Rio Tinto Swings to Annual Loss, Scraps Dividend Policy
February 11 2016 - 1:44AM
Dow Jones News
By Rhiannon Hoyle
SYDNEY--Rio Tinto PLC (RIO.LN) swung to an annual loss and
scrapped its progressive dividend policy, citing a worsening global
economy and a sharp downturn in commodity prices.
On Thursday, the mining company reported a net loss of US$866
million for 2015, compared to a US$6.53 billion profit the year
prior. The result was weighed down by impairment charges totaling
US$1.8 billion against an African iron-ore project and uranium
assets, as well as US$3.3 billion in foreign exchange and
derivatives losses.
Underlying earnings, a measure tracked by analysts that strips
out some one-time costs, fell 51% to US$4.54 billion, it said. That
fell short of the US$4.66 billion median of seven analyst forecasts
compiled by The Wall Street Journal.
Rio Tinto said it would pay a full-year dividend of US$2.15 a
share, in line with the payout for 2014.
"However, with the continuing uncertain market outlook, the
board believes that maintaining the current progressive dividend
policy would constrain the business and act against shareholders'
long-term interests," Rio Tinto Chairman Jan du Plessis said.
Rio Tinto said it will now take into account its profit
performance, the outlook for major commodities, and the health of
its balance sheet before setting future dividends. In the current
financial year, the mining company aims to pay a final dividend of
at least US$1.10 a share, which would be equivalent to US$2
billion.
Rio Tinto has pursued a risky but calculated strategy to keep
expanding the vast Australian iron-ore operations it relies on for
most of its earnings, even as prices of the commodity began a long
slide to their lowest level in a decade.
By doubling down on iron ore, Chief Executive Sam Walsh bet that
Rio's economies of scale in Australia's remote Pilbara
region--which accounts for three in every five tons of iron ore
traded by sea--meant it could still make a healthy profit, while
other companies with higher costs struggle.
Still, Rio Tinto said it was working to counter weaker prices of
iron ore and other key products such as aluminum and copper by
continuing to rein in spending. It said capital expenditure totaled
US$4.69 billion in 2015, down 43% on the previous year.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
February 11, 2016 01:29 ET (06:29 GMT)
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