Falling prices dent full-year earnings at Rio Tinto

(Sharecast News) - Mining giant Rio Tinto said that commodity price movements led to a $1.5bn hit to underlying profits in 2023, though results were partly offset by a stronger US dollar and lower energy prices. Underlying EBITDA totalled $23.9bn for the 12 months to 31 December, down 9% on the year before, while consolidated sales revenue fell 3% to $54.0bn. Net cash generated from operating activities was 6% lower on the year at $15.2bn.

Average prices for copper fell by 3% over the year, and dropped 17% for aluminium, along with further declines seen in diamonds and industrial minerals; gold prices however gained 8% and for iron ore prices rose 0.5%.

On the plus side, Rio Tinto said it benefitted from weaker local currencies in 2023 which had a $0.6bn positive impact on underlying EBITDA, with the US dollar strengthening by 4% against the Australian dollar and by 4% against the Canadian dollar.

Falling energy prices also resulted in a $0.4bn benefit to underlying EBITDA, mainly related to lower diesel prices at its Pilbara iron ore operations, lower energy prices at alumina refineries and aluminium smelters, and lower fuel prices in the Marine business.

Chief executive Jakob Stausholm said the company delivered "resilient financial results", saying: "Our balance sheet strength enables us to continue to invest with discipline while also paying an ordinary dividend of $7.1 billion, a 60% payout."

Nevertheless, while the final dividend was raised to 4.2 cents per share, up from 3.7 cents in 2022, the full-year payout came to just 7.1 cents - a 12% cut from the year before.

Rio Tinto said total cash returns to shareholders over the long term should be in the range of 40% to 60% of underlying earnings. "Acknowledging the cyclical nature of the industry, it is the board's intention to supplement the ordinary dividend with additional returns to shareholders in periods of strong earnings and cash generation," the company said.

In a separate statement, Rio Tinto said it had signed Australia's biggest renewable power deal to supply its Gladstone operations in Queensland, agreeing to buy the majority of electricity from Windlab's planned 1.4GW Bungaban wind energy project.

"The agreement, which follows the announcement last month of a PPA for the Upper Calliope solar farm in Queensland, will make Rio Tinto the biggest industrial buyer of renewable power in Australia and is another major step in the work to repower the company's Gladstone production assets - Boyne aluminium smelter, Yarwun alumina refinery and Queensland Alumina refinery."