Rio Tinto Increases Share Buyback Plans After Jump in 1st-Half Net Profit -- Update
August 02 2017 - 4:20AM
Dow Jones News
By Robb M. Stewart
MELBOURNE, Australia--Rio Tinto PLC (RIO) said it would buy back
a further $1 billion in shares this year, after the mining company
continued to reduce debt and recorded a jump in half-year
profit.
In all, Rio Tinto said Wednesday it would return $3 billion in
cash to shareholders, including the increase to a $500 million
buyback program started earlier in the year and a raised interim
dividend.
The U.K.-Australian company has benefited from higher prices for
its output, from coal to iron ore, which buoyed revenue and almost
doubled cash flow from its operations. It said it also met a target
of reducing cash costs by $2 billion six months earlier than
planned.
Net profit rose to $3.31 billion in the six months through June
from $1.71 billion a year earlier, while revenue increased 25% to
$19.32 billion from $15.5 billion. The improvement came despite
struggling production of iron ore and steelmaking coking coal over
the first half. Disruptive wet weather and rail maintenance in
Australia prompted Rio Tinto to scale back its full-year production
targets for the commodities.
However, mined copper output started to rebound in the second
quarter from a lengthy strike at a mine in Chile, while
thermal-coal production grew for the half year.
Net debt was cut by $2 billion over the six-month period to
$7.57 billion, taking gearing--a measure of a company's debt
relative to equity--to 13% from 17% at the end of December.
"We continue to have the strongest balance sheet in the sector,"
said Chief Executive Jean-Sebastien Jacques, who took the helm of
the mining company about a year ago.
Expectations grew in recent months that Rio Tinto would take the
lead over many of its peers in increasing returns to shareholders,
leveraging improved cash flow and higher commodity prices.
Mr. Jacques said Rio Tinto would pay a dividend of $1.10 a
share, the highest interim payout in the company's history, while
also buying back a total $1.5 billion in shares before
year-end.
"The entire team is working every day to ensure we generate as
much cash as we can," he said during a conference call. "The
momentum is there."
In May, Rio Tinto moved to further reduce debt, initiating a
bond-repurchase plan for up to $2.5 billion that followed on from a
series of bond redemptions and buybacks in 2016 valued at $7.5
billion.
In June, Rio Tinto backed offer from Yancoal Australia Ltd.
(YAL.AU) for its Australian coal unit, Coal & Allied Industries
Ltd. China-backed Yancoal offered an improved bid of $2.69 billion
to top a rival approach from Glencore PLC (GLEN.LN).
Rio Tinto will wait until the cash is in the bank before
deciding what to do with the proceeds, said Chief Financial Officer
Chris Lynch.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
August 02, 2017 04:05 ET (08:05 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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