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Alberto Abaterusso
Alberto Abaterusso
Articles (1432) 

Rio Tinto Returns Record $13.5 Billion to Shareholders in 2018

Copper and diamonds drive ongoing operations

February 27, 2019 | About:

Before the opening bell on Wednesday, Rio Tinto PLC (NYSE:RIO) released its financial results for 2018.

The company mines and processes iron ore, gold, copper, aluminium, diamonds, coal, sulphuric acid, lead carbonate, rhenium, selenium and several industrial minerals such as salt, borates and titanium dioxide. The miner, which has operations in 35 countries, is also involved in developing and exploring metallic projects.

The London-based metals producer returns a record $13.5 billion to shareholders referring to 2018, including a final dividend valued at $3.1 billion and a $4 billion special dividend. It also includes the repurchase of $4.2 billion worth of own common stock.

Rio Tinto recorded $6.3 billion in cash inflow from operations and $7.2 billion in cash inflow from divestments. The company's cash flows were further bolstered by $8.6 billion in pretax proceeds from divestments.

The miner's earnings before interest, taxes, depreciation and amortization decreased only 2% from 2017 despite seeing higher costs for raw materials.

The EBIT-to-capital employed ratio jumped 1 percentage point to 19%, signaling Rio Tinto has not only improved its profitability but also the efficiency with which financial resources have been used during the year.

Input costs put pressure on the operating cash flow, which declined 15% year over year to $11.8 billion. As a result of the lower operating cash flow and $5.4 billion in capital expenditures, free cash flow was $7 billion.

At $8.8 billion, the miner's underlying profit grew 2% thanks to strong contributions from the copper and diamond businesses. The accounting profit, which included realized proceeds from divestments, was $13.6 billion.

Rio Tinto strengthened its balance sheet through a $4.1 billion reduction in its net debt. As a result, the balance sheet held $13.3 billion in cash on hand and short-term securities and $13 billion in total debt at the end of the year.

The stock's closing price was $58.8 per share on Tuesday for a market capitalization of $97.88 billion. After a 7% increase for the 52 weeks through Feb. 26, the share price is now abundantly above the 200, 100 and 50-day simple moving average lines. The share price of $58.8 is 31.8% above the 52-week low of $44.62 and just 3.3% below the 52-week high of $60.72.

The 14-day relative strength index of 74.67 indicates the stock is approaching oversold levels.

Wall Street has issued a recommendation rating of 2 out of 5 with an average target price of $63.23. This means the stock is seen as a buy and the share price is expected to gain 7.5% from Tuesday's close.

Disclosure: I have no positions in any securities mentioned in this article.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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