Rio Tinto maintains dividend after stable first half

(Sharecast News) - Rio Tinto reported underlying EBITDA of $12.1bn for its first half on Wednesday, making for a modest 3% increase from the same period in 2023. The FTSE 100 mining giant said net cash generated from operating activities for the six months ended 30 June rose slightly to $7.1bn, while profit after tax attributable to shareholders increased 14% to $5.8bn.

Despite the gains, free cash flow declined 25% to $2.84bn, largely due to a 34% increase in capital expenditures, which reached $4.02bn.

The company declared an interim ordinary dividend of 177 US cents per share, consistent with last year, translating to a $2.9bn payout.

It said the dividend represented a 50% payout ratio based on underlying earnings of $5.8bn.

The firm's net debt widened to $5.08bn as at 30 June, from $4.23bn at the end of 2023, driven by higher capital investments and dividend payments.

Rio Tinto said it faced mixed commodity pricing, with lower iron ore and aluminium prices offset by a rise in copper and gold prices.

The company benefited from favourable currency movements, particularly the strengthening of the US dollar against the Australian dollar, which added $0.2bn to underlying EBITDA.

Operationally, Rio Tinto reported stable sales volumes, with copper equivalent sales volumes up 1.4%, driven by a 15% increase in copper sales.

However, the impact of inflation on costs and a slight decrease in iron ore shipments from the Pilbara region weighed on overall margins.

Looking ahead, Rio Tinto maintained its guidance for capital investment, expecting to spend up to $10bn annually through 2026, with a focus on growth, sustaining operations, and decarbonization projects.

The company said it also anticipated ongoing exploration and evaluation expenses of around $1bn in 2024, excluding the Simandou project, where costs were now being capitalised.

It was navigating tight labour markets in key regions, and had increased investment in decarbonisation and community initiatives, aligning with its broader strategic objectives.

"Rio Tinto is both consistently very profitable and growing," said chief executive officer Jakob Stausholm.

"This is being driven by the disciplined investments we are making to strengthen our operations and progress major projects for profitable organic growth.

"Our overall copper equivalent production is on track to grow by around 2% this year, and our ambition is to deliver around 3% of compound annual growth from 2024 to 2028 from existing operations and projects."

Stausholm said the company was "at an inflection point" in its growth, with a step change from its aluminium business and consistent production at its Pilbara iron ore operations.

"We have considerable growth in cash flow from the ramp-up of the underground copper mine at Oyu Tolgoi, and more value to come as our Simandou investment and Rincon lithium project proceed at pace.

"We are also solving some of our most complex challenges through technology and partnerships, such as the renewable power solutions announced for Boyne and NZAS.

"Our strong balance sheet enables us to continue to maintain our practice of a 50% interim payout with a $2.9bn ordinary dividend, as we continue to invest with discipline to shape Rio Tinto into an even stronger company."

At 0924 BST, shares in Rio Tinto were up 1.69% at 5,019p.

Reporting by Josh White for Sharecast.com.