Iron Ore Surge Drives Record Dividend At Rio Tinto

By Glenn Dyer | More Articles by Glenn Dyer

Rio Tinto will shower shareholders with billions of dollars in cash with a record final dividend for 2019 to go with the earlier record interim as high iron ore prices helped the company maintain earnings at a high level.

Shareholders will receive total dividends of $US4.43 for 2019, which while weaker than analysts had expected, is nevertheless a massive $US7.2 billion in cash or more than $A10.9 billion (at an exchange rate of 66 US cents).

The miner announced a full-year ordinary dividend of $US3.82 a share, or $US6.2 billion, including record final ordinary dividend of $US2.31 a share (or $US3.7 billion, resulting in total cash returns of $US7.2 billion for the year (or $US443 US cents a share).

That, however, is lower than greedy analysts had been forecasting and perhaps reflects the cautionary comments in the release about the unknown impact of the COVID-19 virus.

The result was driven by Rio’s Australian iron ore division which delivered more than half of the company’s revenue and close to 90% of underlying earnings.

Rio Tinto CEO J-S Jacques warned in the statement that the coronavirus will cause “significant uncertainty” for commodity markets in the near future.

Those comments, the big market sell-offs and the spread of the virus into Europe and the Middle East and parts of Asia outside China have grabbed investor attention from what was Rio’s biggest profit in eight years.

The $US10.37 billion underlying profit was almost in line with the $US10.39 billion underlying profit analysts had expected.

But net profit fell 41% once write downs and other costs were factored in

The net profit of $US8.01 billion for 2019 was down from a profit of $US13.64 billion a year earlier.

The result was dragged down by $US1.7 billion of impairment charges, primarily against the Oyu Tolgoi underground copper project in Mongolia and the Yarwun alumina refinery in Australia.

This compared with $US4.0 billion of gains on asset sales in 2018, Rio Tinto said.

Mr. Jacques said in the statement with the full-year results “We have again delivered strong financial results with underlying EBITDA of $21.2 billion, underlying EBITDA margin of 47% and return on capital employed of 24%.”

“This performance allows us to return a record final ordinary dividend of $3.7 billion, resulting in a full-year ordinary dividend of $6.2 billion and total cash returns of $7.2 billion.

“In line with our disciplined approach to capital allocation, we invested $2.6 billion in development projects, including high-return iron ore and copper. Longer-term, our $624 million exploration and evaluation expenditure in 2019 adds to our pipeline of attractive options.

“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.

“Our resilience and value over volume strategy mean we can invest in our business and deliver superior returns to shareholders in the short, medium and long term,” he added.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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