Rio Tinto tipped to post $8bn profit

A cashed-up Rio Tinto is expected to post a first half net profit of more than $US8 billion ($A7.3 billion), driven by bumper iron ore, aluminium and copper prices.
The earnings season gets into full swing on Thursday when the mining giant reports, with consensus among analysts for a 39.1 per cent jump in first half underlying profit from $US5.77 billion to $US8.03 billion.
The cash cow iron ore division is expected to contribute nearly 80 per cent of the net profit, lifting its performance by more than 50 per cent a year ago to about $US6.2 billion, according to analysts' consensus.
"At the divisional level, only the iron ore and aluminium divisions are forecast to show an improvement in underlying earnings," UBS Investment Research said.
UBS forecast a particularly poor performance by the energy division, predicting a 42 per cent profit fall, saying coal production and contracts had been hit by extreme weather earlier in the year.
Rio, the world's second largest iron ore producer, is so confident about China's appetite for the steelmaking metal it has embarked on a $US676 million Pilbara expansion program.
Production capacity will increase to 333 million tonnes per year (Mtpa) by 2015, from 220Mtpa currently.
UBS tipped the aluminium division to be a big improver, contributing about $468 million in net profit, a 26 per cent jump from a year ago due to higher prices.
An interim dividend of 54 US cents per share is tipped, UBS says.
The company is halfway through a $US5 billion share buyback program, which Fat Prophets analyst David Lennox said recently was expected to be bumped up.
"The spotty production results so far this year will be reflected in the announcement, but may be overshadowed if the company bumps up its share buyback program as anticipated," he said.
Extreme weather in Queensland and Western Australia earlier this year hit its operations, with iron ore shipments lower than a year ago, while high labour costs and a high Australian dollar will have eaten into profits.
UBS's share price target for Rio is $114, with the company's stocks down $1.47, or 1.8 per cent, at $80.05 on Tuesday.