Rio Tinto Group reported lower-than-expected profits and slashed its dividend on weak demand for iron ore, aluminum and copper from a lockdown-hit China.
(Bloomberg) — Rio Tinto Group reported lower-than-expected profits and slashed its dividend on weak demand for iron ore, aluminum and copper from a lockdown-hit China.
The result added to a so-far disappointing season for the world’s biggest miners as they grappled with lower metals prices and rising energy and labor costs. Like its rival BHP Group, which was also hit by the slump in China, Rio is optimistic about a turnaround in its biggest market after the end of Covid Zero.
China’s property sector — a key driver of Rio’s revenues — is now in a “decent state” after the sharp slowdown of recent times, Chief Executive Officer Jakob Stausholm said on an earnings call. Europe’s economy is faring better than expected, he said.
Rio’s underlying profit fell 38% to $13.28 billion in 2022, it said in a statement, in a performance that came in just below estimates. Shareholders will get a final dividend of $2.25 a share, down from $4.17 in the previous year.
The miner was hit by softer prices last year for iron ore, aluminum and copper, its main sources of revenue. Prices for iron ore and copper have already started rallying, however, largely on hopes for a rapid recovery in Chinese demand.
The company also said that inflationary pressures were softening as supply chains started to ease up and gas prices fell, but it added that “direct flow through to the cost base will take time.”
Rio’s Chief Financial Officer Peter Cunningham said the company was seeing overall headline inflation start to moderate. “There’s still very tight labor market in Australia and parts of the US and Canada,” he said.
Miners are coming off a volatile year for industrial metals, with record prices in the first half giving way to a second-half slump amid fears for the global economy. BHP’s half-year earnings also fell from a record, while Vale SA was hurt by cost inflation. Glencore Plc had a better outing, posting its best-ever profit thanks to a global coal boom. Anglo American Plc reports on Thursday.
Rio’s revenue fell around 12% to $55.6 billion last year. Its massive iron ore unit posted a 22% drop in sales. The miner said it was planning total capital investment of $8 billion this year. That includes $2 billion of growth capital, which will increase to $3 billion in 2024 and 2025.
–With assistance from Jason Rogers.
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