Good times roll again at cashed-up Rio Tinto
RIO Tinto dug deep for investors with a record $5.2billion (£3.75billion) full-year dividend payout after reaping the rewards of a commodities price boom.
The FTSE 100 mining heavyweight also announced an additional $1billion share buyback, to take its total returns to shareholders in 2017 to $9.7billion.
It marks a dramatic turnaround in fortunes for the company, which two years ago was forced to scrap its progressive dividend policy after a meltdown in metals prices. That triggered a multibillion cost-saving drive, with Rio boosting productivity and reducing capital spending.
Rio’s underlying pre-tax earnings were up 38 per cent to $18.6billion as it achieved its best margin for a decade, while cash generated from operating activities jumped by 64 per cent to $13.9billion. Its dividend was increased by 71 per cent to $2.90 per share, while net debt was slashed by 60 per cent to $3.85billion.
Rio has seen healthy demand from Chinese steelmakers for its high-quality iron ore and expects further global manufacturing growth.
The effect of price movements increased its earnings by $4.1billion, with average prices for copper and aluminium up 27 per cent and 23 per cent respectively on the previous year.
CEO Jean-Sebastien Jacques said: “The strength of our cashflow is a result of resilient prices coupled with a robust operational performance and a focus on mine-to-market productivity.
“We believe we’ll be able to generate a lot of cash this year. The strength of our balance sheet means we are ideally placed to deal with any economic volatility, invest in high-value growth and retain the optionality for smart mergers and acquisitions.” Potential deals could focus on commodities such as lithium as demand for electric vehicles increases.
Hargreaves Lansdown analyst Nicholas Hyett said: “The Rio cash machine is rolling. Many of its vast, super low-cost mines were profitable even in the darkest days of the commodity rout.
“In these happier times they’re a licence to print money – the Pilbara iron ore mines produced at $13.4 a tonne versus a sale price of $64.1 a tonne.”