Rio Tinto urges caution as profits fall to lowest in 12 years

First half profits at Rio Tinto fell to their lowest since 2004 as crumbling commodity prices hit home, but though the numbers were in bang in-line with analyst forecasts the mining behemoth said caution was still required for the medium-term.

In the six months to 30 June, the day after which saw new chief executive Jean Sebastien Jacques officially take the reins, underlying profit fell 47% to $1.56bn, which was exactly the same as the consensus forecast.

Pre-tax profits slumped 27% to $5.36bn, marginally falling short of expectations of $5.38bn.

The miner cut the interim dividend 58% to 45 cents a share, reflecting the board's new policy to link the payout to underlying earnings.

Having generated net cash from operating activities of $3.2bn, the dividend payout was worth around $0.8bn in total and, following the $1.9bn 2015 final dividend, saw net debt reduced 6% to $12.9bn during the half, which was much better than the market projections for a modest rise to $13.8bn.

Rio said the falls in commodity prices removed $1.9bn from its underlying earnings, which was only partially offset by a $241m gain from currency movements and a $410m boost from lower cash costs.

Its analysis of the global economic situation and demand for commodities was guarded, with uncertainty clouding China's "long transition path of slower and less commodity-intensive growth”.

The miner sees the global economy as "stuck in a subdued low-productivity growth pattern which would indicate that continued caution is required for the second half of 2016”.

Jacques said the board's focus was on "delivering value to shareholders", adding: "Our balance sheet strength and Tier 1 assets provide a stable foundation in these uncertain and volatile markets, which is fundamental in a cyclical and capital-intensive industry. We will generate cash at every opportunity, which we will then allocate in a disciplined way to deliver returns to shareholders, while also investing in compelling growth."