Rio Tinto FY19 Results (ASX: RIO)

Rio Tinto FY19 Results (ASX: RIO)

Rio Tinto (ASX: RIO) has reported its full-year results for FY19. We take a look at the company’s headline figures, key commentary and guidance outlook, plus review the share market’s reaction across the trading day.

 

Headline result

At the close of trading on Wednesday, Rio unveiled its 2019 full-year results, headlined by a 17% increase in underlying EBITDA to US$21.2bn.

Consolidated sales revenue rose 7% to US$43.2bn, while the company reported free cash flow lifted by 31% to US$9.2bn.

Rio Tinto has declared a record final ordinary dividend of US$2.31 per share, or $3.4974 per share in Australian dollars, with the miner’s ordinary dividend per share across the entire year up by 24%. RIO shares will trade ex-dividend on March 5, 2020, before the dividend is paid to shareholders on April 16, 2020.

Although Rio unveiled its results after the ASX closed for trading, the UK and US-listed versions of the stock traded lower by a modest percentage.

 

Key commentary

Supporting the company’s record dividend payment, underlying EBITDA margins were 47% thanks to stronger iron ore prices. In addition, Rio Tinto realised a return on capital employed (ROCE) of 24%.

While underlying earnings of US$10.4bn are an 18% improvement on FY18, this figure disregards US$1.7bn in impairments arising from its Oyu Tolgoi project and Yarwun alumina refinery.

Net cash generated from operating activities leapt 26% to US$14.9bn, with capital expenditure inching up just 1% to US$5.5bn. As part of this expenditure, US$2.6bn was spent on development projects, with US$624m assigned to exploration and evaluation.

Net debt of US$3.7bn is US$3.9bn higher than the prior corresponding period, mostly due to distribution of shareholder returns.

Management also took the opportunity to report a strong safety performance across the year.

 

Guidance outlook

The company expects some “short-term impacts” relating to the Coronavirus, particularly with regards to supply-chain issues. Management believes this may create “significant uncertainty”, however, the company’s most-recent guidance has been retained, subject to a number of assumptions and conditions.

Of its key operational divisions, Rio Tinto anticipates that Pilbara iron ore shipments across FY20 will be in the range of 324 to 334 Mt. Captial expenditure is forecast to be US$7bn, then US$6.5bn in each of the two subsequent years.

Due to increased volume efficiency, unit costs for Pilbara iron ore are expected to be US$14-15/t, albeit offset by “longer haul distances and increased maintenance activity”. Meanwhile, copper C1 unit costs are predicted to come in at 120-135 US cents/lb, impacted by “lower copper grades and lower by-product revenues”.

 

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