Rio Tinto has delivered a strong performance in 2016 despite the year’s challenging economic conditions, according to chairman Jan du Plessis.
Speaking at the company’s annual general meeting, du Plessis highlighted the economic volatility of 2016, particularly in terms of iron ore, with the mineral reaching around $US40 a tonne at the beginning of the year before climbing to around $US80 a tonne by the year’s end.
Despite the overall lower commodity prices in 2016, du Plessis said the company’s cost saving efforts were able to offset these lower prices, leading to a 12 per cent rise in underlying earnings to $US5.1 billion.
However, tighter credit conditions could affect the company’s earnings.
“The global economy starts 2017 with improved manufacturing conditions but also evidence that cost pressures and tighter credit conditions in the US, the UK and China are affecting corporate earnings growth,” du Plessis said.
The company’s operating cash flow was $US8.5 billion, down 10 per cent from its rate in 2015.
However, du Plessis noted that Rio Tinto reduced its debt by more than $US4 billion, dropping from $US13.8 billion to $US9.6 billion.
“This is a great achievement by the management team and once again reflects the significant work over the past year to strengthen the company’s balance sheet,” he said.
The company returned $US3.6 billion to shareholders in 2016; having returned more than $US20 billion to shareholders since 2012.
du Plessis also referred to Rio’s latest taxes paid report, which showed the company contributed more than $US32 billion in corporate taxes in the countries where it operates. This included the $US4 billion in taxes and royalties it paid globally.
“Since 2012 we have paid more than $US32 billion in corporate taxes and royalties, of which more than $US25 billion was paid in Australia,” he said.
“Over the last five years we have consistently been one of the top five corporate taxpayers in Australia.”
du Plessis added that the company is now focusing on the investment of Tier 1, “long-life, low-cost, expandable operations in the most attractive industry sectors”.
“Taken together with the strength of our balance sheet, ours is a strategy that seeks to weather tough times, and to reward shareholders through market cycles,” he said.
du Plessis is retiring from his role as chairman of Rio Tinto, with a successor set to be announced by the end of 2017.