Rio Tinto Shares Fell After Cutting FY22 Dividends on Lower Profits

The Rio Tinto plc (LON: RIO) share price fell 3.29% after the global mining company reduced its dividend payment for the past financial year due to a 38% decline in its full-year 2022 profits compared to 2021. The company attributed the reduced profits to lower demand from China.

As many analysts had predicted, the COVID-19 lockdowns implemented by China hurt Rio Tinto’s revenues and profits, given that China is the world’s largest steel producer. The lockdowns affected Chinese output, which had a knock-on effect on raw material suppliers such as Rio Tinto.

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Furthermore, Rio Tinto noted that higher labour and material costs also contributed to its lower profits. As a result, the mining giant confirmed that it would pay an annual dividend of $4.92 per share, representing a significant decline from last year’s record dividend payout of $10.40. 

Jakob Stausholm, Rio Tinto’s CEO, said: “We are building a stronger Rio Tinto and delivering against our four objectives. Our operational performance has improved, as evidenced by a number of second half records being set at our Pilbara iron ore mine and rail system. We are also investing for the future, doubling our stake in the Oyu Tolgoi copper-gold project in Mongolia through the acquisition of Turquoise Hill Resources, progressing the Rincon Lithium Project in Argentina and reaching milestone agreements that underpin the long-term success of our Pilbara iron ore business.”

Rio’s CEO also noted that the company delivered robust financial results despite the challenging economic environment due to its dedicated workers, its assets’ high quality and its strong balance sheet. 

The company generated underlying pretax profits of $26.3 billion and $9.0 billion in free cash flows. The firm’s underlying profit was $13.3 billion before falling to $8.4 billion after taxes and government royalties.   

Rio Tinto reiterated its unit cost and production guidance for 2023 while lowering its capital expenditure guidance to $8 billion from $8bn to $9bn. However, the firm raised its capex estimates for 2024 and 2025 to between $9 billion and $10 billion.  

The company remains well-positioned to execute its strategy this year.  

*This is not investment advice. 

Rio Tinto share price. 

The Rio Tinto share price fell 3.29% to trade at 6003.0p, from Tuesday’s closing price of 6207.5p.