Rio Tinto PLC (LSE:RIO) shares fell on Thursday as the global miner slashed its annual dividend and reported a 38% drop in full-year 2022 profit impacted by weaker iron ore prices as demand from China slowed, as well as by higher labour and material costs.
The FTSE 100-listed miner posted underlying earnings of $13.3bn for the year to 31 December 2022, compared with a record $21.4bn in 2021, and below estimates of $13.8bn.
The mining giant will pay a full-year dividend of $4.92 per share, down from 2021's record payout of $10.40 per share.
In the results statement, Rio Tinto chief executive Jakob Stausholm said: "We are building a stronger Rio Tinto and delivering against our four objectives. Our operational performance has improved, as evidenced by a number of second-half records being set at our Pilbara iron ore mine and rail system. We are also investing for the future, doubling our stake in the Oyu Tolgoi copper-gold project in Mongolia through the acquisition of Turquoise Hill Resources, progressing the Rincon Lithium Project in Argentina and reaching milestone agreements that underpin the long-term success of our Pilbara iron ore business."
"The uplift in our operational performance, strengthening of external relationships and investment in the long-term strength of the business ensure we will be able to continue to pay attractive dividends and invest in sustaining and growing our portfolio, while contributing to society's drive to net zero," he added.
The company saw additional investments to ramp up production at the Gudai-Darri mine in Pilbara, Australia, along with higher diesel prices and labour costs, resulting in Pilbara unit cash costs rising to $21.30 per tonne in 2022.
Rio maintained its production and unit cost guidance for 2023.
The company noted that strict COVID-19 curbs in top steel producer China curtailed economic activity last year, dragging down iron ore prices from lofty levels a year earlier.
Rio, the world's top iron ore producer, said Chinese consumption showed signs of rebounding and commodity prices had found support in recent months, although the economy remained volatile. The world's second-biggest economy re-opened its borders in January and eased quarantine requirements for travellers after three years of strict coronavirus controls.
Rio lowered its capital investments guidance for 2023 to $8bn from a prior estimate of between $8bn and $9bn, while raising its estimates for 2024 and 2025 to between $9bn and $10bn.
In early trading on Thursday, Rio Tinto shares were down 1.9% at 6,086p.
Last year, Rio earned an average realised price of just $106.10 per dry metric tonne (dmt) of iron ore, down from $143.80 per dmt in 2021.