‘We are in for the long haul’: Rio Tinto CEO defends future spending in the face of recession fears

A mining worker wearing a white hardhat stands on a platform overlooking a huge mine as brokers predict what's next for the South32 share priceA mining worker wearing a white hardhat stands on a platform overlooking a huge mine as brokers predict what's next for the South32 share price

The Rio Tinto Ltd (ASX: RIO) share price has fallen 29% in the past year, but what’s ahead?

Rio shares dropped 1.55% on the market on Thursday, closing at $95.30 a share. For perspective, the BHP Ltd (ASX: BHP) share price also fell 1.14% while Fortescue Metals Group (ASX: FMG) shares closed 2% lower.

So what are the Rio CEO’s thoughts on future spending?

Rio CEO defends spending

Rio Tinto presented half-year results last week, but the company’s CEO Jakob Stausholm shared more insight into the company’s future strategy today.

In a quarter two earnings call, Stausholm was questioned on Rio’s strategy of increasing capital expenditure (capex) in the future.

In response to questions from analysts about the company’s plan to increase capex, he said:

This is actually really fundamental. If we start adjusting our capex programme because we think there’s a recession in the next six months, we’ve lost. We are in for the long haul here.

If you really think about it, the best thing is to invest when you have a recession, because that’s where you can buy services cheap.

Rio reported revenue had fallen 10% to US$29,775 million in its half-year earnings. The mining giant declared a dividend of 276 cents per share.

However, Stausholm touted investing in a recession, highlighting:

We are absolutely convinced that we have the right investment profile going forward.

Obviously, sometimes things becomes a little bit more expensive when you get inflation and we need to manage that very carefully. We fundamentally want to carry out the activities that we have planned to do.

Rio highlighted it is intent on delivering its long-term strategy. In its half-year results, Rio reported its earnings before interest, tax, depreciation and amortisation (EBITDA) slumped 26% to US$15,597 million. Free cash flow also fell 30%.

Share price snapshot

The Rio share price has dived 29% in the past year and nearly 5% year to date.

For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) has lost nearly 6% in the past year.

Rio has a market capitalisation of more than $35 billion based on the current share price.

The post ‘We are in for the long haul’: Rio Tinto CEO defends future spending in the face of recession fears appeared first on The Motley Fool Australia.

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Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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