Mining giant Rio Tinto has reported a 71 per cent drop in first half profit. Source: AAP
RIO Tinto returned to profitability in the first half of 2013 but it had to sack thousands of workers and slash $US1.5 billion in costs to get there.
Chief executive Sam Walsh's self described lean and hungry approach involved spending most of his first six months in the job driving cultural change, he said on Thursday.
Rio Tinto made a profit of $US1.72 billion ($A1.92 billion) in the six months to June 30, down 71 per cent from the same period on 2012.
However it's an improvement from a $US3 billion full year loss posted in 2012.
Iron ore again delivered the bulk of the company's earnings, while cost savings helped to offset some of the impacts of a higher tax rate and lower commodity prices.
The company has also announced it has abandoned its attempted sale of its unwanted aluminium assets, which will now be integrated back into its Alcan group.
Rio's cost cutting included 4,000 job cuts, but staff numbers are down by 2,200 as 1,800 new jobs were created to support its Pilbara iron ore expansion.
Mr Walsh said he was pleased with the cost savings, that were part of a cultural change at Rio including a revamp of incentive schemes.
"I spent the past six months on the ground either in the office in London or in Australia focussing on delivering the messages so that people get it first hand," he told reporters.
"We are seeing greater discipline in the system ... it is getting to basics, what we have done here is get the fundamentals right, get people aligned and give them clear tasks."
The medium term economic outlook remains volatile, with a broader range of outcomes now possible, Mr Walsh said.
"Chinese economic growth had decelerated so far this year and is unlikely to recover significantly in the second half, but we do not expect a hard landing," he said.
The company aims to cut capital expenditure this year by 20 per cent to $US14 billion as it tries to cut debt.
It has an ambitious target of $US5 billion in operating cost cuts by the end of 2014, and is yet to decide on a further $US5 billion iron ore expansion to 360 million tonnes a year.
Morningstar analyst Mark Taylor said he thought that the abandoned aluminium sale was responsible from Rio as it was not accepting a low price in a weak aluminium market.
Rio's underlying earnings - when one-off costs are stripped out - was down 18 per cent from the first half of 2102 to $US4.23 billion ($A4.72 billion), in line with analysts expectations.
Iron ore dominated Rio Tinto's performance, while the coal division posted a loss.
Mr Walsh defended the situation, saying Rio was a diversified miner that just happened to make most of its earnings in iron ore at this point in time because it was in demand.
An increase in Rio Tinto's tax rate to 38 per cent from 27 per cent had an adverse impact on earnings of $US353 million ($A394.15 million).
The company partly blamed that on the mining tax.
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