A.RIO: Rio Tinto announces cash generation of $6.3 billion and cash returns to shareholders of $3.0 billion

Rio Tinto chief executive J-S Jacques said “Today we have announced total cash returns to shareholders of $3 billion. By driving performance, focusing on cash and allocating it with discipline we are delivering superior cash returns to our shareholders.

“These are strong results: operating cash flow was $6.3 billion and we met our $2 billion cash cost reduction target six months early. We are now shifting gear to focus on the untapped value from our productivity programme and continue to strengthen our portfolio to build higher returns for the future. We announced the sale of our thermal coal business in Australia for $2.7 billion and are making good progress on our compelling growth projects – Oyu Tolgoi, Amrun and Silvergrass.”

First half 2017 highlights

• Generated operating cash flow of $6.3 billion, EBITDA¹ of $9.0 billion and EBITDA margin²of 45 per cent
• Delivered underlying earnings of $3.9 billion and net earnings of $3.3 billion
• Achieved $2.1 billion of pre-tax sustainable operating cash cost improvements³ in 2016 and 2017 first half, meeting the target six months ahead of schedule
• Strengthening the portfolio with all three growth projects on track and a $2.7 billion disposal announced in 2017 first half
• Reduced net debt by $2.0 billion to $7.6 billion, with gross debt⁴ lowered by $2.5 billion
• Returning cash to shareholders of $3.0 billion with respect to 2017 first half:
  • Declared interim dividend of 110 US cents per share, equivalent to $2.0 billion
  • An increased share buy-back of $1.0 billion in Rio Tinto plc shares by the end of 2017
  • In total represents 75 per cent of 2017 first half underlying earnings

Six months to 30 June	2017	2016	Change
Net cash generated from operating activities (US$ millions)	6,306	3,240	+95%
Underlying EBITDA1 (US$ millions)	9,042	5,367	+68%
Underlying earnings1 (US$ millions)	3,941	1,563	+152%
Net earnings (US$ millions)	3,305	1,713	+93%
Capital expenditure5 (US$ millions)	1,758	1,318	+33%
Underlying earnings per share (US cents)	219.4	87.0	+152%
Basic earnings per share (US cents)	184.0	95.3	+93%
Ordinary dividend per share (US cents)	110.0	45.0	+144%

	At 30 June 2017	At 31 Dec 2016	Change
Net debt6, 9 (US$ millions)	7,571	9,587	-21%
Net debt to EBITDA7, 9	0.4	0.7
Net gearing ratio8, 9	13%	17%

The financial results are prepared in accordance with IFRS and are unaudited.

¹ Underlying EBITDA and earnings are key financial performance indicators which management use internally to assess performance. They are presented here to provide greater understanding of the underlying business performance of the Group’s operations. Net and underlying earnings relate to profit attributable to the owners of Rio Tinto. Underlying EBITDA and earnings are defined on page 12. Underlying earnings is reconciled to net earnings on page 62.
² EBITDA margin is defined as Group underlying EBITDA divided by Product Group total revenues as per the Financial Information by Business Unit on page 10 where it is reconciled to profit on ordinary activities before finance items and taxation and consolidated sales revenue. This financial metric is used by management internally to assess performance, and therefore is considered relevant to users of the accounts.
³ Operating cash cost improvements represent the difference between the current and prior year full cash cost of sales per unit based on the prior year volume sold.
⁴ Gross debt is defined as Adjusted total borrowings on page 43.
⁵ Capital expenditure is presented gross, before taking into account any cash inflows from disposals of property, plant and equipment.
⁶ Net debt is defined and reconciled to the balance sheet on page 43.
⁷ Net debt to EBITDA is defined as the period end net debt divided by the previous 12 months’ underlying EBITDA.
⁸ Net gearing ratio is defined as net debt divided by the sum of net debt and total equity at each period end.
⁹ These financial performance indicators are those which management use internally to assess performance, and therefore are considered relevant to users of the accounts.

Source: Rio Tinto media releases – Rio Tinto