The Rio Tinto Limited (ASX: RIO) share price is in focus after reporting its 2022 result, which showed the total dividend was cut 53%.
Rio Tinto is one of the largest miners in the world, which produces significant amounts of iron, copper and other commodities.
FY22 result
Here are some of the highlights from the 2022 financial year result:
- Operating cashflow fell 36% to US$16.1 billion
- Free cash flow dropped 49% to US$9 billion
- Underlying EBITDA (EBITDA explained) declined 30% to US$26.3 billion
- Net profit after tax (NPAT) sank 41% to US$12.4 billion
- Underlying profit / earnings per share (EPS) dropped 38% to US$8.196
- Ordinary dividend of US$4.92, down 38%
- No special dividend, so total dividend down 53% to US$4.92
The miner noted that this result reflected the movement in commodity prices, the impact of higher energy and raw materials prices on its operations, and higher rates on inflation on its operating costs. Its effective tax rate also increased by over 3% to 30.9%, primarily because of an $0.8 billion write-down of deferred tax assets in the US.
Rio Tinto finished the year with US$4.2 billion of net debt, down from US$1.6 billion of net cash. It sent $11.7 billion of cash returns to shareholders through dividends, while $3.8 billion was spent on acquiring Turquoise Hill Resources and the Rincon lithium project.
The company noted that the US$4.92 per share dividend represents 60% of its underlying earnings.
2023 guidance
In 2023, the miner said that it expects its share of capital to be around $8 billion, compared to the previous guidance range of $8 billion to $9 billion, including growth capital of around $2 billion, depending on the ramp-up of spending at Simandou – that’s a large, untapped, high-grade iron ore deposit in Africa. This could have a helpful effect on the Rio Tinto share price.
This guidance includes around $1.5 billion over the next three years on decarbonisation projections, mainly relating to Pilbara renewables. By 2030 it expects to have spent a total of around US$7.5 billion.
In 2022, its Pilbara iron ore unit costs per wet metric tonne were US$21.3. It’s expecting this to be between US$21 per wmt to US$22.5 per wmt in 2023.
Rio Tinto’s guidance for Pilbara iron ore shipments is for between 320 million tonnes (mt) to 335 mt, potentially up from 322 mt in 2022.
Refined copper guidance is for between 180 kt to 210 kt, compared to 209 kt in 2022.
Aluminium guidance for 2023 is for a range between 3.1 mt to 3.3 mt, up from 3 mt in 2022.
Final thoughts on the Rio Tinto share price
Rio Tinto shares have done well over the last six months, so I don’t think investors need to rush to buy shares today.
Profit and the ordinary dividend were higher in 2022 than 2020, so it continues to perform well for shareholders.
I like the direction that Rio Tinto is going with its focus on greener resources like lithium and copper. But, I don’t think the Rio Tinto share price is attractive enough to buy yet. I think there are other ASX dividend shares with more compounding growth potential.
