SYDNEY: Global miner Rio Tinto more than doubled its first-half profit buoyed by Chinese iron ore demand and rewarded shareholders with a record interim dividend and $1 billion in share buybacks.
Underlying earnings for the six months to June 30 of $3.94 billion missed forecasts for $4.19 billion but were well above last year’s $1.56 billion following a recovery in iron ore and other commodity prices.
Rio Tinto declared a record-high half-year dividend of $1.10 a share, equivalent to $2 billion, up from 45 cents a share a year ago. The latest buyback comes on top of a $500 million program announced in February.
“The Chinese economy has performed well in 2017 and the outlook signs for 2018 are positive,” Chief Executive Jean-Sebastien Jacques told reporters. “Beyond China, global economies have both improved in Europe and the US“
Rio’s London-listed shares were down 3 percent in early afternoon trade in London, with analysts citing some disappointment over the miss in earnings, linked to the cost of paying down debt early. The dip follows a nearly 9 percent rally in July as the market anticipated Rio’s results and analysts said the company looked strong.
“We still see upside in Rio Tinto, while the company offers some downside protection as well with the robustness of its balance sheet and top quality of its assets,” Bernstein analysts said in a note.
Rio’s Jacques said the focus was on “controlling the controllables,” including costs and margins to shelter the business from commodity market volatility.
Rio’s highest profile cost-cutting is in the Pilbara iron ore region of Australia where it is using automation and as “a next step” analysis of big data to maximize efficiency, Jacques said. Its Silvergrass development in the Pilbara, which should be fully commissioned by the end of this year, will add 10 million tons of annual capacity at lower unit costs, but Jacques said margin was even more important, especially as demand from China shifts to higher quality ore.
“We see a structural shift between high grade and low grade. At the end of the day, high grade will have a significant premium compared to low grade. If that means slightly more cost, so be it,” Jacques told Reuters in an interview.
Iron ore, Rio’s biggest earner, generated $3.255 billion in underlying earnings in the first half. It has been very volatile this year, trading at between $53 and $95 a ton and currently just under $74.
The market has been underpinned by a resurgence in steel production in China, which depends on high grade imported iron ore, providing Rio Tinto and other producers with ample margins on shipments.
Long-time iron ore bear Goldman Sachs in July raised its 2017 forecast to $70 a ton from $55.
Rio Tinto said capital spending should rise by around $500 million to $5.5 billion in both 2018 and 2019.
Jacques said he was keeping a “watching brief” on acquisitions, but only if they added shareholder value.
Rio Tinto’s focus on shareholder returns could add pressure on rival BHP Billiton, which reports full-year results on Aug. 22.
BHP has come under attack from activist shareholder US fund Elliott Management, which has called on it to beef up its cash management policy and remove underperforming
Rio Tinto rewards shareholders as first-half profits more than double
Rio Tinto rewards shareholders as first-half profits more than double
AI will never replace human creativity, says SRMG CEO
- Speaking to Maya Hojeij, senior business anchor at Asharq with Bloomberg, Jomana R. Alrashid expressed pride in SRMG platforms that had absorbed and adopted AI
RIYADH: Jomana R. Alrashid, CEO of Saudi Research and Media Group, highlighted how AI cannot replace human creativity during a session at The Family Office’s “Investing Is a Sea” summit at Shura Island on Friday.
“You can never replace human creativity. Journalism at the end of the day, and content creation, is all about storytelling, and that’s a creative role that AI does not have the power to do just yet,” Alrashid told the investment summit.
“We will never eliminate that human role which comes in to actually tell that story, do the actual investigative reporting around it, make sure to be able to also tell you what’s news or what’s factual from what’s wrong ... what’s a misinformation from bias, and that’s the bigger role that the editorial player does in the newsroom.”
Speaking on the topic of AI, moderated by Maya Hojeij, senior business anchor at Asharq with Bloomberg, the CEO expressed her pride in SRMG platforms that had absorbed and adopted AI in a way that was “transformative.”
“We are now translating all of our content leveraging AI. We are also now being able to create documentaries leveraging AI. We now have AI-facilitated fact-checking, AI facilities clipping, transcribing. This is what we believe is the future.”
Alrashid was asked what the journalist of the future would look like. “He’s a journalist and an engineer. He’s someone who needs to understand data. And I think this is another topic that is extremely important, understanding the data that you’re working with,” she said.
“This is something that AI has facilitated as well. I must say that over the past 20 years in the region, especially when it comes to media companies, we did not understand the importance of data.”
The CEO highlighted that previously, media would rely on polling, surveys or viewership numbers, but now more detailed information about what viewers wanted was available.
During the fireside session, Alrashid was asked how the international community viewed the Middle Eastern media. Alrashid said that over the past decades it had played a critical role in informing wider audiences about issues that were extremely complex — politically, culturally and economically — and continued to play that role.
“Right now it has a bigger role to play, given the role again of social media, citizen journalists, content creators. But I also do believe that it has been facilitated by the power that AI has. Now immediately, you can ensure that that kind of content that is being created by credible, tier-A journalists, world-class journalists, can travel beyond its borders, can travel instantly to target different geographies, different people, different countries, in different languages, in different formats.”
She said that there was a big opportunity for Arab media not to be limited to simply Arab consumption, but to finally transcend borders and be available in different languages and to cater to their audiences.
The CEO expressed optimism about the future, emphasizing the importance of having a clear vision, a strong strategy, and full team alignment.
Traditional advertising models, once centered on television and print, were rapidly changing, with social media platforms now dominating advertising revenue.
“It’s drastically changing. Ultimately in the past, we used to compete with one another over viewership. But now we’re also competing with the likes of social media platforms; 80 percent of the advertising revenue in the Middle East goes to the social media platforms, but that means that there’s 80 percent interest opportunities.”
She said that the challenge was to create the right content on these platforms that engaged the target audiences and enabled commercial partnerships. “I don’t think this is a secret, but brands do not like to advertise with news channels. Ultimately, it’s always related with either conflict or war, which is a deterrent to advertisers.
“And that’s why we’ve entered new verticals such as sports. And that’s why we also double down on our lifestyle vertical. Ultimately, we have the largest market share when it comes to lifestyle ... And we’ve launched new platforms such as Billboard Arabia that gives us an entry into music.”
Alrashid said this was why the group was in a strong position to counter the decline in advertising revenues across different platforms, and by introducing new products.
“Another very important IP that we’ve created is events attached to the brands that have been operating in the region for 30-plus years. Any IP or any title right now that doesn’t have an event attached to it is missing out on a very big commercial opportunity that allows us to sit in a room, exchange ideas, talk to one another, get to know one another behind the screen.”
The CEO said that disruption was now constant and often self-driving, adding that the future of the industry was often in storytelling and the ability to innovate by creating persuasive content that connected directly with the audience.
“But the next disruption is going to continue to come from AI. And how quickly this tool and this very powerful technology evolves. And whether we are in a position to cope with it, adapt to it, and absorb it fully or not.”
