Rio Tinto to return $US13.5 billion to shareholders

Rio Tinto operations in the Pilbara. Copyright © 2018 Rio Tinto.

Rio Tinto has declared a victory for its “value-over-volume” strategy as it announced plans to return a record $US13.5 billion ($18.9 billion) to shareholders following a strong 2018.

Chief executive Jean-Sebastién Jacques said the company’s “world class portfolio and strong balance sheet” had underpinned the business’s ability to carry out the record return.

The company will deliver a final dividend of $US3.1 billion (equivalent to $US1.80 a share) and a special dividend of $US4 billion ($US2.43 per share).

Rio Tinto’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) stood at $US18.1 billion for the 2018 financial year, down $US500 million (around 2 per cent) from the $US18.6 billion posted in 2017.

The company suggested that cost inflation of raw materials and energy inflation at the company’s aluminium and alumina operations were the primary factors affecting EBITDA.

This included supply volatility issues triggered by sanctions against Russian aluminium major Rusal imposed by the United States Treasury imposed in April last year. Rusal is the world’s second largest aluminium producer after Chinese company Hongqiao.

Following the US sanctions, Rio Tinto took the unusual move of declaring force majeure in relation to Rusal, including an arrangement to supply bauxite to Rusal for its Aughinish alumina refinery in Ireland, the largest of its kind in Europe.

Rio Tinto is also involved with Rusal through the company’s 20 per cent stake in Rio Tinto’s Queensland Alumina operation.

Final underlying earnings were up 2 per cent on 2017 figures at $US8.8 billion, however, thanks to strong results from the company’s copper and diamonds operations.

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