Rio Tinto Slips To Loss, Scraps Progressive Dividend Policy; Stock Dips

(RTTNews) - Shares of Rio Tinto Plc. (RTPPF.PK, RIO.L, RIO, RTNTF.PK) were losing around 7 percent in the morning trading in London after the mining giant reported a loss for its fiscal year 2015, compared to profit last year, amid steep decline in commodity prices. Further, the company announced flat dividend, and said it is no longer appropriate to maintain the progressive dividend policy amid the significant deterioration in the macro-economic environment and the resultant market uncertainty.

Further, Rio Tinto Chief Executive Sam Walsh said, "We are embarking on a new round of proactive measures to cut our operating costs by a further $1 billion in 2016 followed by an additional goal of $1 billion in 2017. We are also reducing our capital expenditure to $4 billion in 2016 and $5 billion in 2017, an overall reduction of $3 billion compared with our previous guidance."

For the year 2015, loss before taxation was $726 million, compared to prior year's profit of $9.55 billion.

Net loss attributable to the owners of the company totalled $866 million or 47.5 cents per share, compared to profit of $6.527 billion or 351.2 cents per share in the prior year.

The recent results reflected non-cash exchange rate and derivative losses of $3.3 billion and impairment charges of $1.8 billion, mainly related to the Simandouiron ore project, Energy Resources of Australia (ERA) and the Roughrider uranium project.

Underlying earnings were $4.54 billion, lower than last year's $9.31 billion. Underlying earnings per share were 248.8 cents, compared with 503.4 cents in 2014. The Iron Ore group's underlying earnings were 51 percent lower than 2014.

The underlying results were hurt by the $7.7 billion impact of lower prices, despite cash cost improvements, higher volumes, lower energy costs, positive currency and other movements.

Underlying EBITDA, a key earnings metric, declined 36 percent from last year to $12.62 billion, and EBITDA margin was 34 percent, compared with 39 percent in 2014.

Consolidated sales revenues of $34.83 billion, down from $47.66 billion last year, reflecting a $13.1 billion reduction from the sharp decline in commodity prices.

In the year, increased volumes were achieved primarily in iron ore, following the increase in capacity at the Pilbara ports and mines, and in bauxite. These offset volume declines in copper and in titanium dioxide feedstocks.

The Platts price for 62 percent iron Pilbara fines was 43 percent lower on average. Hard coking coal benchmark prices fell 19 percent and thermal coal spot prices fell 16 percent. Average copper and gold prices were down 20 and eight percent respectively.

Further, the company's board has announced a final dividend of 107.5 cents per share, bringing the 2015 full year dividend to 215 cents per share, in line with 2014.

For 2016, the company intends that the full year dividend will not be less than 110 cents per share, equivalent to $2 billion.

The board expects total cash returns to shareholders over the longer term to be in a range of 40 to 60 percent of underlying earnings in aggregate through the cycle.

For 2016, Rio Tinto's expected global shipments are around 350 million tonnes from its operations in Australia and Canada, subject to weather conditions. In 2016, Rio Tinto expects its share of mined copper production to increase to between 575 and 625 thousand tonnes.

In London, Rio Tinto shares were trading at 1,644 pence, down 6.86 percent. In Australia, shares declined 1.25 percent on Thursday to settle at A$40.99.