Shares in Rio Tinto Ltd (ASX: RIO) jumped more than 5% in early trade after the global miner boosted its interim dividend by 43%.
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Commodity prices boosting Rio Tinto's result
The company said in a statement to the ASX that its net profit for the first half increased 47% to US$6.66 billion, with strong performances across a number of commodities bolstering the result.
Rio Tinto Chief Executive Officer Simon Trott said:
We achieved a step-change in performance in the first half, which, alongside favourable commodity prices, delivered a 28 per cent increase in underlying EBITDA and a 75 per cent rise in free cash flow. Our continued investment in growth drove a 3 per cent increase in copper equivalent production and further strengthened our portfolio diversification, with Copper, Aluminium and Lithium contributing more than 50 per cent of underlying EBITDA.
Mr Trott said the company's productivity improvements underpinned the strong result.
He added:
We have already banked US$870 million of productivity benefits and are on track to reach an annualised run-rate of US$1.8 billion by year-end, with significantly more to come as our multi-year program continues to scale.
Rio Tinto will pay a dividend of US$2.11 per share, with an ex-dividend date of 13 August. The dividend will be paid on 24 September.
In terms of individual commodities, Rio produced 3% more copper compared with the same period the previous year, "driven by strong operational performance and continued ramp-up of our major growth projects, including copper from Oyu Tolgoi''.
The Pilbara iron ore division achieved its highest first-half iron ore production since 2018, and the aluminium operations also sustained their strong performance, Rio said.
Pilbara iron ore sales increased 4%, "underpinned by strong system performance and healthy stock levels'', despite impacts from poor weather in the first quarter.
The profit result, the company said, was "underpinned by significantly stronger copper, gold and silver prices across the portfolio contributing to a US$2 billion increase''.
Rio's net debt decreased by US$0.3 billion during the half to US$14.1 billion, and gearing was 16% at the end of June.
Are Rio Tinto shares overvalued?
RBC Capital Markets said the result was positive; however, it still has an underperform rating on Rio shares and a price target of $143.
The broker said the dividend was 3% above consensus estimates, and free cash flow of $3.8 billion was also well ahead of consensus.
Rio said it remained committed to paying out 40% to 60% of underlying earnings as dividends.
Rio shares were 5.1% higher at $167.60 in early trade.
