Rio Tinto Lifts Dividend Despite Lower Net Profit -- Update
July 29 2020 - 3:04AM
Dow Jones News
By David Winning
SYDNEY--Rio Tinto PLC lifted its mid-year dividend payout
despite a 20% fall in its net profit, as it balanced high iron-ore
prices with an uncertain global economic outlook.
Rio Tinto on Wednesday reported a net profit of $3.32 billion in
the six months through June, down from $4.13 billion in the same
period a year earlier when it wrote down its investment in the Oyu
Tolgoi copper deposit in Mongolia. Management said the on-year
decline in statutory profit reflected higher impairment charges,
exchange-rate losses and extra closure costs for some assets.
The company said its first-half underlying earnings fell by 4%
to $4.75 billion, beating the $4.09 billion forecast from a Wall
Street Journal poll of analysts.
Directors of the world's second-biggest mining company by market
value declared an interim dividend of $1.55 a share, up 3% on a
payout of $1.51 a year ago.
"Despite the challenging backdrop, we generated underlying
earnings before interest, tax, depreciation and amortization of
$9.6 billion, with a margin of 47%, driven by our strong and stable
operations, with all of our assets continuing to operate throughout
the first half," Chief Executive Jean-Sébastien Jacques said.
The global economy suffered a severe contraction in the three
months through June, as the U.S. grappled with the spread of the
coronavirus and other countries faced second waves of infections
that are proving harder to contain than initial outbreaks. Many
economies have started to reopen, but pandemic flare-ups have made
it a bumpy process and authorities have often had to reverse course
and tighten restrictions once again.
Navigating disruptions to commodities supply and demand has been
a challenging task for global mining companies, with the potential
to create winners and losers depending on where operations are
based.
Iron-ore prices this month topped $110 a metric ton as supply
from Brazil was disrupted by the spread of the coronavirus at some
mine sites run by Vale SA. In contrast, Australia's iron-ore
production is in a region largely unaffected by the virus, enabling
miners including Rio Tinto and BHP Group Ltd. to continue high
shipments of the commodity.
Rio Tinto's iron-ore exports rose 1% in the three months through
June and it continues to forecast annual shipments of between 324
million tons and 334 million tons. BHP's iron-ore output rose 11%
in its most recent quarter.
A recent strengthening of demand in China, the world's top buyer
of iron ore and many other commodities, has provided another boost.
China this month said its economy in the second quarter grew 3.2%
from a year earlier, helped by an aggressive campaign to eradicate
the virus within its borders. Steel utilization rates in the
country have improved.
Still, Mr. Jacques has been cautious about the outlook,
particularly for copper. The Escondida copper mine in Chile is
operating with fewer workers as part of a strategy to limit the
risk of the coronavirus spreading. Rio Tinto estimates the pandemic
has disrupted 3%-4% of global copper supply, and warns this could
increase further.
Rio Tinto said its net debt totaled $4.83 billion at the end of
June, down from $12.90 billion four years ago.
Write to David Winning at david.winning@wsj.com
(END) Dow Jones Newswires
July 29, 2020 02:49 ET (06:49 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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