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Rio rewards shareholders as profit soars

Prashant Mehra  |  08 Feb 2018Text size  Decrease  Increase  |  
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SYDNEY - [AAP] Rio Tinto (ASX: RIO) will deliver a record payout to shareholders after stronger commodity prices nearly doubled its full year profit.

The mining giant declared a final dividend of $US1.80 per share, taking full-year dividends to a record $US2.90 a share, or $US5.2 billion in total.

Rio has also launched an additional buyback of $US1 billion of its London-listed shares, to be completed in 2018.

Its net profit soared 90 per cent to $US8.76 billion ($A11.13 billion), due mainly to higher iron ore and coal prices in 2017.

Underlying earnings, which excludes impairments and exchange losses, rose 69 per cent to $US8.63 billion ($A10.97 billion), matching analyst expectations.

Chief executive Jean-Sebastien Jacques said the gains were a result of resilient prices during the year, coupled with a robust operational performance.

"We are in good shape and well positioned for the future but I can assure you we are not going to be complacent," he told reporters.

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"We will be able to generate further cash this year and we will go through our disciplined cash allocation in order to generate returns for shareholders."

Prices for iron ore, Rio's primary earner, peaked at nearly $US95 a tonne in February 2017, and stayed between $US60 and $US70 through the year, helped by continued strong demand from Chinese steel mills.

The steel-making ingredient currently trades around $US76 a tonne.

Rio Tinto said higher prices boosted its underlying earnings by $US4.1 billion in the 12 months to December 31.

The company's underlying profit from iron ore increased 45 per cent to $US6.7 billion, while in its energy division, which includes coal operations, underlying profit doubled to $US1.2 billion.

Aluminium earnings also jumped, by 67 per cent to $US1.6 billion.

"It is an excellent result from an operational point of view," Fat Prophets mining analyst David Lennox said.

"Prices did the bulk of the heavy lifting for them, but they have also taken a further $US400 million out of costs."

Mr Jacques said he remains optimistic about China over the medium to long term, though still had concerns of a slowdown in the short term.

"We acknowledge there is volatility but we are not too concerned about the outlook. We are well positioned to benefit from the situation in China with our premium product," he said.

The new buyback of London-listed stock, which generally trades at a discount to the Australian-listed shares because of the absence of franking credits and currency differentials, is in addition to a $US1 billion buyback announced in August 2017, and $US2.5 billion of buybacks announced in September 2017.

Rio Tinto expects capital expenditure to remain at around $US5.5 billion in 2018 and around $US6 billion in both 2019 and 2020.

RIO TINTO'S PROFIT SOARS

* Full-year net profit up 90pc to $US8.76bn

* Revenue up 64pc to $US13.88bn

* Final dividend up 55 US cents to $US1.80 per share

 

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is a freelance journalist.

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© 2021 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

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