Rio Tinto earnings results

CommSec CommSec

 

28 February 2019

Results (US$m)

Full Year 2018

Full Year 2017

Change

Net cash generated from operating activities

11,821

13,884

-15%

Consolidated Sales Revenue

40,522

40,030

+1%

Consensus

39,859

 

 

Underlying Earnings

8,808

8,627

+2%

Underlying Earnings Consensus

8,539

   

Underlying EBITDA

18,136

18,580

-2%

Final Dividend (US$)

1.80

1.80

 Unch

Rio Tinto (RIO) delivers record returns to shareholders following asset sales

 

Results

  • Global mining giant, Rio Tinto (RIO) has beaten consensus expectations to record Underlying Earnings of US$8.8 billion, up 2% on the prior year while generating US$40.5 billion in consolidated sales revenue over 2018. However, Underlying EBITDA (a key financial indicator used by RIO management to assess performance) fell 2% to US$18.1 billion.  

Drivers

  • There were a number of factors that helped drive RIO’s FY18 result. Commodity price movements assisted increase underlying EBITDA by $277 million compared with 2017 with the average price for copper and aluminium up 6% and 7% respectively. Sales volumes also increased for iron ore, gold and copper. Currency movements boosted underlying EBITDA by US$286 million on Australian Dollar weakness against the US Dollar. Although, higher costs from raw materials lifted operating costs and hampered underlying EBITDA as oil prices rose roughly 31% in 2018.
  • While iron ore production contributes more than 60% to RIO’s total underlying earnings, the majority of underlying EBITDA growth came from a 46% lift in its Copper & Diamond product group. Iron ore saw a 2% decline in underlying EBITDA to US$11.3 billion in 2018 and aluminium fell 10%. 

Dividend

  • Rio Tinto is paying a fully franked, final dividend of US$1.80 and a special dividend of US$2.43 to be paid on 18 April 2019 with an ex-dividend date of 7 March 2019. There will be a Dividend Reinvestment Plan (DRP) available for both the final and special dividends. RIO will be returning a total of US$13.5 billion to shareholders in 2018.

Outlook

  • Production guidance remains unchanged from figures provided at its fourth quarter operations review. Rio Tinto expects considerable geopolitical uncertainties, particularly in relation to US-China trade, and a year of volatile commodity prices in 2019. Capital expenditure is also expected to stay around US$6 billion in 2019 and lift to US$6.5 billion in 2020.

Share price

  • The initial reaction for RIO shares was on the London Stock Exchange (LSE), which lifted 0.9% as the results were released after market close for the ASX. With the Australian market now open, RIO shares are lifting by more than 1% and trading at the best levels since August 2008.  

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