Home Commodities Rio Tinto cuts dividend in half but expects global economy to stabilize in 2023

Rio Tinto cuts dividend in half but expects global economy to stabilize in 2023

by SuperiorInvest

Rio Tinto cut its annual dividend by more than half to reflect lower commodity prices, but said it was “quietly confident” that the outlook for the global economy had improved after China eased its Covid-19 restrictions.

The world’s second-biggest miner said on Wednesday it would pay a total dividend of $4.92 for 2022 – down 53 percent from 2021, when it paid a large special dividend on the back of record profits driven by soaring commodity prices. Revenue for 2022 fell 13 percent to $55.5 billion, while pretax profit fell 40 percent to $18.6 billion.

Rio Tinto it followed BHP and Fortescue Metals in cutting its payout to shareholders after a bumper 2021, but the company said it would still pay out $8 billion in 2022.

Jakob Stausholm, chief executive, said it was the second-biggest dividend payout in the company’s 150-year history and came as the miner reshaped its business to improve returns after years of underperforming its rivals. “What I’m seeing gives me confidence that we’re on the right track,” he said.

The company is dependent on China for iron ore exports. Stausholm said he was “very positive” about the country’s prospects now that it has eased Covid-19 restrictions. Their rise has caused a recovery in the price of iron ore since November. He added there were positive signs of recovery in China’s property sector, a key end market for Australia’s iron ore, which is used to make steel.

“We are quietly confident [Chinese] demand will be a stabilizing factor for the global economy in 2023,” he said.

The outlook reaffirms the comments he made BHP that China would offset the potential weakening of the European and US economies in 2023, which could hit demand. Stausholm said there was less fear of an economic downturn in the US and Europe, where the energy crisis has eased, than at the end of 2022.

Rio Tinto, which produces iron ore, aluminum, copper and lithium, predicts that the energy transition will drive demand for commodities by 2035 at a rate of around 3.7 percent a year.

Stausholm said he does not want to use the company’s balance sheet to make “transformative mergers and acquisitions,” despite a recent surge in consolidation in the mining sector as the biggest companies focus on higher-growth minerals.

Rio Tinto paid $3.3 billion buy Canadian Turquoise Hill last year to gain more control over Mongolia’s Oyu Tolgoi copper mine and has been linked to a potential lithium expansion. Stausholm said he doesn’t want the company to be distracted by large-scale acquisitions.

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