Rio Tinto: Rio Tinto announces total dividend of 557 US cents per share for 2020, a 72% pay-out, from robust results during a challenging year
Rio Tinto Chief Executive Jakob Stausholm said: “It has been an extraordinary year – our successful response to the COVID-19 pandemic and strong safety performance were overshadowed by the tragic events at the Juukan Gorge, which should never have happened.
“During 2020, the agility and resilience of the business and our employees, coupled with strong commodity prices, enabled us to deliver underlying EBITDA of $23.9 billion and Return on Capital Employed of 27%. As a result, the Board has approved a total dividend of 557 US cents per share including a special dividend of 93 US cents per share, representing a 72% full year pay-out ratio, which builds on our five-year pay-out track record.
“My new executive team and wider leadership of the company are all committed to unleashing Rio Tinto’s full potential. We will increase our focus on operational excellence and project development and strengthen our ESG credentials. Working closely with the Board, we must earn the right to become a trusted partner for Traditional Owners, host communities, governments and other stakeholders but we all recognise that this will require sustained and consistent effort.
“Safe and well-run operations, together with world-class assets, great people, capital discipline and a strong balance sheet, leave Rio Tinto well placed to generate superior returns for shareholders, invest in sustaining and growing our portfolio, and make a broader contribution to society.”
Strong safety performance in 2020, fatality-free for a second year in a row, with the all injury frequency rate improving to 0.37. However, fatigue and other pressures from COVID-19 have heightened the safety risk in day-to-day operations and we recognise that there is no room for complacency.
We are working to restore trust with the Puutu Kunti Kurrama and Pinikura (PKKP) people following the Juukan Gorge events. Progress has been made as set out in the joint statement issued in December following a meeting between the PKKP and Rio Tinto boards, but we do not underestimate the time and effort it will take for us to help restore trust and rebuild our reputation.
2020 was a significant year for our climate strategy with the introduction of new Scope 1 and 2 targets: today, we have set new Scope 3 emissions goals and the Board intends to put the company’s annual TCFD-aligned reporting (Task Force on Climate-related Financial Disclosures) to an advisory vote at our 2022 Annual General Meetings.
$15.9 billion net cash generated from operating activities was 6% higher than 2019 primarily driven by higher iron ore prices and stability in operating performance. These flowed through to 3% higher free cash flow2 of $9.4 billion, which was net of a $0.7 billion increase in capital expenditure1 to $6.2 billion.
$23.9 billion underlying EBITDA2 was 13% above 2019, with an underlying EBITDA margin2 of 51%.
$12.4 billion underlying earnings2 (underlying EPS2 of US 769.6 cents) were 20% above 2019 with a 29.5% effective tax rate on underlying earnings – in line with 2019. Taking exclusions into account, net earnings of $9.8 billion were 22% higher than 2019, mainly reflecting $1.1 billion of impairments, most of which were taken in the first half of 2020 (five aluminium smelters and the Diavik diamond mine) and $1.3 billion of exchange losses. This compared with $1.7 billion of impairments in 2019 (primarily the Oyu Tolgoi underground copper/gold project and the Yarwun alumina refinery).
Strong balance sheet with net debt2 of $0.7 billion, a decrease of $3.0 billion, reflected the strength of our free cash flow, partly offset by $6.3 billion of cash returns to shareholders in 2020.
$9.0 billion full-year dividend, equivalent to 557 US cents per share and 72% of underlying earnings, includes $5.0 billion record final ordinary dividend (309 US cents per share) and $1.5 billion special dividend (93 US cents per share) declared today.
The 2020 full year results release is available here
1 – Capital expenditure is presented gross, before taking into account any cash received from disposals of property, plant and equipment (PP&E).
2 – This financial performance indicator is a non-GAAP alternative performance measure (“APM”). It is used internally by management to assess the performance of the business and is therefore considered relevant to readers of this document. It is presented here to give more clarity around the underlying business performance of the Group’s operations.
This announcement is authorised for release to the market by Rio Tinto’s Group Company Secretary.
Classification: 3.1 Additional regulated information required to be disclosed under the laws of a Member State