Rio Tinto share price on watch amid FY22 results

This mining giant has released its highly anticipated results after the market close

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Key points

  • Rio Tinto has released its eagerly anticipated full-year results
  • The mining giant has reported a decline in revenue and earnings due to weaker commodity prices
  • This has led to a sizeable dividend cut in FY 2022

The Rio Tinto Ltd (ASX: RIO) share price will be one to watch on Thursday.

That's because the mining giant has just released its full-year results after the market close.

Rio Tinto share price on watch following results release

  • Revenue down 13% to US$55,554 million
  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) down 30% to US$26,272 million
  • Net profit after tax down 41% to US$12,420 million
  • Fully franked final dividend down 46% to US$2.25 per share

What happened during FY 2022?

For the 12 months ended 31 December, Rio Tinto reported a 13% decline in revenue to US$55,554 million and a 41% reduction in net profit after tax to US$12,420 million.

Management advised that this reflects the movement in commodity prices, the impact of higher energy and raw materials prices on its operations, and higher rates of inflation on operating costs and closure liabilities.

In addition, the company recorded an effective tax rate on net earnings of 30.9% compared with 27.7% in 2021, with the increase being primarily due to the $0.8 billion write down of deferred tax assets in the United States.

In light of this profit decline, the mining giant's board has declared a final dividend of US$2.25. This brings its full-year dividend to US$4.92, which is down 38% from US$7.93 per share a year earlier.

How does this compare to expectations?

According to a note out of Goldman Sachs, its analysts were expecting Rio Tinto to report underlying EBITDA of US$26.8 billion versus the consensus estimate of US$26.7 billion.

On the bottom line, Goldman was forecasting a net profit after tax of US$12.9 billion, compared to the consensus estimate of US$13.7 billion.

Finally, it was expecting this to lead to a fully franked full year dividend of US$4.64 per share, whereas the market was expecting a US$4.92 per share dividend.

As you can see above, Rio Tinto has missed on these earnings metrics but is in-line with the market's dividend estimate.

Management commentary

Rio Tinto's CEO, Jakob Stausholm, was pleased with the work the company did in FY 2022. He 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.

We continue to focus on making lasting change to strengthen our workplace culture and to building better relationships with Indigenous peoples, communities and other partners. At all times we will seek to find better ways, in line with our purpose. We clearly have more to do but I am encouraged by the progress we are making.

Outlook

Rio Tinto has reaffirmed the production and cost guidance it provided for FY 2023 with its fourth quarter update. This includes:

  • Pilbara iron ore shipments of 320Mt to 335Mt
  • Aluminium production of 3.1Mt to 3.3Mt
  • Mined copper production of 650kt to 710kt
  • Pilbara iron ore unit cash costs of US$21 to US$22.5 per wmt

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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