Annual Results 2019

LONDON--(BUSINESS WIRE)--Rio Tinto Chief Executive J-S Jacques said “We have again delivered strong financial results with underlying EBITDA of $21.2 billion, underlying EBITDA margin of 47% and return on capital employed of 24%. This performance allows us to return a record final ordinary dividend of $3.7 billion, resulting in a full-year ordinary dividend of $6.2 billion and total cash returns of $7.2 billion.

“In line with our disciplined approach to capital allocation, we invested $2.6 billion in development projects, including high-return iron ore and copper. Longer term, our $624 million exploration and evaluation expenditure in 2019 adds to our pipeline of attractive options.

"Our world-class portfolio and strong balance sheet serve us well in all market conditions, and are particularly valuable in the current volatile environment. We are closely monitoring the impact of the Covid-19 virus and are prepared for some short-term impacts, such as supply-chain issues. Our products are currently reaching our customers.

"Our resilience and value over volume strategy mean we can invest in our business and deliver superior returns to shareholders in the short, medium and long term."

Our financial results are prepared in accordance with International Financial Reporting Standards (IFRS).

• Strong safety performance in 2019, with no fatalities and a slightly improved all injury frequency rate, coming from a strong base. Continued improvement in prevention of catastrophic events through a step-change in process safety management.
• $14.9 billion operating cash flow was 26% higher than 2018 and $9.2 billion free cash flow² was 31% higher than 2018. Both are presented after $0.9 billion tax paid in 2019 relating to the 2018 coking coal disposals.
• $5.5 billion capital expenditure¹ was consistent with 2018. In late 2019, we announced the approval of two further investments, at Greater Tom Price (iron ore, $0.8 billion) and Kennecott (copper, $1.5 billion).
• $21.2 billion underlying EBITDA³ was 17% above 2018, primarily driven by higher iron ore prices, with an underlying EBITDA margin⁷ of 47%.
• $10.4 billion underlying earnings were 18% above 2018. Taking exclusions into account, net earnings of $8.0 billion were 41% lower than 2018, mainly reflecting $1.7 billion⁸ of impairments in 2019, primarily the Oyu Tolgoi underground project, consistent with our 2019 interim results, and the Yarwun alumina refinery. This compared with $4.0 billion of gains on disposals in 2018.
• Strong balance sheet with net debt⁴ of $3.7 billion, a rise of $3.9 billion, mainly reflected $11.9 billion of cash returns to shareholders in 2019 through dividends and share buy-backs, and a $1.2 billion non-cash increase from the implementation of IFRS 16 "Leases", partly offset by free cash flow of $9.2 billion.
• $7.2 billion full-year dividend, equivalent to 443 US cents per share and 70% of underlying earnings, includes $3.7 billion record final ordinary dividend (231 US cents per share) declared today.

1 Capital expenditure is presented gross, before taking into account any cash received from disposals of property, plant and equipment (PP&E) and excludes capital expenditure for equity accounted units.

The following financial performance indicators - which are non-GAAP measures - are those management uses internally to assess performance. We therefore consider them relevant to readers of this document and present them here to give more clarity around the underlying business performance of our operations.

2 Free cash flow is defined as net cash generated from operating activities less purchase of PP&E, plus sales of PP&E less lease principal payments, following the adoption of IFRS 16 "Leases" in 2019.

3 Net and underlying earnings relate to profit attributable to the owners of Rio Tinto. Underlying EBITDA and earnings are defined on

page 15. Underlying earnings is reconciled to net earnings on page 10.

4 Net debt / cash is defined and reconciled to the balance sheet on page 46.

5 Net gearing ratio is defined as net debt divided by the sum of net debt and total equity at the end of each period.

6 Return on capital employed (ROCE) is defined as underlying earnings excluding net interest divided by average capital employed (operating assets before net debt).

7 Underlying EBITDA margin is defined as the Group's underlying EBITDA divided by Product Group total revenues per the financial information by business unit on page 13. Product Group total revenues is defined as consolidated sales revenue plus share of equity accounted unit sales and intra-subsidiary/equity accounted unit sales.

8 See page 42 for a pre-tax analysis of impairment charge.

The full Rio Tinto 2019 full year results announcement is available here

This announcement is authorised for release to the market by Rio Tinto’s Group Company Secretary.

LEI: 213800YOEO5OQ72G2R82

Classification: 3.1 Additional regulated information required to be disclosed under the laws of a Member State

Category: General

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