The market missed Rio Tinto’s (RIO) stronger than expected second half and higher full year figures and dividend boost yesterday.
After a week of solid gains, Rio shares fell 27 to $67.83 ahead of the result being released just after 5 pm Sydney time yesterday.
Either investors had run out of patience or the clever ones, in the know as usual, had decided to take trading profits ahead of the actual announcement.
The world’s second biggest iron ore miner announced a dividend of $US1.92 after reporting underlying earnings of $US10.2 billion for 2013.
The dividend is 15% better than the $US1.67 paid to shareholders last year.
A final of 108.50 US cents is being paid compared with the previous final of 94.50 USc. The interim was 83.50c, up from 72.50c.
Driving the better result was a 45% jump in second half profit, thanks to higher iron ore exports and prices. Rio had reported an underlying first half profit of $US4.2 billion for the first half ending June.
Underlying earnings for the year totalled $US10.2 billion, 10% above the figure for 2012.
A consensus of analysts had been expecting underlying earnings of about $US9.8 billion.
Rio cut costs beyond the promised amount in 2013, delivering $US2.3 billion instead of the promised $US2 billion. Exploration savings were $US1 billion, instead of the promised $US750 million (that can’t fall much further without compromising the company’s future).
Net profit fell to $US3.7 billion after impairments on the Gove alumina refinery in the Northern Territory, the early works on the Oyu Tolgoi project in Mongolia and the Kitimat project in Canada.
Losses and impairments for the year totalled $US6.3 billion.
Rio produced 266 million tonnes of iron ore in 2013, just above the 265 million tonnes promised.
RIO 1Y – Rio ups dividend again after solid second half
In yesterday’s statement, CEO Sam Walsh said “These strong results reflect the progress we are making to transform our business and demonstrate how we are fulfilling our commitments to improve performance, strengthen the balance sheet and deliver greater value for shareholders.
"We have achieved underlying earnings of $10.2 billion, exceeded our cost reduction targets and set production records. In turn, this has enhanced our cash flow generation and lowered net debt.
"The 15 per cent increase in our dividend reflects our confidence in the business and its attractive prospects.”
The company said that net debt fell to $18.1 billion at 31 December 2013, $4.0 billion down on the half year and $1.1 billion down on the previous year end.
The company said cash flows from operations of $20.1 billion, were up 22% on 2012, rand "reflect the cost reduction initiatives and record volumes"
"Capital expenditure reduced 26 per cent to $12.9 billion with the completion of five major capital projects. Reduction of $1.9 billion in sustaining capex. 2014 capex expected to be less than $11 billion with 2015 capex at around $8 billion," Rio said.
Rio’s shares had fallen 3.7% over the past year against a 6% rise in the ASX 200.
RIO Annual results 2013 – presentation slides
