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FTSE 100: Rio Tinto halves dividend as profits plunge

Rio Tinto A dump truck drives at the Kumtor open pit gold mine at an altitude of about 4,000 meters above sea level in the Tien Shan mountains, Kyrgyzstan, May 28, 2021. Picture taken May 28, 2021. REUTERS/Vladimir Pirogov
Rio Tinto is the world’s second-largest miner. Photo: Vladimir Pirogov/Reuters

Rio Tinto (RIO.L) has posted a 38% drop in profits for last year and more than halved its dividend after being hit by weaker demand from China.

The world’s second-largest miner said lockdown-hit China meant less need for steel in its economy, pushing weaker iron ore.

Rio Tinto’s underlying profit fell 38% to $13.28bn (£11bn) in 2022, while revenue for 2022 fell 13% to $55.5bn. Shareholders will get a final dividend of $2.25 a share, down from $4.17 in the previous year.

Rio Tinto chief executive Jakob Stausholm said: "We are building a stronger Rio Tinto and delivering against our four objectives. Our operational performance has improved, as evidenced by a number of second-half records being set at our Pilbara iron ore mine and rail system.

"We are also investing for the future, doubling our stake in the Oyu Tolgoi copper-gold project in Mongolia through the acquisition of Turquoise Hill Resources, progressing the Rincon Lithium Project in Argentina and reaching milestone agreements that underpin the long-term success of our Pilbara iron ore business."

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He added: "The uplift in our operational performance, strengthening of external relationships and investment in the long-term strength of the business ensure we will be able to continue to pay attractive dividends and invest in sustaining and growing our portfolio, while contributing to society's drive to net zero."

Rio Tinto, the world's top iron ore producer, said that it was “very positive” on the China’s prospects.

In January, China reopened its borders and eased quarantine requirements for travellers after three years of strict controls, and is putting in place policies to boost its sagging economy.

Victoria Scholar, head of investment at Interactive Investor, said: “Rio Tinto reported underlying earnings of $13.3bn last year, below analysts’ estimates for $13.8bn and a fall from 2021’s record high $21.4bn. It cut its dividend by more than 50% from $10.40 per share in 2021 to $4.92 last year and cut its 2023 capital investments guidance from between $8bn and $9bn to $8bn.

“China’s draconian zero-tolerance to COVID approach, which is finally being unwound, weighed on iron ore prices last year, negatively impacting Rio Tinto.

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“While’s China’s economic reopening looks set to provide a tailwind to Rio this year, the risk of further restrictions from Beijing and another spike in infections remain potential hurdles. The inflationary backdrop is also adding to Rio Tinto’s cost burden with higher fuel and raw material costs as well as higher wage bills as a result of labour shortages.”

Miners are coming off a volatile year for industrial metals, with record prices in the first half giving way to a second-half slump amid fears for the global economy.

Russ Mould, investment director at AJ Bell, said: “Rio Tinto’s latest results illustrate how the mining industry’s fortunes fluctuate from year to year.

“Having enjoyed a boom in 2021, a pullback in commodity prices in 2022 has led to a big drop in both earnings and the dividend. This was already expected by the market, hence the mild share price reaction to the news.

“What happens next is more important – a reopening of the Chinese economy should in theory lead to a rise in commodity demand, helping to offset any potential weakness in other parts of the world.”

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