Iron-ore accounted for 90% of Rio Tinto’s earnings, underlying its pedigree as it operates one of the world’s biggest iron-ore export hubs.
Rio Tinto Plc (NYSE: RIO) has announced a special dividend for its investors after the company sees a 22% rise in annual profit. Rio Tinto which is the world’s biggest producer of iron and ore and the world’s second-largest mining company by value announced a net profit of $9.77 billion for 2020 on February 17, up from the $9.1 billion it recorded in 2019.
The mining company in what its new chief executive described as a “year of extremes” saw a $1.3 billion of exchange losses and $1.1 billion in impairment charges with three of it’s Pacific Aluminium smelters taking the biggest hits.
Rio Tinto reported a 20% rise in underlying earnings to $12.45 billion in the year to December on revenue of $44.6 billion, after a surge in the prices of iron and ore. The company’s net debt also fell from $3.65 billion in 2019 to $664 million whilst its profit before tax went up from $11.1 billion in 2019 to $15.4 billion.
Rio Tinto’s numbers performed well above expectations from analysts as its underlying earnings according to a compilation of 16 analyst forecasts was expected to be $11.75 billion.
Iron-ore accounted for 90% of Rio Tinto’s earnings, underlying its pedigree as it operates one of the world’s biggest iron-ore export hubs. Rio’s impressive performance saw its directors declare a final dividend of $3.09 a share, alongside a special payment of $0.93 which took the miner’s full-year ordinary payout to $4.64 a share. The company paid $4.43 a share last year and analysts were expecting a total dividend of $4.80 according to a compiled consensus by market monitoring firm, Vuma.
Rio Tinto, adding to its half-year dividend, generated $9billion to shareholders for its most recent financial year, making it the biggest ever payout in its 148 years of existence. Jakob Stausholm, the Chief Executive of Rio Tinto speaking after the announcement stated that, the year in review was an extraordinary one and the company’s successful response, coupled with a strong safety performance in wake of the COVID-19 pandemic were overshadowed by the tragic events at the Juukan Gorge, which should never have happened.
“During 2020, the agility and resilience of the business and our employees, coupled with strong commodity prices, enabled us to deliver underlying EBITDA of $23.9 billion and Return on Capital Employed of 27%. As a result, the Board has approved a total dividend of 557 US cents per share including a special dividend of 93 US cents per share, representing a 72% full year pay-out ratio, which builds on our five-year pay-out track record,” Stausholm said.
Stausholm added that his new executive team and wider leadership of the company are all prepared to unleash the full potential of Rio Tinto. “We will increase our focus on operational excellence and project development and strengthen our ESG credentials,” he stated.
At the time of writing, after the announcement, RIO stock is 2.36% up, trading at $89.70. Yesterday it closed with a 4.75% rise.
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