Rio Tinto announces record returns to shareholders of $13.5 billion including final dividend of $3.1 billion and special dividend of $4.0 billion

27 February 2019

Rio Tinto announces record returns to shareholders of $13.5 billion including final dividend of $3.1 billion and special dividend of $4.0 billion

pdf Annual results 2018 pdf 486 KB - Opens in a new window

Rio Tinto chief executive J-S Jacques said “We have once again announced record cash returns to shareholders of $13.5 billion on the back of $18 billion of underlying EBITDA and a Return on Capital Employed of 19%. These strong results reflect the efforts of the team to implement our value-over-volume strategy as we continued to strengthen the portfolio and invest in future growth.

“Our world-class portfolio and strong balance sheet will serve us well in all market conditions, and underpin our ability to continue to invest in our business and deliver superior returns to shareholders in the short, medium and long term.”

Annual results 2018 highlights

  • Sadly, we had three fatalities in 2018, two workplace related, one security incident. All Injury Frequency Rate (AIFR) of 0.44 (2017: 0.42).
  • $6.3 billion of cash returns from operations, comprising the $1.0 billion share buy-back announced in August 2018, and record $5.3 billion full year ordinary dividend (equivalent to 307 US cents per share) – 72% of underlying earnings3, including final dividend of $3.1 billion (equivalent to 180 US cents per share), announced today.
  • $7.2 billion of supplementary cash returns from divestments, comprising a special dividend of $4.0 billion announced today, equivalent to 243 US cents per share, and $3.2 billion of share buy-backs, $1.1 billion of which remains outstanding in Rio Tinto plc shares, to be completed no later than 28 February 2020.
  • This brings total cash returns declared in respect of 2018 to $13.5 billion.
  • Robust underlying EBITDA of $18.1 billion was just 2% below 2017, despite divestments and input cost pressures in aluminium and alumina. $0.4 billion exit rate from our mine-to-market productivity programme6 was impacted by $0.3 billion higher costs from raw materials.
  • $11.8 billion operating cash flow, 15% below 2017, driven primarily by the timing of tax payments related to 2017 earnings and higher inventory balances as a result of the increased price of raw materials.
  • $7.0 billion free cash flow, with lower operating cash flow as described above and increasing investment in capital projects in line with guidance. $5.4 billion of capital expenditure with $2.9 billion invested in high value development projects including AutoHaul™ automated trains, Amrun bauxite and Oyu Tolgoi underground copper/gold mine. Koodaideri and Robe River replacement iron ore mines approved.
  • $8.8 billion underlying earnings, 2% higher due to a strong contribution from Copper & Diamonds, offsetting lower underlying earnings in other product groups.
  • $13.6 billion net earnings driven primarily by gains on disposals and foreign exchange movements.
  • 19% Return on Capital Employed (ROCE)7, a rise of one percentage point, as we continue our strategic reshaping of the portfolio.
  • Strong balance sheet as net debt5 fell by $4.1 billion to a net cash5 position of $0.3 billion, including cash and highly liquid investments of $13.3 billion. Cash flows were bolstered by $8.6 billion of pre-tax divestment proceeds, including our remaining Australian coal assets and Grasberg.

 

At year end

2018

2017

Change

Net cash generated from operating activities (US$ millions)

11,821

13,884

-15%

Capital expenditure1 (US$ millions)

5,430

4,482

+21%

Free cash flow2 (US$ millions)

6,977

9,540

-27%

Underlying EBITDA3 (US$ millions)

18,136

18,580

-2%

Underlying earnings3 (US$ millions)

8,808

8,627

+2%

Net earnings (US$ millions)

13,638

8,762

+56%

Underlying earnings3 per share (US cents)

512.3

482.8

+6%

Basic earnings per share (US cents)

793.2

490.4

+62%

Ordinary dividend per share (US cents)

307.0

290.0

+6%

Net cash/(debt)4 (US$ millions)

255

(3,845)

Net gearing ratio5

-1%

7%

 

1 Capital expenditure is presented gross, before taking into account any cash received from disposals of property, plant and equipment (PP&E).
The following financial performance indicators – which are non-GAAP measures - are those management uses internally to assess performance. They are therefore considered relevant to readers of this document. They are presented here to give more clarity around the underlying business performance of the Group’s operations.
2 Free cash flow is defined as net cash generated from operating activities less purchases of PP&E plus sales of PP&E.
3 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 49.
4 Net cash / debt is defined and reconciled to the balance sheet on page 44.
5 Net gearing ratio is defined as net debt divided by the sum of net debt and total equity at the end of each period.
6 Mine-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.
7 Return on Capital Employed (ROCE) is defined as underlying earnings excluding net interest divided by average capital employed (operating assets before net debt).
8 For full details, see the Notice to the ASX dated 27 February 2019 (“Rio Tinto Exploration Update – copper-gold mineralisation discovered in the Paterson Province in the far east Pilbara region of Western Australia”) and accompanying information provided in accordance with the Table 1 checklist in The Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code, 2012 Edition). These materials are also available on riotinto.com.