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Rio Tinto PLC (NYSE:RIO)
Gross Profit
$15,067 Mil (TTM As of Jun. 2014)

Rio Tinto PLC's gross profit for the six months ended in Jun. 2014 was $7,444 Mil. Rio Tinto PLC's gross profit for the trailing twelve months (TTM) ended in Jun. 2014 was $15,067 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Rio Tinto PLC's gross profit for the six months ended in Jun. 2014 was $7,444 Mil. Rio Tinto PLC's revenue for the six months ended in Jun. 2014 was $24,337 Mil. Therefore, Rio Tinto PLC's Gross Margin for the quarter that ended in Jun. 2014 was 30.59%.

Rio Tinto PLC had a gross margin of 30.59% for the quarter that ended in Jun. 2014 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Rio Tinto PLC was 78.02%. The lowest was 19.14%. And the median was 46.19%.

Warning Sign:

Rio Tinto PLC gross margin has been in long term decline. The average rate of decline per year is -8.5%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Rio Tinto PLC's Gross Profit for the fiscal year that ended in Dec. 2013 is calculated as

Gross Profit (A: Dec. 2013 )=Revenue - Cost of Goods Sold
=51171 - 36104
=15,067

Rio Tinto PLC's Gross Profit for the quarter that ended in Jun. 2014 is calculated as

Gross Profit (Q: Jun. 2014 )=Revenue - Cost of Goods Sold
=24337 - 16893
=7,444

For company reported semi-annually, GuruFocus uses latest annual data as the TTM data. Rio Tinto PLC Gross Profit for the trailing twelve months (TTM) ended in Jun. 2014 was $15,067 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Rio Tinto PLC's Gross Margin for the quarter that ended in Jun. 2014 is calculated as

Gross Margin (Q: Jun. 2014 )=Gross Profit (Q: Jun. 2014 ) / Revenue (Q: Jun. 2014 )
=(Revenue - Cost of Goods Sold) / Revenue
=7,444 / 24337
=30.59 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Rio Tinto PLC had a gross margin of 30.59% for the quarter that ended in Jun. 2014 => Competition eroding margins


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Rio Tinto PLC Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Gross_Profit 5,34510,79115,41723,17337,0458,00719,90924,27713,43115,067

Rio Tinto PLC Semi-Annual Data

Dec09Jun10Dec10Jun11Dec11Jun12Dec12Jun13Dec13Jun14
Gross_Profit 4,2648,30611,60311,60612,6717,4555,9766,4198,6487,444
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