Rio Tinto Ltd (RIO) - Full Year Results 2017

CommSec CommSec

07 February 2018

RESULTS

Full Year 2017

Full Year 2016

CHANGE

Net cash generated from operating activities (US$m)

13,884

8,465

+64%

Net debt (US$m)

3,845

9,587

-60%

Capital expenditure (US$m)

4,482

3,012

+49%

Free cash flow (US$m)

9,540

5,807

+64%

Underlying earnings (US$m)

8,627

5,100

+69%

Earnings consensus (US$m)

8.690

 

 

Final Dividend (US$)

1.80

1.25

 +44%

Rio Tinto (RIO) result beats expectations; announces record dividend 

  • Australian mining giant, Rio Tinto (RIO) announced a solid operating cash flow of US$13.9 billion, a record full year dividend to shareholders and an additional US$1 billion share buy-back of its London listed shares which is to be completed by the end of 2018.
  • The market expected a solid result on the back of higher commodity prices, especially from iron ore, coking coal and an end of year lift in copper prices, supporting strong sales results. The increase in commodity prices easily offset the lift in energy, currency transaction costs and inflation. RIO said it continues to see productivity improvements, which has helped the balance sheet by US$5 billion. 
  • RIO’s underlying earnings (EBITDA) reached US$18.6 billion and the company reached a ten year record EBITDA margin of 44%. Margin growth continues especially for iron ore with Pilbara earnings margins hitting 68%, helped by higher prices and the mining of higher grade ore. RIO’s copper margins were 39% even with the added delays in production from the strike at Escondida. The company feels that it is well positioned for significant future growth in copper with high grade ore production expected in 2020 from Oyu Tolgoi, its gold and copper mine in Mongolia.
  • RIO said it is still looking to reshape its portfolio with US$2.7 billion of divestments in 2017 but has not closed the door to potential new acquisitions, saying it is “screening for new commodities with a new ventures unit looking at opportunities”. The market is a flutter with speculations of small bolt on acquisitions for RIO, especially in the lithium and broader rare metals space. 
  • RIO said it continues to invest in growth with Silvergrass in production while Amrun and Oyu Tolgoi projects are on track. RIO has signalled plans to expand its aluminium and bauxite production on views that new aluminium supply will be needed outside China within a few years. 
  • RIO will pay a final dividend to shareholders of US$1.80 a share on 12 April 2018 and bringing its total dividend to US$2.90 for FY17.

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