REPORTING SEASON: Rio Tinto Limited (RIO)
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Figure 1: Rio Tinto Limited 12 month chart
Australia’s second largest resource company, Rio Tinto (RIO) issued a better than expected $10.2bn full year underlying profit.
The result was driven by US$2.3bn worth of cost cuts, record iron ore shipments and a weaker Australian dollar (fell US14.7¢ against the greenback in 2013).
Iron ore, which is used to make steel is Australia’s largest export and accounted for 96% of RIO’s underlying profit. RIO is the country’s biggest ore producer; ahead of both BHP and Fortescue.
Cost saving initiatives increased iron ore earnings by US$240m. Iron ore was volatile last year however staged a recovery from June to only lose 7% by Dec 2013.
Profit was also boosted by a US$557m contribution from its aluminium unit (US$503m more than 2012).
Growing momentum from its cost savings and increased volumes helped aluminium despite a 9% fall in its price.
Capital expenditure was cut by 26% in 2014 to US$12.9bn.
As expected, this is likely to be less than US$11bn in 2014 and ~US$8bn in 2015.
The focus will shift to production rather than stgeloping its assets.
RIO generated 35.4% of its revenue from sales to China and CEO Sam Walsh expects our largest trading partner to maintain 7.5% growth.
A fully franked final dividend of AU120.14¢ was declared (31% rise), payable to eligible investors on 10 April 2014.