Rio Tinto Posts Record Annual Profit, Nearly Doubles Dividend -- Update

   By Rhiannon Hoyle 
 

Rio Tinto PLC, one of the world's biggest mining companies, said it made a record profit in 2021 and would nearly double its full-year payout to shareholders, becoming the latest resources company to report a surge in earnings from increased commodity prices.

Rio Tinto on Wednesday said it made a net profit of $21.09 billion last year, up from $9.77 billion in 2020.

Underlying earnings totaled $21.38 billion, up from $12.45 billion the year earlier, reflecting a jump in prices not just for iron ore--which accounts for most of Rio Tinto's profits--but other commodities including copper and aluminum. Analysts had expected underlying earnings of roughly $21.63 billion, according to 13 estimates compiled by Visible Alpha.

Directors of Rio Tinto declared a final dividend of $4.17 a share plus a special dividend of $0.62, taking the total payout for the year to $10.40 a share.

"The recovery of the global economy, driven by industrial production, resulted in significant price strength for our major commodities, which we were able to capture," said Jakob Stausholm, Rio Tinto's chief executive.

He said the fiscal results, which included one of the largest annual profits ever recorded by a mining company, was the strongest in Rio Tinto's 149-year history. Each of its core businesses was highly profitable and the company's balance sheet is now the strongest it has been for at least 15 years, Mr. Stausholm told reporters, adding that the miner had done a better job of converting strong prices into earnings than it did during a commodity price boom a decade ago.

Some of Rio Tinto's rivals, including Glencore PLC and BHP Group Ltd., have also reported record earnings in their latest respective fiscal reports.

Commodity prices jumped last year as fiscal and monetary policies were geared to support economic growth.

The price of iron ore, the key ingredient in steel, was especially strong, surging to an all-time high in May. China's steel output last year exceeded 1 billion metric tons for a second time while, globally, crude steel production rose by one of its largest absolute annual increments in history to record levels, Rio Tinto said.

Iron ore accounted for roughly 80% of its underlying earnings last year, as the average price Rio Tinto was paid for its Australian iron ore climbed to $143.80 a ton, from $98.90 a ton in 2020.

Miners are using fatter earnings from higher prices to reward their shareholders.

The industry in recent years pivoted to spending more on capital returns, and less on growth, after investors berated companies for burning through cash during the China-led commodity bull run a decade ago.

Peter Cunningham, Rio Tinto's chief financial officer, told The Wall Street Journal the miner's high payout reflected the strength of its cash flow and wouldn't affect a new strategy to invest more in commodities tied to a global energy transition and the decarbonization of its own mining operations.

Rio Tinto has been slowly returning to growing its business, at a time when analysts increasingly worry that the industry's hesitancy toward new projects could create supply crunches for some critical commodities. Rio Tinto is expanding a copper mine in Mongolia. It is also seeking to develop a lithium project in Serbia, although was recently told permits there would be revoked. The company said it is exploring all options for that project.

"I still hope to see it happen, but I don't want to make any predictions," said Mr. Stausholm. "Those decisions are not in my hands."

Rio Tinto, like its peers, has faced rising cost pressures as inflationary headwinds mount globally. Rio Tinto on Wednesday said it expects mining costs in its Australian iron-ore business to rise due to higher input prices, labor costs, and maintenance of processing plants.

Mr. Stausholm said he wasn't particularly concerned about a jump in global energy costs, highlighting that Rio Tinto has it own energy assets--including hydropower facilities in Canada--that become more competitive during periods of high electricity prices. "So, there are both pluses and minuses," he said.

He added that it was unclear what impact, if any, the developing situation in Ukraine might have on commodity supply, after Russia's decision to deploy troops to two breakaway Ukrainian provinces.

Mr. Stausholm said there could potentially be disruptions in the aluminum industry depending on the extent of sanctions. Russia is one of the world's biggest aluminum-producing countries. "We managed well last time there were sanctions," though, Mr. Stausholm said.

Write to Rhiannon Hoyle at [e-mail]

(END) Dow Jones Newswires

February 23, 2022 04:12 ET (09:12 GMT)

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