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Date : 28/07/2022

Rio Tinto Limited (ASX RIO) shares in the Red after Slashing Dividends in 1H22 Results

Rio Tinto Limited (ASX RIO) is the world’s second-largest metal and mining company on the ASX. The company was founded after purchasing a mine complex in Rio Tinto, Spain, by investors from the Spanish government. The company was founded in 1873.

Rio Tinto recently acquired mining and exploration companies and burnt a lot of cash to strengthen its position in the industry.

But today, the RIO shares slid on the ASX after the company announced 1H22 results. The company has announced they have halved the dividend for this year because of the dark clouds covering the mining giant.

RIO: 1H22 Results

RIO shares are trading at $96.98 apiece and have lost 2% in the intraday trading session on Wednesday. The current market cap of the company is 139.69 Billion AUD.

Rio Tinto ASX

  1. The company’s revenue saw a decline of 10% and reported revenue of $29.775 Billion.
  2. The underlying EBITDA of the company in 1H22 is $15.6 Billion declining 26% YoY.
  3. NPAT of the company is $8.9 Billion declining by 28% in 1H22 compared to $12.3 Billion last year in the same period.
  4. Free cash flows are $7.1 Billion, decreasing by 30% in 1H22.
  5. The company announced a dividend of 267 cents per share, while the company paid 376 cents per share last year.
  6. The company did not announce any special dividends; they paid 561 cents last year.

RIO: What happened in the first half?

There has been a significant blow to the company’s revenue reducing it by 10% YoY. The main reason for the decline in the company’s revenue is the softer iron ore prices. Because of this, iron ore EBITDA for the firm dropped by 35% to $10,395 million in the year’s first half. This was somewhat compensated for by a rise of 49 per cent in aluminium EBITDA, which amounted to $2,866 million. As a result, the company went short on the expected revenue and EBITDA.

Analysts at Goldman Sachs were expecting revenue of $29.66 Billion and EBITDA of $15.7 Billion. But according to the market consensus, the company should have a review of $30.8 Billion and an EBITDA of $16.8 Billion. The company fell short of expectations, and as a result, RIO shares slid on the ASX.

Additionally, the company had to reduce its dividends by 276 cents per share significantly. Goldman was expecting a dividend of 368 cents apiece. The company not only came short of expectations but also announced zero special dividends in this half-year result.

RIO: CEO’s Remarks

There have been a sustained increase in operational performance and some significant gains in our growth goal,” Rio Tinto CEO Jakob Stausholm said. Even after the start of underground mining at Oyu Tolgoi was made, we continued to improve our relationship with the Mongolian government by delivering the first iron ore from the Gudai-Darri mine and approving finance for the Rincon lithium project’s early stages.

He added that as a company, we’re dedicated to improving our workplace culture and our links to Indigenous peoples, communities, and other partners. While working towards a net-zero carbon footprint, we’re making strides that will benefit shareholders, maintain and develop our company’s portfolio, and create a positive impact on society.

Conclusion

The decline in revenue is not very significant as markets were expecting a softer revenue due to lower commodity prices. However, RIO significantly reduced its dividends, and the market reacted negatively. It is worth noting that the dividend is still the second highest interim dividend paid in its history.

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