Rio Tinto is well positioned to continue generating strong returns, building on a track record of $32 billion returned to shareholders since 2016, and the significant progress achieved in strengthening the resilience and sustainability of the business.
At its investor seminar in London, Rio Tinto chief executive J-S Jacques and members of his executive team will outline how the quality of Rio Tinto’s portfolio, strong customer relationships and capital discipline positions the company for continued strong financial performance, as demonstrated by free cash flow of $10 billion in 2019 calculated at current spot prices*.
J-S said “Rio Tinto has a world-class portfolio, delivering superior margins and free cash flows, with an established track record of generating resilient returns. This includes $32 billion returned to shareholders since 2016, in a volatile macro environment.
We are not complacent, and will step up our operational performance to fully optimise our assets and maintain strong cash delivery. We will continue to create value by strengthening relationships with our customers and with other partners, both of which are crucial for our future success.”
Rio Tinto will also underline its environmental and sustainability credentials and demonstrate what it is doing to position the business for a carbon constrained world and reinforce its value proposition to investors as the only major diversified miner who does not extract fossil fuels. Rio Tinto has reduced its emissions-intensity footprint by almost 30 per cent since 2008 and today, over 70 per cent of its electricity comes from renewable sources. Current emissions targets, which have already been achieved, expire at the end of 2019 and new targets will be disclosed in early 2020. The new targets will move Rio Tinto closer to its long-term commitment of substantially decarbonising its business by 2050.
Key points from the presentation include:
- $10 billion of free cash flow in 2019* at spot prices, demonstrating the ongoing cash generation resilience of our world-class assets in a volatile macro environment.
Rio Tinto remains committed to maintaining an appropriate balance between investment in the business and cash returns to shareholders. Over the last three years, our pay-out ratio, excluding returns from divestments, has averaged more than 70 per cent, above our returns policy range of 40-60 per cent in recognition of the strong free cash flow generation of the business.
Total capital expenditure in 2019 is expected to be $0.5 billion lower than previous guidance at around $5.5 billion, with $0.5 billion deferred into 2020. As a result, guidance for 2020 is around $7 billion. Guidance for 2021 remains unchanged at around $6.5 billion. Guidance for 2022 was included for the first time at around $6.5 billion.
*2019 forecast assumes June year-to-date actual realised pricing, July to September monthly average index prices with the remainder of 2019 based on October spot prices. Production and shipments for 2019 is based on consensus. Free cash flow is defined as net cash generated from operating activities less purchases and sales of Property, Plant & Equipment