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Rio Tinto - Final Results

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Rio Tinto 

Final Year Results

Rio Tinto announces full-year ordinary dividend of $6.2 billion (382 US cents per share), including record final ordinary dividend of $3.7 billion (231 US cents per share), resulting in total cash returns of $7.2 billion (443 US cents per share)

26 February 2020

Rio Tinto Chief Executive J-S Jacques said "We have again delivered strong financial results with underlying EBITDA of $21.2 billion, underlying EBITDA margin of 47% and return on capital employed of 24%. This performance allows us to return a record final ordinary dividend of $3.7 billion, resulting in a full-year ordinary dividend of $6.2 billion and total cash returns of $7.2 billion.

"In line with our disciplined approach to capital allocation, we invested $2.6 billion in development projects, including high-return iron ore and copper. Longer term, our $624 million exploration and evaluation expenditure in 2019 adds to our pipeline of attractive options.

"Our world-class portfolio and strong balance sheet serve us well in all market conditions, and are particularly valuable in the current volatile environment. We are closely monitoring the impact of the Covid-19 virus and are prepared for some short-term impacts, such as supply-chain issues. Our products are currently reaching our customers.

"Our resilience and value over volume strategy mean we can invest in our business and deliver superior returns to shareholders in the short, medium and long term."

At year end

2019

 

2018

 

Change

Net cash generated from operating activities (US$ millions)

14,912

11,821

26

%

Capital expenditure1 (US$ millions)

5,488

5,430

1

%

Free cash flow2 (US$ millions)

9,158

6,977

31

%

Underlying EBITDA3 (US$ millions)

21,197

18,136

17

%

Underlying earnings3 (US$ millions)

10,373

8,808

18

%

Net earnings (US$ millions)

8,010

13,638

(41

)%

Underlying earnings3 per share (US cents)

636.3

512.3

24

%

Ordinary dividend per share (US cents)

382.0

307.0

24

%

Total dividend per share (US cents)

443.0

550.0

(19

)%

Net (debt)/cash4 (US$ millions)

(3,651)

255

 

 

Return on capital employed (ROCE)6

24

%

19

%

 

Our financial results are prepared in accordance with International Financial Reporting Standards (IFRS). Footnotes are set out on page 5.

•   Strong safety performance in 2019, with no fatalities and a slightly improved all injury frequency rate, coming from a strong base. Continued improvement in prevention of catastrophic events through a step-change in process safety management.

• $14.9 billion operating cash flow was 26% higher than 2018 and $9.2 billion free cash flow2 was 31% higher than 2018. Both are presented after $0.9 billion tax paid in 2019 relating to the 2018 coking coal disposals.

• $5.5 billion capital expenditure1 was consistent with 2018. In late 2019, we announced the approval of two further investments, at Greater Tom Price (iron ore, $0.8 billion) and Kennecott (copper, $1.5 billion).

• $21.2 billion underlying EBITDA3 was 17% above 2018, primarily driven by higher iron ore prices, with an underlying EBITDA margin7 of 47%.

• $10.4 billion underlying earnings were 18% above 2018. Taking exclusions into account, net earnings of $8.0 billion  were 41% lower than 2018, mainly reflecting $1.7 billion8 of impairments in 2019,  primarily the Oyu Tolgoi underground project, consistent with our 2019 interim results, and the Yarwun alumina refinery. This compared with $4.0 billion of gains on disposals in 2018.

•   Strong balance sheet with net debt4 of $3.7 billion, a rise of $3.9 billion, mainly reflected $11.9 billion of cash returns to shareholders in 2019 through dividends and share buy-backs, and a $1.2 billion non-cash increase from the implementation of IFRS 16 "Leases", partly offset by free cash flow of $9.2 billion.

• $7.2 billion full-year dividend, equivalent to 443 US cents per share and 70% of underlying earnings, includes $3.7 billion record final ordinary dividend (231 US cents per share) declared today.

Stronger revenues and underlying EBITDA

•   $43.2 billion consolidated sales revenue ($45.4 billion including our share of equity accounted units) was 7% higher than 2018, primarily driven by higher iron ore prices. This was partially offset by lower copper and aluminium prices and the absence of revenues from assets divested in 2018.

• $21.2 billion underlying EBITDA3 was 17% higher than 2018, reflecting the higher iron ore price and the recovery from the operational challenges earlier in the year. This more than compensated for higher unit costs and the absence of underlying EBITDA from assets divested in 2018.

•   30% effective tax rate on underlying earnings3 - one percentage point higher than in 2018, primarily reflecting increased profits in Australia.

•   $8.0 billion net earnings - 41% lower than 2018, mainly reflecting the impairments of Oyu Tolgoi and Yarwun alumina refinery in 2019, which compared with gains on disposals in 2018. See table on page 8.

