Rio Tinto returns record dividend as firm warns of coronavirus impact
Rio Tinto today returned a record final divided of $3.7bn as the Anglo-Australian mining giant thanked the strength of its “world-class portfolio and balance sheet” for helping it through the “current volatile environment”.
However, the FTSE 100 firm warned that it was “closely monitoring the impact of the Covid-19 coronavirus and [is]prepared for some short-term impacts, such as supply-chain issues”.
The figures
Revenue from sales at the miner hit $43.2bn, seven per cent higher than in 2018, largely as a result of higher iron ore prices, which offset lower prices for aluminium and copper.
The firm made a profit of after tax of $7bn, nearly half what it made it 2018.
In total, Rio Tinto announced a full year dividend of $6.2bn at 382 cents per share, a 24 per cent increase on last year’s return.
Operating cash flow was $14.9bn, 26 per cent higher than in 2018.
The company’s debt pile stands at $3.7bn, which Rio Tinto said was largely the result of $11.9bn worth of cash returns to shareholders through dividends and buybacks in 2019.
Shares in the mining giant fell almost two per cent during the morning’s trading.
Why it’s interesting
Until the start of this year, investors would have been confident about Rio Tinto’s results, as the stock gained nearly 30 per cent in 2019.
However, recent weeks have seen the miner shed about 10 per cent of that due a coalescence of factors that have weighed down sentiment.
Last week’s iron ore exports downgrade, which was brought on by a halt in manufacturing activity caused by the coronavirus outbreak, is another blow for the commodity, with supply already disrupted by the recent cyclone Damien in Australia.
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According to RBC Capital Markets, inventories of the metal are now 42 per cent higher on average than they have been at this time of the year.
However, the results, which are the company’s best since 2011, have defied these fears. Investment analyst Brenton Saunders of fund manager Pendal Group said: “It’s an improved result on 2018, driven almost entirely by the higher iron ore price.
“If anything the dividend is a bit light relative to free cash flow, which I suspect is partly related to the coronavirus. Then they’d want to have a little bit more of a buffer.”
In addition, analysts have been critical of the firm’s new solar farm in Australia, which is meant to reduce emissions from its Koodaideri mine.
In January, the firm posted its fourth quarter results, which saw a slight decline in production volumes.
Chief executive Jean-Sebastien Jacques attributed the decline to challenging weather conditions and operation difficulties in the first half of 2019.
What Rio Tinto said
Commenting on this morning’s results, Jacques said: “Our world-class portfolio and strong balance sheet serve us well in all market conditions, and are particularly valuable in the current volatile environment.
“We are closely monitoring the impact of the Covid-19 virus and are prepared for some short-term impacts, such as supply-chain issues. Our products are currently reaching our customers.
“In line with our disciplined approach to capital allocation, we invested $2.6bn in development projects, including high-return iron ore and copper.
“Longer term, our $624m exploration and evaluation expenditure in 2019 adds to our pipeline of attractive options”.