Rio Tinto
(ASX:RIO) has fallen into line with rivals BHP and Fortescue by revealing a sharp fall in revenues, earnings and dividends for 2022 as iron ore prices sank in reaction to China’s zero-Covid policy and energy and other costs were pushed higher by the fallout from Russia’s invasion of Ukraine a year ago.
BHP reported a 32% slide in net profit for the six months to December, Fortescue a 15% slide, also for the December half year. Rio Tinto’s was for all of 2022 and it revealed a slump of 41% to $US12.42 billion.
And, like BHP and Fortescue, Rio cut its full year dividend to $US4.92 per share, down 53% from the combined ordinary and special dividend paid for 2021 of $US10.40 per share.
Revenue fell 13% to a still high $US55.55 billion from 2021’s $US63.5 billion.
Rio Tinto last year earned an average realised price of just $1US06.1 per dry metric tonne (dmt) of iron ore, compared with $US143.8 per dmt in 2021.
Copper prices also fell thanks to China’s stringent lockdowns for all but the final weeks of the year.
Apart from higher wages due to a shortage of skilled labour, Rio, like its peers had to pay more for fuel and raw materials – especially diesel (which BHP also complained about).
The company is the world’s top iron ore producer and said underlying EBITDA fell 32% to $US26.27 billion, compared with a record $US37.72 billion in 2021.
EBITDA from the company’s core iron ore business in WA tumbled 33% to $US17.612 billion from $US27.592 billion.
That $US10 billion fall helped explain to slide in overall earnings, coming from a big fall in iron ore prices and revenues of around 25%.
EBITDA in copper fell 40% and for aluminium it was down 16% over the full year.
Rio CEO Jakob Stausholm said in the earnings release, “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.
“We continue to focus on making lasting change to strengthen our workplace culture and to building better relationships with Indigenous peoples, communities and other partners. At all times we will seek to find better ways, in line with our purpose. We clearly have more to do but I am encouraged by the progress we are making.
“Despite challenging market conditions, we remain resilient because of the quality of our assets, our great people and the strength of our balance sheet. That is why we delivered strong financial results with underlying EBITDA of $26.3 billion, free cash flow of $9.0 billion and underlying earnings of $13.3 billion, after taxes and government royalties of $8.4 billion.
“This enables us to continue to invest in strengthening the business while also paying a total dividend of $8.0 billion, a 60% payout, in line with our policy.”
Rio’s 2023 guidance is for a slight rise in iron ore and copper costs and no change on the production targets revealed in the full year production report in January.
After producing 322 million tonnes of iron ore in 0222, Rio is aiming 320 to 335 million tonnes for this year, which is unchanged from the final forecast for last year.
Rio shares eased half a per cent on Wednesday ahead of the result’s release to close at $125.51.