$7.2 billion of dividends declared for 2019

Ordinary dividend

US$ billion

US cents

per share

Interim ordinary dividend paid in September 2019

2.5

 

151

Final ordinary dividend to be paid in April 2020

3.7

 

231

Full-year ordinary dividend

6.2

 

382

 

Additional returns

 

 

Special dividend paid in September 2019

1.0

 

61

 

Combined total is 70% of 2019 underlying earnings

7.2

 

443

 

 Strong cash flow from operations drives free cash flow

 

2019

 

2018

 

 

US$m

US$m

Net cash generated from operating activities

14,912

11,821

Capital expenditure1

(5,488)

(5,430)

Sales of property, plant and equipment

49

586

Lease principal payments

(315)

-

 

Free cash flow2

9,158

6,977

Disposals*

(80)

7,733

Dividends paid to equity shareholders

(10,334)

(5,356)

Share buy-backs

(1,552)

(5,386)

Non-cash impact from implementation of  IFRS 16 "Leases" from 1 January 2019

(1,248)

-

 

Other

150

132

(Increase)/decrease in net debt4

(3,906)

4,100

* Net disposal proceeds include a cash outflow representing Rössing's cash balance at the date of the sale. See page 9.

See page 5 for other footnotes.

•   $14.9 billion in cash generated from operating activities, after $0.9 billion tax paid relating to the 2018 coking coal disposals. This was 26% higher than 2018 and was driven primarily by higher underlying EBITDA from higher iron ore prices and the ongoing management of working capital.

•   $5.5 billion capital expenditure1 comprised of $2.6 billion of development capital, of which $1.2 billion is replacement capital, and $2.9 billion of sustaining capital.

•   $10.3 billion of dividends paid in 2019 comprised of the 2018 final and special dividends paid in April 2019 ($6.8 billion) and   the 2019 interim and special dividends paid in September 2019 ($3.5 billion).

•   $1.6 billion paid for 28.4 million share repurchases under the Rio Tinto plc on-market share buy-backs announced in 2018,   with the remaining $0.2 billion purchases to be completed no later than 28 February 2020.

• The implementation of IFRS 16 "Leases" on 1 January 2019 increased net debt by $1.2 billion (non-cash movement).

• As a result of the above, and $0.2 billion of other movements, net debt4 increased by $3.9 billion since the end of 2018 to $3.7 billion.

Continued investment in growth projects and development

•   Greenfield success with further encouraging drill results released in August 2019 at the Winu project in Western Australia.   Extensive drilling and geophysical testing programme completed: geotechnical, hydrology, mining, processing and basic engineering studies are well advanced. Targeting first production in 2023, subject to regulatory approvals and consents.

•   $624 million spent on exploration and evaluation. This 28% rise was mostly driven by higher greenfield expenditure to underpin future growth projects, as well as increased activity at the Resolution copper project in Arizona, for which we committed $302 million ($166 million our 55% share) in future expenditure.

• $2.6 billion Koodaideri replacement iron ore mine progressed, with key construction activities on schedule. Koodaideri will have a 43 Mt annual capacity underpinning production of our Pilbara Blend™, with first tonnes in late 2021.

• $1.5 billion investment at Kennecott approved in late 2019. Phase 2 of the south wall pushback is expected to extend copper operations to 2032.

• At the Oyu Tolgoi underground copper/gold mine in Mongolia, we completed the primary production shaft in October 2019, a key milestone. Work continued on the mine design and, overall, we remain within the cost and schedule ranges announced in July 2019. We continue to expect to complete the mine design in the first half of 2020 and the definitive estimate9 of cost and schedule in the second half of 2020.

• $463 million investment in the Zulti South project at Richards Bay Minerals (RBM) in South Africa approved in 2019 to sustain current capacity and extend mine life. Construction is on hold after a number of security incidents - we will assess a restart after normalisation of operations at RBM.

Climate change strategy update

We have a key role to play in enabling the transition to a low-carbon economy. We do this through our well-positioned portfolio of high-quality iron ore, copper and aluminium. We do not mine coal or extract oil and gas and 76% of our electricity consumption at our managed operations is supplied by renewable energy.

In 2015, we supported the outcomes of the Paris Agreement. Since 2008, we have reduced our absolute greenhouse gas emissions from our managed operations by 46% (or 18% when excluding divestments).

Our ambition is for net zero emissions from our operations by 2050. We have set new targets for scope 1 & 2 emissions for our managed and non-managed operations (on an equity share basis):

• A 30% reduction in emissions intensity by 2030 from 2018 levels

• A 15% reduction in absolute emissions by 2030 from 2018 levels

Our growth, overall, between now and 2030 will be carbon neutral. This is underpinned by approximately $1 billion of climate-related spend over the next five years.