Rio Tinto more than halved its annual dividend to reflect lower commodity prices but said it was “quietly confident” the outlook for the global economy had improved after China relaxed its Covid-19 restrictions.
The world’s second-largest miner on Wednesday said it would pay a total dividend of $4.92 for 2022 — 53 per cent lower than in 2021 when it paid a large special dividend on the back of record profits driven by soaring commodity prices. Revenue for 2022 fell 13 per cent to $55.5bn, while profit before tax dropped 40 per cent to $18.6bn.
Rio Tinto followed BHP and Fortescue Metals in reducing its shareholder payout after a bumper 2021, but the company said that it had still paid out $8bn in 2022.
Jakob Stausholm, chief executive, said it was the second-largest dividend payout in the company’s 150-year history and came as the mining company was reshaping its business to improve returns after years of underperformance against its rivals. “What I’m seeing gives me confidence that we are on the right track,” he said.
The company is reliant on China for iron ore exports. Stausholm said he was “very positive” about the country’s prospects now that it had relaxed Covid-19 restrictions. Their lifting has driven a recovery in the iron ore price since November. He added that there were positive signs of a recovery in the Chinese real estate sector, a key end market for Australian iron ore, which is used to make steel.
“We are quietly confident [Chinese] demand will be a stabilising factor for the global economy in 2023,” he said.
The outlook reaffirms comments made by BHP that China would offset potential weakness in European and US economies in 2023, which could hit demand. Stausholm said there was less concern about economic downturns in the US and Europe, where the energy crisis had eased, than at the end of 2022.
Rio Tinto, which produces iron ore, aluminium, copper and lithium, forecasts the energy transition will drive commodity demand at a rate of around 3.7 per cent per year to 2035.
Stausholm said he was not looking to use the company’s balance sheet to conduct “transformative M&A”, despite a recent spate of consolidation in the mining sector, as the largest companies have positioned themselves towards higher-growth minerals.
Rio Tinto paid $3.3bn to buy out Canada’s Turquoise Hill last year to gain greater control of the Mongolian copper mine Oyu Tolgoi and has been linked with potential expansion in lithium. Stausholm said he did not want the company to become distracted by large-scale takeovers.