Rio Tinto announces $7.2 billion of returns to shareholders comprising $3.2 billion from operations and $4.0 billion from asset disposals

01 August 2018

Rio Tinto announces $7.2 billion of returns to shareholders comprising $3.2 billion from operations and $4.0 billion from asset disposals

pdf Rio Tinto 2018 half year results pdf 281 KB - Opens in a new window

Rio Tinto chief executive J-S Jacques said "We have reported another strong set of results with underlying EBITDA of $9.2 billion and operating cash flow of $5.2 billion. In a favourable market environment, our Tier 1 assets and strong operational capability have achieved a 43 per cent EBITDA margin. Inflationary pressures are being experienced across the industry, but we have been able to offset these through our mine-to-market productivity programme.

"As a result, we continue to deliver superior shareholder returns with a record interim dividend of $2.2 billion and a $1.0 billion top-up to our existing share buy-back programme. In addition, in 2018 we have announced $5.0 billion of divestments. The board has today approved that these disposal proceeds, net of tax, will be returned to our shareholders, with the precise timing and form to be determined.

"We will continue to invest in Tier 1 growth, further strengthen our portfolio and maintain a strong balance sheet in order to deliver superior returns to shareholders in the short, medium and long term."

First half 2018 highlights

  • Interim ordinary dividend announced today of $2.2 billion, equivalent to 127 US cents per share, represents 50 per cent of underlying earnings
  • Additional share buy-back of $1.0 billion in Rio Tinto plc shares announced today, to be completed by the end of February 2019
  • Underlying EBITDA1 of $9.2 billion and margin2 of 43 per cent
  • Generated operating cash flow of $5.2 billion, net of a $1.2 billion payment to the Australian Tax Office pertaining to 2017 profits
  • Increase in capital expenditure to $2.4 billion, with $1.4 billion of investment in growth including the AutoHaulTM, Amrun and Oyu Tolgoi projects
  • Delivered underlying1 and net earnings of $4.4 billion and free cash flow3 of $2.9 billion
  • Ongoing reshaping of the portfolio with binding agreements for $5.0 billion (pre-tax) of divestments announced in 2018 first half. The post-tax proceeds of $4.0 billion will be returned to shareholders
  • In addition, on 12 July 2018, the Group announced the signing of a non-binding Heads of Agreement to sell its interest in Grasberg for $3.5 billion

 

Six months to 30 June

2018

2017

Change

Net cash generated from operating activities (US$ millions)

5,228

6,306

-17%

Capital expenditure4 (US$ millions)

2,363

1,758

+34%

Free cash flow3 (US$ millions)

2,883

4,627

-38%

Underlying EBITDA1 (US$ millions)

9,198

9,042

+2%

Underlying earnings1 (US$ millions)

4,416

3,941

+12%

Net earnings (US$ millions)

4,380

3,305

+33%

Underlying earnings1 per share (US cents)

253.6

219.4

+16%

Basic earnings per share (US cents)

251.6

184.0

+37%

Ordinary dividend per share (US cents)

127.0

110.0

+15%

 

At 30 June 2018

At 31 Dec 2017

Change

Net debt5 (US$ millions)

5,229

3,845

+36%

Net gearing ratio6, 7

10%

7%

The financial results are prepared in accordance with IFRS and are unaudited.
1Underlying EBITDA, underlying earnings and underlying earnings per share are key financial performance indicators which management use internally to assess performance and are referred to as non-GAAP measures. They are presented here to provide greater understanding of the underlying business performance of the Group’s operations. Net and underlying earnings relate to profit attributable to the owners of Rio Tinto. Underlying EBITDA and earnings are defined on page 14. Underlying earnings is reconciled to net earnings on page 72.
2EBITDA margin is defined as Group underlying EBITDA divided by Product Group total revenues as per the Financial Information by Business Unit on page 12 where it is reconciled to profit on ordinary activities before finance items and taxation and consolidated sales revenue. This financial metric is used by management internally to assess performance, and therefore is considered relevant to users of the accounts.
3Free cash flow is defined as Net cash generated from operating activities less Purchases of property, plant and equipment (PP&E) plus Sales of PP&E. It is a key financial indicator which management uses internally to assess performance and is therefore considered relevant to users of the accounts.
4Capital expenditure is presented gross, before taking into account any cash inflows from disposals of property, plant and equipment.
5Net debt is defined and reconciled to the balance sheet on page 44.
6 Net gearing ratio is defined as net debt divided by the sum of net debt and total equity at each period end.
7These financial performance indicators are those which management use internally to assess performance, and therefore are considered relevant to users of the accounts.
8Mine-to-market productivity improvements refer to the additional free cash flow generated from post-tax operating cash cost improvements and post-tax volume gains from productivity programmes. This financial performance indicator is used by management internally to assess performance, and therefore is considered relevant to users of the accounts
9This production target was disclosed in a release to the market on 6 May 2016. All material assumptions underpinning that target continue to apply and have not materially changed.

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