S&P revises Rio Tinto to negative

Standard & Poor's said it revised the outlook to negative from stable on Rio Tinto plc and affirmed the A-/A-2 long- and short-term corporate credit ratings.

S&P said the outlook revision reflects its view that the continued weakness and volatility in commodity prices – resulting from heightened uncertainty on demand from China and, in particular, its challenged steel industry – could weaken Rio Tinto's key credit metrics, especially if funds from operations (FFO) to debt fell below 35% from 50% as of end-June, a level that was still consistent with the current rating.

Moreover, the agency considers that the company's commitment to maintain its current dividend policy somewhat reduces its financial flexibility. Still, it thinks that Rio Tinto could further cut operating expenses and capital expenditures (capex).

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