• Rio Tinto will issue second largest interim payout after recording $8.9 billion half year profit
  • Iron ore giant will send US$4.3bn ($6.2b) back into the pockets of shareholders, 52% below last year’s record divvie
  • Weaker iron ore prices lop US$5.74b off earnings, as market cools from 2021’s all time highs

Rio Tinto (ASX:RIO) has dumped its special dividend but will still make the second largest interim payout in its history with a US$4.3 billion half year return to shareholders.

Rio reported a US$8.9 billion profit after tax for the first half of the 2022 calendar year on underlying EBITDA of US$15.6 billion.

That was down from US$12.3b and US$21.04b respectively in the first half of 2021, when Rio paid a record US$5.61 per share dividend.

Today’s dividend of US$2.67/sh, representing half of Rio’s profits for the first half of the year, comes in at a massive $6.2 billion Australia, with Rio electing to forgo a special divvie.

But it was well behind analyst consensus, which forecast Rio would pay out 338.77 US cents including a 305.38 US cent ordinary dividend.

The vast bulk of the drop was due to lower iron ore prices against 2021’s first half surge, when prices hit a record US$237/t.

Iron ore EBITDA fell 35% or US$5.74b from US$16.06b in the first half of 2021 to US$10.395b in the first half of 2022.

Prices fell back across the June quarter this year as steel mill margins turned negative in China and Covid lockdowns hurt demand for steel from the property, manufacturing and infrastructure sectors.

Copper revenues also fell 27%, though higher aluminium prices following Russia’s invasion of Ukraine and energy shortages that forced the closure of smelters overseas were in Rio’s favour, with aluminium and alumina revenues 49% higher to US$2.87b.


Market more challenging: Stausholm

Rio CEO Jakob Stausholm said the market environment had become more challenging.

“We remain focused on delivering on our long-term strategy, with a steady improvement in operating performance and some notable advances in our growth agenda,” he said.

“We continue to strengthen our partnership with the Mongolian government following commencement of underground mining at Oyu Tolgoi, delivered first iron ore from the Gudai-Darri mine and approved early works funding at the Rincon lithium project.

“Market conditions were good, albeit below last year’s record levels.

“We delivered largely flat production and solid financial results, with underlying EBITDA of $15.6 billion, free cash flow of $7.1
billion and underlying earnings of $8.6 billion, after taxes and government royalties of $4.8 billion.

“As a result, we are paying our second highest ever interim dividend of $4.3 billion, a 50% payout, in line with our policy. The market environment has become more challenging at the end of the period.”

However, Stausholm remains bullish on China’s economy despite Covid lockdowns and stressed property market that has hurt steel and metals demand, chopping commodity prices down to size over the past three months.

“All this could provide the mining industry and Rio Tinto an advantage over other industries considering China’s role in global commodity demand, and particularly iron ore,” he said.

“For Rio, China accounts for over half of our revenue.

“We remain convinced that the longer term trends that we highlighted last October remain intact, underpinned by ongoing urbanisation and additional demand created by the energy transition.”

Rio’s profit after tax and payout remain some 169% and 72% respectively above 2020 levels.

Iron ore sentiment was relatively stable today, with 62% Fe futures in Singapore down 0.29% to US$111.80/t after briefly touching three week highs.

Rio shares fell 2% to $96.98, valuing the dual-listed miner at $138.56 billion. Its shares were down 3.72% in London at 7pm AEST.



Rio Tinto (ASX:RIO) share price today: