The major miners have cruised through Covid-19 so far thanks to the iron ore price, which quickly recovered after tumbling at the end of January. Now Rio Tinto (RIO) will hand shareholders $2.5bn (£1.9bn), or $1.55 per share, in its interim dividend. Last year, after another strong period for iron ore, it paid out $1.51 plus a 61¢ special dividend.
The Anglo-Australian miner did see a 4 per cent drop in underlying profits year-on-year, to $4.8bn, while $1bn in write-downs related to various aluminum smelters and the struggling Diavik diamond took the shine off its reported numbers.
The production numbers, announced earlier this month, showed iron ore production and, importantly, shipped volumes had held up despite Covid-19 restrictions in Western Australia and a cyclone. They were both up 3 per cent in the half, to 161.1m tonnes (t) and 159.6mt, respectively.
Chief executive Jean-Sebastien Jacques – who is currently under heavy scrutiny following Rio Tinto’s destruction of sacred sites in the Pilbara in May and a Financial Times report saying the company is in talks over a deal with the Serious Fraud Office (SFO) – said the mining industry had been hit by “supply and demand shocks never before seen”.
Rio’s reaction to this is seemingly to hold onto more of its underlying profit than last year, with the dividend payout down from 70 per cent last year (including the special dividend) to 53 per cent.
The company is investigating why it blew up the Juukan Gorge caves to expand the Brockman 4 iron ore mine pit against the wishes of the local Aboriginal community. Mr Jacques will appear before an Australian parliamentary inquiry into the destruction in the first week of August.
The SFO is looking into payment made to a consultant close to Guinea president Alpha Condé, which saw two executives leave the company.
The aluminium writedown came after a difficult period for the division, which had an underlying profit of $193m, a 39 per cent year-on-year drop. Rio has announced it will close the Tiwai Point smelter in New Zealand and has complained about the power prices for its Australian and Icelandic operations, even saying the Icelandic energy supplier’s conduct had been “abusive and discriminatory” towards it.
Consensus estimates are for an 8 per cent year-on-year decline in sales for 2020, to $39.8bn and a 12 per cent decline in cash profits, to $18.6bn.
| RIO TINTO (RIO) | ||||
| ORD PRICE: | 4,827p | MARKET VALUE: | £ 78bn | |
| TOUCH: | 4,826-4,828p | 12-MONTH HIGH: | 4,991p | LOW: 2,954p |
| DIVIDEND YIELD: | 6.2% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 2,427¢* | NET DEBT: | 11%** | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2019 | 20.7 | 5.19 | 253 | 151† |
| 2020 | 19.4 | 5.28 | 205 | 155 |
| % change | -6 | +2 | -19 | -12 |
| Ex-div: | 06 Aug | |||
| Payment: | 17 Sep | |||
| £1=$1.30, *Includes intangible assets of $3.3bn or 206¢ per share **Includes lease liabilties of $1.2bn, †Excludes 2019 special dividend of 61¢ | ||||
