Mining giant Rio Tinto PLC (LON:RIO) saw its underlying earnings rise by 12% in 2016 and will return 70% of that, or US$3.6bn to shareholders via dividends and a US$0.5bn share buy-back over 2017.
The group is paying a full year dividend of 170 US cents per share, equivalent to US$3.1bn, albeit down 21% on 2015’s 215 US cent payout.
However, Rio Tinto had only committed to paying out a minimum of 110 US cents, while analysts had expected a payout of 113 US cents.
The FTSE 100-listed firm saw its 2016 underlying earnings rise to US$5.1bn, up from US$4.54bn in 2015 as it generated operating cash flow of US$8.5bn, albeit down 10% on 2015’s US$9.383bn.
The miner’s sales revenues of US$33bn were US$1bn lower than the previous year due primarily to lower average commodity prices, and lower market premia for aluminium.
Portfolio optimisation …
Rio said it is investing in three major growth projects in bauxite, copper and iron ore and has optimised its portfolio with disposals of US$1.3bn in 2016 and up to US$2.45bn announced to date in 2017.
The group also strengthened its balance sheet further, with net debt cut by 30% to US$9.6bn.
Rio Tinto’s chief executive J-S Jacques said: "We enter 2017 in good shape. Our team will deliver $5 billion of extra free cash flow over the next five years from our productivity programme.
“Our value over volume approach, coupled with a robust balance sheet and world-class assets, places us in a strong position to deliver superior shareholder returns through the cycle."
In early trading Rio shares topped the FTSE 100 leader board, up around 3%, or 92.5p to 3,527.5p.
Brokers mixed ...
Laith Khalaf, senior analyst at Hargreaves Lansdown said: “All the dials seem to be moving in the right direction at Rio, mainly thanks to the self-help measures implemented by the company.” He added: “The fact that Rio has also decided to return capital to investors via a share purchase plan, as well as ramping up its capital expenditure, suggests the company is pretty bullish about its prospects going forward.”
Analysts at VSA Capital research noted that Rio “announced robust full year results for 2016” but added: “Segment performance was mixed with iron ore and energy and minerals performing strongly offset by weakness in aluminium, copper and diamonds.”
And Liberum repeated its ‘sell’ stance on the miner’s shares, with its analysts saying: “Despite its balance sheet strength Rio is still heavily exposed to iron ore and aluminium where we see significant downside over 2017.”
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