Rio Tinto Limited

Decent First Half-Year Performance: Rio Tinto Limited (ASX: RIO) released its first half year performance wherein consolidated sales revenue grew by 3.1 per cent and amounted to 19.9 Bn in 1HFY18 against 1HFY17. The sales were mainly driven by increasing volumes of iron ore, bauxite and copper and higher prices for aluminium and copper, offsetting the impact of lower iron ore prices and the divestment of Coal & Allied. Underlying EBITDA grew by 2 per cent to $9.2 Bn in 1HFY18. Net earnings increased by 33 per cent and recorded $4.38 Bn in 1HFY18 which is broadly in line with underlying earnings supported by extraordinary gains incurred during the period. Based on the first half year performance, the Board of Directors declared a half-year dividend (fully franked) of A$1.7084, equivalent to ~ US$2.2 Bn, representing 50 per cent of underlying earnings. It will be paid on September 20, 2018. Moreover, the group will continue to deliver superior shareholder returns with a $1.0 Bn top-up to its existing share buy-back programme. Furthermore, the group will continue to invest in Tier 1 growth to strengthen its portfolio and maintain its balance sheet in order to deliver superior returns to shareholders in the short, medium and long-term. The group has now announced to return $7.2 billion to shareholders and this includes $3.2 billion through operations.


Underlying EBITDA H1 2017 vs H1 2018 (Source: Company Reports)

On the other hand, the group has completed the sale of its remaining coal assets in Queensland, Australia, for $3.95 Bn. The transactions included the sale of the group’s stake in the Hail Creek coal mine and Valeria coal development project to Glencore for $1.7 Bn, and its other stakes in the Kestrel underground coal mine to a consortium comprising private equity manager EMR Capital and PT Adaro Energy Tbk for $2.25 Bn. Meanwhile, the share price climbed up 5.66 per cent in the past six months (as at July 31, 2018) and currently traded close to 52-week high level ($87.090). Hence, we maintain our “Expensive” recommendation on the stock at the current market price of $ 81.650, up only 0.55% on August 01, 2018 despite the updates.
 
 
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