Rio to press ahead with dividend payout
Chairman Simon Thompson says Rio has resisted the temptation to follow many of its corporate peers and cut dividends.
Rio Tinto chair Simon Thompson says the company has resisted temptation to follow many of its corporate peers and cut dividends to preserve cash in the face of the global coronavirus crisis, citing a “full” iron ore order book and the need to look after Australian retail shareholders.
The COVID-19 crisis has seen a swath of corporate giants flag deferrals of interim dividends, and reviews of dividend policies, with the issue hitting local bank stocks hard on Wednesday.
But speaking via webcast to shareholders at Rio’s annual London meeting, Mr Thompson said a board meeting this week had elected to pay the full $US2.31 a share ($3.49 at the record date) on April 16, as planned.
“We took this decision because Rio Tinto has a strong balance sheet, our operations are running safely, and our order book for iron ore is full,” he told shareholders.
“This enables us to continue to pay our suppliers and to contribute to national and regional economies, at a time when it is needed most. We are also conscious that a large number of our smaller shareholders, particularly in Australia, rely on the Rio Tinto dividend for their pensions.”
But, despite the expectations of analysts that the strong iron ore price would allow Rio and other Pilbara miners to maintain strong dividend payouts, Mr Thompson warned Rio’s position on payouts would need to be reviewed “in light of current events” ahead of its half-year results in July.
He refrained from giving a broader update on Rio’s operational performance and outlook at the annual shareholder meeting, saying the company would outline its thoughts on the impact of the global coronavirus crisis when it delivers its March quarter production report on April 17.
Chief executive Jean-Sebastien Jacques said the majority of the company’s operations were still continuing, despite the impact of movement and other restrictions imposed by national and local governments.
“What I can say is this, our iron ore order books are full and the majority of our assets are continuing to operate,” he said.
“But there have been some inevitable impacts. Restrictions put in place in Mongolia, South Africa and Quebec to contain the spread of the virus are impacting our operations and projects there, as we have already disclosed.”
Mr Thompson said the release of Rio’s annual tax payment report, which showed the company paid $US4.8bn in corporate taxes across the globe in 2019 — and $US7.6bn including royalties — highlighted the importance of maintaining its operations through the virus outbreak, delivering a veiled warning to governments considering curtailing mining operations to prevent outbreaks in local communities.
“Maintaining our financial strength and resilience will be even more vital, as the world economy, and the many thousands of people and local businesses that depend upon our activities, start to recover from the current health crisis,” he said.
While Rio’s tax report highlighted its contribution to the Australian and WA economy — saying it had paid $US4.2bn in corporate taxes to the ATO and $US6.2bn in total including royalties on its WA iron ore operations — it also confirmed the company’s stoush with the Tax Office had deepened over the use of its controversial Singapore marketing hub.
Rio’s profit from the hub surged almost 75 per cent to $US459m in 2019, as the mining giant confirmed it was in dispute with the ATO over the pricing of aluminium produced in Australia and sold through its Singapore marketing arm.
Rio said the ATO had lodged a claim for an additional $86.1m in taxes over alleged transfer pricing on the sale of aluminium through the Singapore hub, covering aluminium sales from 2010 to 2016.
The claim comes on top of the ongoing dispute between Rio and the ATO over transfer pricing allegations on its WA iron ore operations, worth $447m.
Rio said it was disputing the latest ATO claim, formally lodged with the company last month.
“The amended assessments for both the iron ore and aluminium matters do not relate to any tax avoidance schemes as confirmed by the Australian Taxation Office, and no penalties have been levied by the Australian Taxation Office,” Rio said.
The details of the aluminium sales dispute come as Rio also revealed before-tax profits made by the marketing hub lifted almost 75 per cent in 2019, from $US264m in 2018 to $US459m. That represented around 4 per cent of Rio’s annual $US12.3bn pre-tax profits, double that of the previous year when Rio booked global pre-tax earnings of $US18.2bn.
Rio said the report showed it made a $US45.1bn direct economic contribution to the countries in which it operates in 2019, taking its direct contribution since 2015 to $US210bn.
Rio shares closed down $1.39, or 1.5 per cent, at $89.26.