Rio Tinto plc Announces 10% Profit Increase, Hikes Dividend

Rio Tinto plc (LON: RIO) benefited from better production efficiencies and cost-cutting.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 14 March, 2014 10:38 am GMT

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The share price of Rio Tinto (LSE: RIO) (NYSE: RIO.US) fell 1.4% to 3,117p during early trade this morning after the miner announced a 10% increase in profit to $10.2bn.

The firm stated that the main drivers for this were its successful cost reduction initiative and increased production volumes.

Rio added that cost savings of $2.3bn included greater production efficiencies and the lower price of raw materials.

The FTSE 100 company also said that production records were set for iron ore, bauxite and thermal coal, with copper volumes recovering strongly.

In addition, net debt reduced by $1.1bn to $18.1bn.

Rio’s chief executive, Sam Walsh, commented:

“These strong results reflect the progress we are making to transform our business and demonstrate how we are fulfilling our commitments to improve performance, strengthen the balance sheet and deliver greater value for shareholders. We have achieved underlying earnings of $10.2 billion, exceeded our cost reduction targets and set production records. In turn, this has enhanced our cash flow generation and lowered net debt.”

The full year dividend was increased 15% to 116p supported by earnings per share of 333p. As such the dividend is covered by 2.9 times earnings.

Of course, the decision to ‘buy’ — based on those ratings, today’s results and the wider prospects for the mining industry — is entirely your decision.