Rio Tinto share price on watch following FY 2023 earnings miss

Rio Tinto's iron ore operations were on form in 2023. It's a shame the rest of the business wasn't.

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

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

Rio Tinto share price on watch following results

  • Revenue down 3% to US$54,041 million
  • Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) down 9% to US$23,892 million
  • Underlying earnings per share down 12% to US$7.25
  • Free cash flow down 15% to US$7,657 million
  • Fully franked final dividend per share up 14.7% to US$2.58 per share

What happened in FY 2023?

For the 12 months ended 31 December, Rio Tinto reported a 3% decline in revenue to US$54,041 million and a 9% decline in underlying EBITDA to US$23,892 million. This reflects solid growth from the company's iron ore operations, which was fully offset by weaker performance across the rest of its operations due to lower commodity prices and higher costs.

The star of the show was Rio Tinto's Iron ore operation, which reported a 4% increase in revenue to US$32,249 million and a 7% increase in underlying EBITDA to US$19,974 million.

Elsewhere, Copper revenue was flat in FY 2023 at US$6,678 million with underlying EBITDA down 26% to US$1,904 million. Aluminium revenue was down 13% to US$12,285 million with underlying EBITDA down a sizeable 38% to US$2,282 million. Finally, Minerals revenue dropped 12% to US$5,934 million with underlying EBITDA down 42% to US$1,414 million.

Rio Tinto's profit after tax fell 19% to US$10,058 million and its underlying earnings per share reduced 12% to US$7.25. This led to the company's board cutting its full-year dividend by 12% to US$4.35 per share.

Management commentary

Rio Tinto's Chief Executive, Jakob Stausholm, was pleased with the company's performance. He said:

We are making clear progress as we shape Rio Tinto into a stronger and even more reliable company.

By focusing on our four objectives, we are building a portfolio that is fit for the future – including our Oyu Tolgoi underground copper mine in Mongolia and the Simandou iron ore project in Guinea.

We have taken significant steps over the past month towards our target to halve our global Scope 1 & 2 carbon emissions this decade with agreements to contract future renewable wind and solar power for our Gladstone operations.

How does this compare to expectations?

The bad news for the Rio Tinto share price is that this result has fallen a touch short of the market's expectations.

The consensus estimate was for underlying EBITDA of US$24,024 million, whereas Rio Tinto delivered US$23,892 million.

On the plus side, its final dividend of US$2.58 per share was slightly ahead of expectations.

Outlook

The company is guiding to largely flat production in FY 2024.

For example, iron ore shipments are expected to be 323Mt to 338Mt (from 331.8Mt), Aluminium is expected to be 3.2Mt to 3.4Mt (from 3.3Mt), and copper is expected to be 660kt to 720kt (from 620kt).

One thing that is expected to increase is the company Pilbara iron ore unit cash costs. It is guiding to a cost of US$21.75 to US$23.50 per tonne (from US$21.50).

The Rio Tinto share price is flat over the last 12 months.

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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