Higher energy costs, inflation, and downward pressure on commodity prices has weighed on profits at multinational miner Rio Tinto, which has slashed its dividend amid faltering demand.
Underlying earnings have dropped 38 per cent to £11bn ($13.3bn), with the Aussie commodities giant bludgeoned by lower prices for iron ore and copper, bearing the brunt of higher energy and raw materials prices on operations, alongside higher rates of inflation.
Net cash generated from operating activities was also 36 per cent lower than 2021, coming in at £13.3bn ($16.1bn) .
The company was exposed to a higher US tax rate of 30.9 per cent compared with 27.7 per cent in 2021.
This increase was primarily due to the $800m write down of deferred tax assets in the US.
Shareholders will now get a final dividend of $2.25 per share, down from $4.17 per share 12 months earlier – a 60 per cent payout in line with the miner’s company policy, clocking in at around $8bn.
The company has fallen back into net debt of $4.2bn compared with a net cash position of $1.6bn at the start of the year.
This reflects its free cash flow of $9bn being offset by $11.7bn of cash returns to shareholders and $3.8bn for the acquisitions of Turquoise Hill Resources and Rincon Lithium Project.
Rio Tinto and BHP suffer from commodity slump
Rio Tinto’s steep downturn in revenues and profits follows a disappointing set of results for rival BHP yesterday, with miners suffering from a volatile year for industrial metals.
Record prices in the first half giving way to a second-half slump amid escalating fears for the global economy.
Rio Tinto’s biggest iron ore customer is China, which has rallied in recent weeks on signs of a recovery in demand following a severe decline late last year amid the country’s zero covid approach, which it has since rowed back on.
Chief executive Jakob Stausholm said: “Despite challenging market conditions, we remain resilient because of the quality of our assets, our great people and the strength of our balance sheet.. This enables us to continue to invest in strengthening the business while also paying a total dividend of $8bn, a 60 per cent payout, in line with our policy.
“The uplift in our operational performance, strengthening of external relationships and investment in the long-term strength of the business ensure we will be able to continue to pay attractive dividends and invest in sustaining and growing our portfolio, while contributing to society’s drive to net zero.”
Rio Tinto last made headlines last month, when it lost and then recovered a radioactive capsule which emits the equivalent radiation of 10 X-rays an hour – after the product fell off a truck in Western Australia.
It also announced plans last year to create a foundation to support cultural projects in the region, as it seeks to heal its reputation after it blew up two ancient rock shelters in Juukan Gorge.
The company has been plagued with scandal following its destruction of the sacred Aboriginal cave system.
The cave system, in the Juukan Gorge near Pilbara, had shown signs of continued human occupation for more than 46,000 years – before it was blown up in 2020 in exchange for £75m of iron ore.
A new leadership team was brought in after a severe backlash from shareholders, consumers and politicians, and the company commissioned an internal workplace review into its business culture.
This revealed 21 reports of actual or attempted rape in the past five years alongside widespread bullying and discrimination.