By Rhiannon Hoyle

Rio Tinto reported a 19% decline in annual net profit and trimmed its total payout to shareholders following a drop in prices of aluminum, which has been buffeted by weak demand in the U.S. and Europe.

The world's second-biggest miner by market value said Wednesday that it made a net profit of $10.06 billion in 2023. That was down from a profit of $12.39 billion in 2022.

Rio Tinto said its earnings were weighed by lower prices for aluminum and some other commodities it sells, although that was offset by a slight rise in the price it received for its Australian iron ore, which accounts for most of the company's income.

Both the mining giant's underlying earnings and total dividends were above the market's expectations.

Underlying earnings--a closely watched profit measure that strips out some one-time charges--totaled $11.76 billion, down 12%. Analysts expected underlying earnings of $11.64 billion, according to a consensus estimate compiled by Visible Alpha from 18 forecasts.

Directors declared a final dividend of $2.58 a share, taking the miner's total payout for the year to $4.35 a share. Analysts forecast total dividends around $4.23, according to the Visible Alpha-compiled consensus. The miner paid investors $4.92 a share for 2022.

Rio Tinto said investor returns for the year reflected a 60% payout ratio, a measure watched by analysts and calculated by dividing dividends per share by underlying earnings per share. The miner says it aims to pay shareholders between 40% and 60% of underlying earnings on average through commodity cycles. It has recorded a 60% payout for eight years now.

In an interview, Chief Financial Officer Peter Cunningham said the company feels confident that sort of payout ratio is sustainable, even as Rio Tinto starts investing more heavily in both growth projects and decarbonizing its operations.

"The strong balance sheet then effectively is a buffer if we have some lean years on prices," he told The Wall Street Journal.

On a call with reporters, Cunningham said a fall in prices, especially for aluminum, were the biggest driver of reduced profits in 2023.

An 18% drop in the price it received for its aluminum outpaced easing cost pressures for that division. Last month, Rio Tinto said aluminum demand in North America and Europe has remained weak, except in the transport sector.

Rio Tinto's mammoth iron ore division was again the workhorse.

The company is the world's top producer of iron ore, running a vast network of 17 mines as well as port and rail infrastructure in remote northwest Australia. It ships the steelmaking commodity to mills mostly in China.

Underlying earnings from the company's iron ore division rose by 6% versus 2022, and the business accounted for more than 90% of the miner's profits.

Rio Tinto said it was paid roughly $108 a metric ton for its Australian iron ore last year, up from about $106 a ton the year prior. It also increased its shipments by 3% year-on-year.

Sales of copper fetched roughly 3% less than a year earlier and production of refined copper was sharply lower, driving up costs in that business. Rio Tinto's majority owned Canadian iron-ore operations reported both weaker output and prices after grappling with disruptions from wildfires in northern Quebec as well as from mechanical problems.

Rio Tinto's group production rose by just over 3% last year, reflecting the addition of a new Australian iron-ore mine called Gudai-Darri. The company is seeking to add further to its operations with investments in commodities including lithium, used to make electric-vehicle batteries.

Rio Tinto reported a 4.8% rise in capital expenditure last year to $7.08 billion.

One of its projects is a giant iron-ore development in Guinea, called Simandou, which Rio Tinto says is likely to be its single biggest investment over the next few years and the world's biggest mining project.

In December, Rio Tinto estimated its initial share of capital expenditure at roughly $6.2 billion, higher than some analysts said they had anticipated. On Wednesday, Chief Executive Jakob Stausholm told reporters that work on the project is progressing in line with the miner's expectations.

Meanwhile, in Argentina, Rio Tinto is building a small so-called starter plant to produce battery grade lithium carbonate at the Rincon project it acquired in 2022. It expects that plant to start production by the end of 2024 and is studying options for a full-scale operation.

Stausholm said the sharp fall in lithium prices over the past year hasn't shaken Rio Tinto's confidence in lithium, but is a reminder of the need to have low-cost operations that can survive market crashes. He said Rio Tinto has no interest at present in expanding into other battery metals, such as nickel or cobalt.

Write to Rhiannon Hoyle at

(END) Dow Jones Newswires

02-21-24 0304ET