Investors are still resentful of the mining industry's splurge on investment during the boom years. Yet Rio Tinto, under Sam Walsh, was one of the first to reign in ballooning costs and at first glance it seems to be exceeding targets. Also, unlike some other firms, such as BHP, it has explicit targets for cost savings. Costs were reduced by 2.3bn dollars last year, versus the 2bn dollars projected. Good work. The ratio of net debt to operating profits in EBITDA terms is now below one. Will shareholders see any benefit as a result? Yes, the Anglo Australian outfit surprised on Thursday with a 15 per cent hike in its dividend to 1.92 dollars, twice analysts' expectations.
Some investors, however, are worried by the prospect of new capacity due to come on line shortly as a result of previous years' investment. That could leave it even more exposed to iron ore for future growth and to the possibility of a 'hard landing' in China. "The mitigating factor is that its new projects have low cash costs. Deutsche Bank reckons that Rio could still manage 4% dividend growth in 2015 even if iron ore prices sink to $80 a tonne, from about $120 now," the Financial Times' Lex column explains.
Barclays' Chief Antony Jenkins defence of the recent bonuses paid out to its staff in spite of collapsing profits is egregious. A long-term business cannot be built on rewarding employees today in anticipation of future performance. If Jenkins feels the need to reward traders and dealmakers 13% more when profits drop by a third then what will he feel the need to pay them if they actually deliver? Barclays has the benefit of strong franchises in high street banking and credit cards and is ahead of the pack when it comes to mobile banking. Yet the 'bear' case for the lender's stock has not changed one iota, its culture has not improved and is a recipe for a shipwreck. The investment banking division still behaves like a parasitic worker co-operative, some shareholders - such as Qatar - seem to matter more than others and allegations over foreign exchange
manipulation are a new source of worry, The Times' Tempus writes.
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