Rio Tinto to award shareholders with four billion-dollar special dividend

Mining giant Rio Tinto announced a record cash return to shareholders including a four billion US dollar (£3 billion) special dividend after posting a 56% jump in annual profits.

The Anglo-Australian firm reported net profit of 13.64 billion dollars (£10.24 billion) for 2018, up from 8.76 billion dollars (£6.58 billion) the year earlier, thanks to eight billion dollars’ (£6 billion) worth of disposals.

Last year, the company sold its stake in the Grasberg copper mine in Indonesia and its Dunkerque aluminium smelter in France.

The cash from the asset sales helped the company declare a record cash return of 13.5 billion dollars (£10.14 billion) to shareholders, including a 3.1 billion-dollar (£2.3 billion) final dividend, a four billion-dollar special dividend and a 3.2 billion (£2.4 billion) share buyback programme.

The special dividend equated to 2.43 dollars (£1.82) a share.

Chief executive Jean-Sebastien Jacques said Rio Tinto’s “strong results reflect the efforts of the team to implement our value-over-volume strategy as we continued to strengthen the portfolio and invest in future growth.

“Our world-class portfolio and strong balance sheet will serve us well in all market conditions, and underpin our ability to continue to invest in our business and deliver superior returns to shareholders in the short, medium and long term.”

Nicholas Hyett, equity analyst at investment firm Hargreaves Lansdown, said that following the disposals, Rio Tinto’s balance sheet is “entirely free from debt despite record cash returns to shareholders – and given that the major energy and minerals business has struggled with some major disruption this year, it looks like there’s more where that came from”.

“A conservative balance sheet suggests to us that management are a little cautious about the outlook for the near term and, given the importance of Chinese demand to global commodity prices, that’s fair enough”.

Mr Hyett said Chinese steel production hit a record 928 million tonnes in 2018 but “recent noises from the Asian giant suggest its economy might be slowing. Rio’s learnt the hard way that going into a commodity downturn laden with debt is a far from pleasant experience”.