Rio Tinto announces $500m share buyback as profits rise on iron ore price rises
Rio Tinto has announced a $500m (£400m) share buyback programme after full-year profits rose.
The figures
The miner reported underlying earnings jumped to $5.1bn (£4.1bn), up 12 per cent from $4.5bn in 2015.
Earnings per share jumped even further, with a 14 per cent rise to $2.83.
Rio Tinto also cut $1.6bn of costs in a “sustainable” manner, it said, while selling $1.3bn of assets during the year.
Net debt across the company was reduced by 30 per cent, to $9.5bn.
The share buyback will start on 1 March.
Why it’s interesting
Rio Tinto has ridden the commodities wave over the last year, with its share price almost doubling. The price of iron ore surged 81 per cent last year and now sells for around $80 a tonne, despite analysts' expectations for a retreat to around $55.
Cost cutting is still continuing under a "portfolio optimisation" programme – to the point it is literally giving away assets in India where it hasn't been able to turn a profit. Its results note the $2.45bn sale of Australian Coal & Allied to China's Yancoal was only announced this year.
All of that came while it stepped up production on iron ore shipments to take advantage of higher prices, while aluminium and copper production also rose.
What Rio Tinto said
Rio Tinto chief executive J-S Jacques said: “Today’s results show we have kept our commitment to maximise cash and productivity from our world-class assets, delivering $3.6 billion in shareholder returns while maintaining a robust balance sheet. At the same time, we strengthened the portfolio and advanced our high-value growth projects as we look to the future.
We enter 2017 in good shape. Our team will deliver $5 billion of extra free cash flow over the next five years from our productivity programme.
He added: "Our value over volume approach, coupled with a robust balance sheet and world-class assets, places us in a strong position to deliver superior shareholder returns through the cycle."
In short
Iron prices pumped up Rio Tinto in 2016, as the commodities rally gave investors in miners a gold rush.