Rio Tinto chairman says market volatility will stabilise in long term

Thursday’s Rio Tinto AGM in Melbourne saw chairman Jan Du Plessis reassure shareholders with high earnings figures, and predictions of short- to medium-term market volatility.

Thanks to new CEO Sam Walsh’s aggressive cost cutting measures such as firing workers, shelving projects and selling non-core assets, Rio has achieved high underlying earnings of $10.2 billion in 2013, and increased dividends by 15 per cent.

Du Plessis’ optimism about the success of the company was measured by his concerns about volatility in the world economy and a fragile political environment.

“While the outlook is now brighter in some parts of the world, we believe that volatility looks set to remain in the short to medium term as a number of structural deficiencies remain unresolved,” he said.

“Tensions remain in Europe, and the pace of reform and structural readjustments is slow,” Du Plessis said.

“The combination of low interest rates, low growth and low inflation leaves that continent with considerable challenges.”

He added that the Chinese market would only achieve certainty in the longer term.

“While the fundamental drivers of the Chinese economy remain intact, we can expect some variability in the near term as authorities endeavour to steer the economy along a more sustainable and steady path of growth,” he said.

However, Du Plessis even argued that such volatility could be turned to the company’s advantage.

"If we play our cards well, a volatile world should actually suit us well… in really healthy boom conditions as a company we tend to be outperformed by the minor indexes.”

Image: Zimbio

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