks have been punished by investors in recent months in view of the weak outlook.
About the Company
Rio Tinto (RIO) is a global industrial metal & mineral mining conglomerate headquartered in London. They employ more than 60,000 people in more than 40 countries across six continents.
They have strong presence in Australia and North America, and also have significant businesses in Asia, Europe, Africa and South America. They have five product groups – Aluminum, Copper, Diamonds & Minerals, and Energy and Iron Ore.
Q3 2015 Operational Results
Rio reported operational results for its third-quarter on Oct 16, 2015. Iron ore production was at 86.1 million tons, up 12% year over year. The quarterly aggregate bauxite output increased 4% year over year to 11,287 kilotons while aluminum output was up about 1% to 830 kilotons.
The company continues to cut its investment in the tough environment and has announced that its essential spending for this year is $2.5 billion, compared with overall investment plans of $5 billion, down from about $6 billion, forecast earlier.
Commodity Price Slump Continues
China is the largest consumer of commodities in the world and thus, slowing economic growth in the country does not bode well for commodities. Prices for commodities like iron ore and copper have fallen sharply of late, thanks to a rising supplies and falling demand. Ongoing rout in Chinese stocks has further hurt investor confidence.
Iron ore prices slumped almost 45% last year while copper prices plunged to a six-year low this week.
Downward Revisions
Due to weak outlook, analysts have revised their estimates for the company downwards. Zacks Consensus Estimates for the current and the next fiscal year are $2.58 per share and $1.85 per share, respectively, down from $2.60 per share and $1.93 per share, before the results.
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