Rio Tinto Beats 2018 Estimates and Declares Special Dividend



Rio Tinto’s 2018 results beat consensus

Rio Tinto (RIO) released its 2018 results on February 27. Its EPS of $5.12 beat consensus estimates by 5%, and its revenues of $40.5 billion were also higher than the consensus estimate of $39.8 billion.

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Key highlights from 2018 results

Rio confirmed a copper find at Winu in the Paterson Range in the East Pilbara. Rio’s CEO, Jean-Sebastien Jacques, mentioned that while it is still early and more work needs to be done, the initial results are encouraging. Another important announcement from the company came in the form of declaring a special dividend of $4 billion, or $2.43 per share, which was in addition to the final dividend of $1.8 per share.

Rio’s underlying earnings grew by 2% to $8.8 billion, beating the market expectations of $8.5 billion. This quarter’s earnings were also the highest annual underlying earnings since 2014 for the company. Strong earnings for the miner were supported by the copper and minerals division. In addition to higher earnings, Rio’s special dividends are supported by divestment proceeds of $3.9 billion from selling its entire stake in Indonesia’s Grasberg mine.

Strong commodity prices (COMT), especially iron ore (XME), also supported its earnings. Rio’s iron ore shipments for 2018 came in at 338.2 million tons, up 2% YoY. The company also maintained its 2019 iron ore production guidance of 338 million to 350 million tons.

The miner also had a net cash position of $0.3 billion by the end of December in comparison to a net debt position of $3.85 billion a year back. This is despite 27% lower free cash flow YoY. Some of the reduction in net debt was on account of proceeds from divestments.

Peers’ results

Rio’s rival BHP Billiton (BHP) also declared results on February 19. The results were weaker-than-expected. Vale SA (VALE) has been under pressure due to the bursting of a tailing dam at one of its mines in Brazil, the second such disaster in over three years. You can read Will Iron Ore Breach $100 in the Wake of Vale’s Dam Collapse? for more on the disaster and its impact on iron ore prices as well as miners.

In the next part, we’ll see how analysts are reacting to Rio’s results and how the analyst sentiment has changed in the recent past.


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