MARKET REPORT: Rio Tinto warns era of record profits is over for the mining sector

Shares in Rio Tinto were dragged lower as it signalled the end of the era of record returns for the mining sector. 

It fell 0.7pc, or 35.5p, to 4788p after it reported a half-year profit of £7.4bn, down from £10.2bn the year before, and a 10pc slide in revenues to £24.7bn. 

As a result, Rio slashed its dividend for the period to £3.6bn, less than half of the £7.5bn payout from a year ago. It was still the second-highest half-year dividend for the firm on record, however. 

Shares in Rio Tinto were dragged lower as it signalled the end of the era of record returns for the mining sector

Shares in Rio Tinto were dragged lower as it signalled the end of the era of record returns for the mining sector

The results came as falling commodity prices, including for iron ore, pile pressure on the sector. Strict Covid restrictions in China, one of the world’s largest importers of raw materials, have hit demand and fuelled fears over the health of the global economy. 

Rio is also grappling with labour shortages and higher costs caused by the surging price of energy weighing on its profit margins. Analysts at Liberum struck a downbeat tone for its outlook, saying they did not expect ‘any sustainable recoveries’ in iron ore prices in the short term as a result of difficulties in the Chinese property sector and an increasing supply in the second half of the year. 

But despite Rio’s bleak figures, shares in other blue-chip miners posted gains. Glencore was up 1.9pc, or 8.2p, at 447p while Anglo American ticked up 0.9pc, or 24p, to 2775p. One outlier was copper miner Antofagasta, which fell 0.1pc, or 0.5p, to 1079p. The FTSE 100 was up 0.6pc, or 41.95 points, at 7348.23 while the FTSE 250 gained 0.4pc, or 70.30 points, to 19,639.09. 

Market sentiment was boosted by upbeat figures from Lloyds (up 4.1pc, or 1.79p, at 45.32p). The numbers from the high street bank helped to lift NatWest 1.8pc, or 4.1p, to 233.5p and Barclays 0.5pc, or 0.78p, to 157.66p. Standard Chartered added 1.3pc, or 7.6p, to 587p and HSBC fell 0.1pc, or 0.3p, to 524p. 

The numbers from the high street bank helped to lift NatWest 1.8pc, or 4.1p, to 233.5p and Barclays 0.5pc, or 0.78p, to 157.66p

The numbers from the high street bank helped to lift NatWest 1.8pc, or 4.1p, to 233.5p and Barclays 0.5pc, or 0.78p, to 157.66p

Among those leading the bluechip index higher was packaging firm Smurfit Kappa, which jumped 5.5pc, or 148p, to 2850p after posting a surge in half-year profits to £648m for the six months to the end of June, 86pc higher year on year as it cashed in on the boom in demand for packaging. 

STOCK WATCH: PARSLEY BOX

Shares in troubled Parsley Box sank to fresh lows as demand plunged. The meal delivery company, which has seen its share price plunge 94pc since its debut on AIM last March, said first-half revenues dropped to £9.6m from £14m in the same period last year as order numbers fell to 212,000 from 385,000. 

As a result, the group expects to report full-year revenues of £19m, down from £21m last year, alongside a loss of £4.1m. The shares tumbled 34.3pc, or 6p, to 11.5p.

The strong results sent shares in rival packaging group Mondi up 4.7pc, or 66.5p, to 1483p while fellow peer DS Smith also rose 4pc, or 10.7p, to 276.9p. Lucky Strike and Pall Mall cigarette manufacturer BAT dipped 0.6pc, or 22p, to 3449p after saying its exit from Russia cost it £957m. That meant profit for the first half of 2022 fell 25pc to £3.7bn despite a 5.7pc rise in sales to £12.9bn. 

Budget airline Wizz Air bounced 10.4pc, or 204p, to 2169p as its boss Jozsef Varadi predicted a ‘material operating profit’ in its second quarter despite chaos at airports across Europe. The upbeat outlook helped offset a difficult first quarter in which losses ballooned to £240m in the three months to June 30 from a £91m loss the year before. 

Rival airlines were also on the march, with British Airways owner IAG up 5.2pc, or 5.9p, to 119.06p, while easyJet gained 4.7pc, or 17.4p, to 390.7p. Mexican gold and silver miner Fresnillo added 1.7pc, or 10.8p, to 655.4p after a 4.7pc rise in production to 1.2m tonnes of ore in the first half of the year despite what boss Octavio Alvidrez said were the ongoing effects of Covid and ‘supply chain bottlenecks’. 

Pub group Marston’s was up 3.6pc, or 1.68p, at 48.68p after sales in the 42 weeks to July 23 were just 2pc below pre-pandemic levels. And space-focused investment firm Seraphim gained 9.6pc, or 6.85p, to 78.6p, after it reported activity in the space sector ‘remained strong’ in the year to the end of June.

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