Iron-ore prices have nearly halved over the year, so a 9 per cent slide in underlying earnings from Rio Tinto (RIO) is a creditable result for 2014. The FTSE 100 miner's focus on capital discipline allowed it to cut net debt by a third, fund a double-digit dividend increase and initiate a $2bn share buy-back programme.
Despite weakening commodity prices - which effectively reduced earnings by $4.1bn - Rio's operating cash flow was down by just 5 per cent. This is testament to improved working capital management, with inventories and receivables reduced by a quarter and a fifth respectively.
The completion of major mining projects allowed the group to pare back last year's capital budget by 37 per cent to $8.2bn. Management anticipates an annual outlay of around $7bn through to the end of 2017. Meanwhile, a tight rein on operating costs underpinned savings of $1.5bn in 2014, bringing the total to $4.8bn since the group started to rationalise its cost base in 2012. Management anticipates further cash savings of $750m in the current year.
Rio has also partially offset the collapse in iron-ore prices by scaling up production. For example, increased capacity at its Pilbara ports and mines in Australia boosted the group's seaborne exports by nearly a fifth.
JPMorgan anticipates 2015 EPS of 369¢.
| RIO TINTO (RIO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 3,053p | MARKET VALUE: | £56.5bn | |
| TOUCH: | 3,052-3,054p | 12M HIGH / LOW: | 3,642p | 2,600p |
| DIVIDEND YIELD: | 4.6% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 2,502¢* | NET DEBT: | 23% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2010 | 55.2 | 20.5 | 731 | 108 |
| 2011 | 60.5 | 13.2 | 304 | 145 |
| 2012 | 51.0 | -2.4 | -163 | 167 |
| 2013 | 51.2 | 3.5 | 198 | 192 |
| 2014 | 47.7 | 9.6 | 353 | 215 |
| % change | -7 | +173 | +78 | +12 |
Ex-div: 5 Mar Payment: 9 Apr *Includes intangible assets of $7.1bn, or 384¢ a share £1=$1.53. NAV and market value reflect both UK and Australian listed shares | ||||
