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Rio Tinto posts loss, dividend surprises

Christine St Anne  |  14 Feb 2013Text size  Decrease  Increase  |  

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Christine St Anne is Morningstar's online editor.

 

Global mining giant Rio Tinto (RIO) on Thursday announced a 40 per cent fall in underlying earnings to US$9.3 billion for 2012.

However, the miner posted a $3-billion loss after impairments of $14.4 billion relating to its aluminium businesses and coal assets in Mozambique. Cost pressures also impacted the result.

Morningstar global head of basic materials Mark Taylor said the result was in line with expectations.

"The company did a pretty good job in guiding analysts to what was to be a realistic number," he said.

Taylor, however, was surprised by the higher dividend announced by the miner. The company declared full-year dividends of 167 US cents a share, up 15 per cent on the previous year.

"For all this talk about delivering value to shareholders, the higher-than-expected dividend is evidence that Rio is focused on giving back to shareholders despite a 40 per cent drop in underlying earnings," he said.

Underlying earnings per share for the year were down 153 per cent to US$161.3.

The miner said the effect of price movements on all major commodities in 2012 decreased underlying earnings by $5.3 billion compared with 2011.

Average prices declined from record highs in 2011 for nearly all of Rio Tinto's major commodities with the exception of gold, which was up 6 per cent.

Volume increases, however, enhanced earnings by $634 million compared with 2011. These were achieved primarily in iron ore, where sales volumes rose 3 per cent due to increased capacity at the Pilbara ports and at Escondida, in line with higher ore grades, Rio said.

The miner also reported volume declines in gold grades at the Kennecott Utah Copper division and no metal share from Grasberg, which lowered earnings by $943 million compared with 2011.

Higher energy costs across the group lowered underling earnings by $23 million compared with 2011. The miner said many operations were impacted by higher fuel, diesel and power rates.

Fixed production cost inefficiencies associated with lower volumes due to grade, higher maintenance costs, and costs associated with its Pilbara operations lowered underlying earnings by $304 million compared with 2011.