Rio Tinto declares record first-half dividend
RIO Tinto has declared a record first-half dividend and announced a new $1.25 billion share buyback as it reaps the rewards of stronger commodity prices and deep cost cutting.
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RIO Tinto has declared a record first-half dividend and announced a new $1.25 billion share buyback as it reaps the rewards of stronger commodity prices and deep cost cutting.
The record payday for shareholders came as the Anglo-Australian mining giant virtually doubled its profit to $US3.3 billion ($4.1 billion) for the six months to June compared to the same period a year earlier.
Underlying profit, which omits one-offs, surged 152 per cent to $US3.9 billion, slightly missing analysts’ expectations.
A lift in the prices of its key commodities — iron ore, aluminium, coal and copper — boosted underlying profit by $US2.7 billion, Rio reported yesterday after the share market closed.
Rio sold its iron ore, which makes up the bulk of its earnings, for $US62.40 a tonne during the period, up from the $US44.50 a tonne it received for the period a year earlier.
Rio has also been slashing its cost base since the peak of the mining boom and yesterday announced it had hit its latest target — to take out $US2 billion over 2016 and 2017 — six months early.
Some $US8 billion has been shaved from Rio’s annual cost bill since the end of 2012.
Rio declared a fully franked interim dividend of $US1.10 a share. Its latest payment beats its previous interim record of $US1.075, delivered in June 2015 when it was operating under a progressive dividend policy, pledging to never let payments fall.
It dropped the policy in 2015 and now aims to pay out between 40-60 per cent of underlying earnings with returns weighted to the final dividend.
Rio also announced a $US1 billion share buyback, on top of the $US500 million buyback it tabled in February when it released its 2016 full-year results.
The latest dividend and buyback means Rio will pay out 75 per cent of its first-half underlying earnings for 2017.
It sets the miner up to deliver a record full-year dividend, with its coffers to be boosted by the $US2.7 billion sales of its NSW thermal coal business to China’s Yancoal in June.
Chief executive Jean-Sebastien Jacques said Rio was delivering “superior returns” to shareholders by driving performance across the business, focusing on cash generation and allocating it with discipline.
“We are now shifting gear to focus on the untapped value from our productivity program and continue to strengthen our portfolio to build higher returns for the future,” he said.
Rio is the first major miner to hand down its financials this corporate reporting season with BHP Billiton, South32, Newcrest and Fortescue to follow later this month.
RBC Capital Markets analyst Paul Hissey said balance sheets were strong across the mining industry after several tough years and most miners were weighing up whether to return money to shareholders or invest in growth projects.
Mr Hissey said investors would be looking for an update on BHP’s cost-cutting efforts when it hands down its full-year results on August 22.
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