Rio's free cash flow up by 31% in 2019

26th February 2020 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH ( – Higher iron-ore prices helped to drive a 31% increase in free cash flows for diversified miner Rio Tinto during the 2019 financial year, compared with 2018.

The miner on Wednesday announced that free cash flow for the full 2019 reached $9.1-billion, up from the $6.9-billion reported in 2018, while underlying earnings before interest, taxes, depreciation and amortization (Ebitda) increased by 17%, from $18.1-billion to $21.1-billion.

“We have again delivered strong financial results with underlying Ebitda of $21.1-billion, underlying Ebitda margin of 47% and returns on capital employed of 24%. This performance allows us to return a record final ordinary dividend of $3.7-billion, resulting in a full year ordinary dividend of $6.2-billion and total cash returns of $7.2-billion,” said Rio CEO Jean-Sebastian Jacques.

The results were driven by a 7% increase in consolidated sales revenue, which reached $43.2-billion during the full year, driven primarily by higher iron-ore prices. This was offset by lower copper and aluminium prices, and the absence of revenues from assets divested in 2018.

Net earnings for the period were down 41% on 2018, to $8-billion, reflecting impairments of $1.7-billion on the Oyu Tolgoi asset and the Yarwun alumina refinery, and which compared with gains on disposables in 2018.

Meanwhile, Rio noted that its $5.5-billion capital expenditure in 2019 was consistent with the capital spent in 2019, with the miner announcing the approval of two further investments at the end of the year, including the $800-million Greater Tom Price investment and a further $1.5-billion at Kennecott.

“In line with our disciplined approach to capital allocation, we invested $2.6-billion in development projects, including high-return iron-ore and copper. Longer term, our $624-million exploration and evaluation expenditure in 2019 adds to our pipeline of attractive options,” said Jacques.

"Our world-class portfolio and strong balance sheet serve us well in all market conditions, and are particularly valuable in the current volatile environment. We are closely monitoring the impact of the Covid-19 virus and are prepared for some short-term impacts, such as supply-chain issues. Our products are currently reaching our customers.

"Our resilience and value over volume strategy mean we can invest in our business and deliver superior returns to shareholders in the short, medium and long term,” he said.

Rio has maintained its production outlook for 2020, with iron-ore shipment targets set at between 324-million and 334-million tonnes, while mined copper output has been targeted at between 530 000 t and 570 000 t. Alumina production has been targeted at between 7.8-million and 8.2-million tonnes, with between 3.1-million and 3.3-million tonnes of aluminium and between 55-million and 58-million tonnes of bauxite expected.

Capital expenditure of about $7-billion for 2020 is expected.